What the owner is obliged to do
1 min read
Item 15 states the franchisee's obligation to participate personally in the business. It is a contract term, and it is the most reliable answer to "how much of my time will this take?" available before you speak to franchisees.
Terms used in this guide
- FDD (Franchise Disclosure Document)
- The document a franchisor must give you at least 14 days before you sign or pay. It is organized into 23 numbered Items covering costs, obligations, history and the agreements.
What Item 15 typically says
- A requirement that the franchisee devote full time and best efforts, sometimes only for an initial period.
- Permission to designate a manager, usually conditioned on the manager completing training and on the franchisee retaining a stated ownership share.
- A requirement that the franchisee, or a principal, personally guarantees the agreement.
- Occasionally, a franchisor right to require the owner's direct involvement if performance standards are not met.
"Semi-absentee" and "passive" are not disclosure terms
Neither phrase appears as a defined category in the FDD. A manager-permitted structure means you may hire a manager — it does not mean the business runs without you, and it does not remove your personal obligations under the agreement. Read the exact Item 15 wording for any offer you consider, and be wary of anyone who describes an offer as passive or hands-off.
Questions worth asking
- What exactly must the designated manager complete before approval?
- What ownership share must I retain?
- Does the initial full-time period end on a date, or on a performance condition?
- What can the franchisor require of me if the unit underperforms?
Checking what the owner would actually do?
A consultant can help you identify the owner duties and management terms to check for each franchise.
Request a free consultation