Each franchisee in most modern-day franchises will be granted on loan for the duration of the franchise agreements a confidential operations manual to be used in the operation of the franchise outlet. The reason that theses confidential operations manuals are on loan and stipulated as such in the franchise agreements is because this prevents someone from saying that they bought them when they paid for the franchise fee. Also like a library book on loan, it must be returned. This prevents confidential and proprietary information and business know-how from falling into the hands of competitors of the franchise system, which could hurt the entire group of franchises within the company.

It is for this reason, that we decided to add an additional clause into our franchise agreements stipulating such;

3.12.2 On Loan to Franchisee

Franchisee copy of the Confidential Operations Manual is on loan to Franchisee for the duration of this Agreement. It is not Franchisees to keep. Franchisee must return it to Franchisor upon termination, nonrenewal, transfer or expiration of this Agreement. If Franchisee fails to return it, Franchisee agrees to pay Franchisor for any expenses incurred by Franchisor, including all attorneys fees, to retrieve the Confidential Operations Manual. At all times Franchisee will insure that their copy of the Confidential Operations Manual and any other manuals and software given to Franchisee are kept current and up to date. If of any dispute as to the contents of the Confidential Operations Manual, the terms of Franchisors master copies maintained at Franchisors principal place of business will be controlling.

----- ---- -----

All franchisors are well advised to discuss this issue with a competent, knowledgeable and an experienced franchise lawyer and strategize on ways to protect and preserve your confidential and proprietary business knowledge. Consider this in 2006.