Updating Franchise Standards: How to Agree Changes

When an established business becomes a franchise, it continues to evolve: equipment, product ranges, premises design and business management software all change. But a decision the owner can quickly implement at a company-owned outlet cannot automatically be imposed on an independent partner. A franchise network needs an agreed process for making changes. This helps the concept develop without unexpected costs or disputes over which version of the rules is binding.

1. Classify changes by their impact on franchisees

Before signing your first agreements, draw up a classification of updates. The main criterion is not the number of pages in the new instructions, but the effect on franchisees’ obligations, costs and working processes.

It is useful to distinguish three categories:

• Editorial clarifications: correcting errors, adding illustrations or explaining an existing procedure more clearly. These must not introduce additional obligations by stealth.
• Operational changes: a new order-handling process, an updated customer service script or a different reporting format. These may require system configuration and staff time.
• Changes requiring investment: replacing equipment, refurbishing interiors or adopting paid software. These decisions affect the financial performance of a franchisee’s business and require a separate assessment.

Also make provision for urgent changes arising from mandatory legal requirements or an identified safety risk. Urgency does not remove the need to explain the reasons and check the legal basis.

For each category, specify who initiates the change, who approves it, how notice is given and how the transition deadline is set. This prevents minor clarifications from becoming bogged down in lengthy procedures, while ensuring that costly upgrades cannot be introduced through a routine email from a manager.

2. Set out the mechanism in the agreement, not just the manual

In Russia, commercial concession arrangements—the legal framework used for franchising—are specifically governed by Chapter 54 of the Civil Code of the Russian Federation. Intellectual property provisions also appear in Part Four of the Civil Code. Under Article 1032, the user of the rights must follow the rights holder’s instructions and directions intended to ensure that the nature, methods and conditions of use of the bundle of exclusive rights correspond to the rights holder’s own use.

However, this is not blanket permission to alter any contractual obligation. The ability to change terms unilaterally must be assessed in light of Article 310 of the Civil Code and the agreement itself. For example, an increase in royalties cannot be justified solely by issuing a revised operations manual.

Work with a lawyer to specify:

• which documents contain binding standards and how the current version is identified;
• which changes the rights holder may introduce unilaterally;
• when a supplementary agreement is required;
• how notices are sent and receipt is confirmed;
• how transition periods are set and exceptions documented;
• who pays for equipment, configuration and other work.

Article 1036 of the Civil Code provides for amendments to commercial concession agreements under the rules in Chapter 29 and for state registration of those amendments in the prescribed manner. If an update affects the agreement, check separately what registration steps are required. The grant of the right to use the bundle of exclusive rights must itself be registered with Rospatent, Russia’s intellectual property authority, under Article 1028. If this requirement is not met, the grant is deemed not to have taken place. This is not the same as the signed agreement automatically being invalid.

3. Test the update at a company-owned outlet

Before making a new standard mandatory, test the specific change rather than the entire business model all over again. Define the problem you are addressing, the expected result and the circumstances in which you would abandon the proposed solution.

Suppose you want to replace your order-taking software. It is not enough to show that it suits head office. You need to test data migration, compatibility with the till system, operation during a connection failure, access permissions and the ability to export data. Separately, calculate the time needed for reconfiguration and the temporary loss of productivity.

Prepare a change summary: how things worked before, what is proposed, what results the tests produced and what costs emerged. Separate one-off costs from recurring expenses. If savings depend on order volumes, do not apply the results from a large company-owned outlet to every franchisee without adjustment.

Discuss the summary with representatives of different outlet formats. This consultation helps identify constraints early, but does not replace formal agreement where it is legally required.

4. Manage the transition and document exceptions

The notice should give franchisees enough information to prepare an action plan. Include a list of changes, the basis for introducing them, the effective date, the work required and contact details for the person responsible. Set the transition deadline with equipment delivery, configuration and possible downtime in mind, rather than simply choosing a date that suits head office.

Do not just upload a file to a shared folder. Use the communication channel agreed in the contract and retain proof of delivery. Remember to distinguish between receipt of a notice and consent to a change: the former does not always mean the latter.

If a franchisee cannot make the transition on time, document a temporary exception. Specify the reason, the permitted operating arrangements, the expiry date and any necessary safety measures. A verbal agreement with a manager creates uncertainty for both the franchisee and the person checking compliance.

Keep a register recording the version number, approval date, affected outlets, implementation status and current exceptions. Archive earlier versions. After the transition, compare actual costs and results with the original assessment, then refine the procedure for the next update.

Practical takeaway: before selling your first franchise, establish a contractual mechanism for updates and test it on one real change. A sound process answers four questions: what is changing, on what basis, at whose expense and by when.