Mcdonalds Operations Manual 25
Jemima Torguson
There is no denying that the McDonalds operations manual is an example of how to set up a franchising dynasty that can dominate an industry. When it comes to franchise operations, there may be no other interventional franchising empire that has achieved such a high level of efficiency and finding ways to make operations from Boston to Hong Kong run like a well oiled machine.
A fact of life that most people accept the same way they accept that the sun comes up and mosquitoes bite in the summer is that when you go to a McDonalds, it will always be the same experience. That too is a corporate ethic that McDonalds made a cornerstone of their operation when they set out to franchise the company. That consistency is something that the McDonalds operations manual stipulated down to the color of the bathroom tissue and the type of light bulbs to put in.
That consistency is a huge reason why the McDonalds operations manual has generated such success for the chain. Truck drivers know that if they want a good cup of coffee, go to McDonalds. Parents know that the food they get for their kiddos at McDonalds will satisfy the little tykes and that it is fundamentally a worthwhile meal for the buck, they can trust McDonalds.
This action filed by the plaintiff, McDonald's Corporation, charges in five counts that the defendants have willfully engaged in a series of acts of trademark infringement and unfair competition, including (1) trademark use of a distinctive golden-arch sign and building designs which are confusingly similar to golden-arch sign and building trademarks which plaintiff has promoted throughout the United States and which *256 have been registered in the United States Patent Office; (2) imitation of the format of plaintiff's business including menus, prices, advertising, employee uniforms, sidewalk colors, ash can colors, and equipment layout; (3) improperly obtaining and copying a valuable operational manual from plaintiff's licensee; (4) interference with plaintiff's restaurant operations through defendants' efforts to hire away and to subvert the loyalty of plaintiff's employees; and (5) breach of a contract made during the pendency of the litigation whereby defendants promised not to begin construction of any new units pending trial. Plaintiff seeks an injunction to prohibit defendants from engaging in unfair trade practices. Plaintiff also seeks damages for the alleged unfair trade practices.
1. The plaintiff, McDonald's Corporation, hereinafter referred to as McDonald's, is a national hamburger drive-in chain with over six hundred units. The defendants, Richard H. Moore and Paul Leverett, are partners doing business as Dixie Hamburger Company. They also own and operate a small hamburger drive-in chain, Colonel Dixie Systems, Inc., hereinafter referred to as Colonel Dixie.
2. The genesis of this action was a letter written to the defendants on March 20, 1963, by Mr. Norman D. Axelrad, head of McDonald's legal department, requesting that the defendants cease and desist from using a yellow "M" arch in their buildings.
3. The defendants, intending to build a drive-in restaurant, had some preliminary sketches drawn by a Mr. Rush from Auburn, Alabama. When they finally acquired the property, the lessor, Mr. Arthur Olensky, informed them that he wanted them to use his architect, Mr. Fred Woods. The defendants contacted Mr. Woods and he designed the building now used by all Colonel Dixie outlets. Mr. Woods testified that the building was an original idea with him and that he did not copy any other building. Mr. Woods had earlier served as a resident architect for McDonald's. The defendants did not see the plans until they were completed. The building is basically square with twenty-one loops on the outside, attached to the building. The McDonald's building has only two arches. The original color of the building was to have been blue, but Mr. Woods and the defendants decided that a yellow would show up better after checking the surroundings with a color chart.
4. Mr. Woods and Mr. Charles Waller designed the sign used by the defendants. The sign was designed so as to conform with the building: both used loops. Nothing was ever said about copying any other sign. Architects call the color used by Colonel Dixie, "hazard yellow." Advertisers call the same color, "lemon yellow." The color in Colonel Dixie's building and sign is commonly used in outdoor advertising and on street signs and curbs because it shows up so well. At least five witnesses testified that the buildings and signs of McDonald's and Colonel Dixie are not confusing. But as one witness succinctly stated it, "All hamburger buildings look alike to me."
5. The sign at McDonald's is a parabolic arch, according to the testimony of Mr. Woods, while the sign of Colonel Dixie is not parabolic. Colonel Dixie's sign has a rotating panel, which the McDonald's sign does not have. There are three panels in the Colonel Dixie sign, while McDonald's sign has only one. Mr. James Vernon testified that color is the only similarity in the two signs. He stated that there was no geometric similarity in the signs.
7. Several of the witnesses testified as to the similarities of various aspects of the operations of the parties. Both parties use green cement sidewalks, red *257 and white trash cans, similar menu pads, and various other similar minor details. Of course, many differences in the operations were also pointed out.
8. In June 1963, Mr. David Hanke, an employee of Colonel Dixie, asked Mr. Welford Stuckey, an employee of McDonald's, to obtain a copy of McDonald's operations manual for him. Mr. Stuckey complied with this request and the manual was eventually given to the defendants. While the manual was in the defendants' possession, they had it copied. Mr. Leverett stated that they only had the manual copied to see if their operation was similar to McDonald's, because they had gotten notice that McDonald's was going to sue them. Mr. Moore had the manual copied and he personally made the decision as to which portions of the manual were copied. At least two portions of the manual, French fry and milk shake, were not copied. The procedures of Colonel Dixie and McDonald's are different as regards French fries and milk shakes. After the manual was copied, Mr. Stuckey returned the original to McDonald's. The defendants kept the copy in their possession until shortly before this trial.
9. At least five men who had previously worked for McDonald's were hired by Colonel Dixie after they had terminated their employment with McDonald's. This group included Mr. David Hanke, Mr. Welford Stuckey, Mr. Gary Overstreet, Mr. James Owens, and Mr. David Hudson.
2. In a trademark infringement case, the burden on the plaintiff is to prove only that there is a "likelihood of confusion." The correct rule is stated in American Foods, Inc., et al. v. Golden Flake, Inc., 5 Cir., 312 F.2d 619:
5. The Court finds that the defendants' improper acquisition and copying of the operational manual was such misconduct that it amounts to unfair competition. The case of Seismograph Service Corporation v. Offshore Raydist, Inc., D. C., 135 F. Supp. 342, states the rule to be applied as follows:
7. The Court is of the opinion that an employer can seek employees from any source, so long as in doing so he does not violate any law. The Court finds that the defendants' actions in hiring ex-employees of McDonald's did not constitute unfair competition. The hiring of an employee from a competitor did not constitute unfair competition in Official Aviation Guide, Inc. v. American Aviation Associates, 7 Cir., 150 F.2d 173.
9. The Court finds that the defendants definitely breached the agreement not to begin construction or operation of additional outlets until the case was heard on the merits, by entering into a lease to operate and starting construction of an outlet in Chickasaw, Alabama.
Want to save on the $20,000 to $45,000 that franchise consultants charge to write an operations manual? Already have an operations manual but want it reviewed by a franchise expert? Need a sample table of contents and technical writing instructions so you can get started writing your own operations manual?
A legal introduction to franchise operations manuals: Because the operations manual is incorporated by reference in the franchise agreement, it becomes a living legal document requiring oversight and review by a franchise attorney. This is not to say a franchise attorney should write your operations manual. Heaven forbid, doing that would be very, very expensive. And, for the reasons discussed below, it would also be a waste of money and result in a very mediocre manual.
Drafting a franchise operations manual seems daunting, especially for a company that has never written one before. A franchise operations manual is actually easy to draft, but requires a special focus to avoid franchise liability issues unique to the world of franchising.
Using a consultant to write a franchise operations manual or buying a template operations manual also carries significant, long-term legal risk. The principal legal risk comes from including inappropriate topics, chapters and policies that are commonly found in company owned, chain operations manuals. If these are included, as they invariably are in franchise operations manuals and template operations manuals, very significant franchise liability issues arise.
Because franchise consultants are not franchise attorneys or experts, they are entirely oblivious to this risk. The same goes for companies that hawk cheap template manuals. They have no clue where the bullets come from in franchise litigation. As a consulting and testifying franchise expert, I routinely find operations manuals drafted by franchise consultants and do-it-yourself template manuals containing inappropriate chapters or topics. And these get franchise companies into hot legal water that becomes very expensive.
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