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The Franchise Operations Manual Defined

Within a franchise system, the operations manual is a confidential manual provided by a franchisor to its franchisees. The purpose of the operations manual is to provide franchisees with step-by-step information and guidance as to all aspects of developing, establishing, and running the franchised business. The Operations manual is a "how to" guide for franchisees. In addition to serving the critical business function of training, informing and educating franchisees, the operations manual serves as an important legal instrument where a franchisor may institute and implement operational requirements to be followed by franchisees. Since the operations manual contains confidential information that only a franchisor shares with its franchisees, the operations manual is not disclosed in the FDD. However, the FDD will include a copy of the table of contents to the operations manual and information about the number of pages contained in the operations manual.

What Start-Up Franchisors Need to know About the Operations Manual

As a start-up and emerging franchisor your operations manual will serve an important role in your franchise system. The operations manual will be a critical tool for you to utilize in organizing and evaluating the operational components of your franchise system and will be critical to properly train and educate your franchisees. Within your FDD and franchise agreement will be numerous references to your "confidential operations manual" and your FDD and franchise agreement will state that the systems and standards associated with the franchise system are set forth in the confidential operations manual and that the franchisor reserves the right to supplement and modify the systems and standards contained in the operation manual. In addition to being a critical business tool for training, educating and instructing franchisees, the operations manual is also an important legal tool to assist franchisor's in maintaining control over their franchise systems.

Who Prepares the Operations Manual

When developing and starting-up a franchise system, the operations manual, along with the FDD, represents one of the most critical franchise development documents. Many start-up franchisors spend the time to prepare their own operations manual and others rely on the assistance from franchise development professionals. Whether you prepare your operations manual yourself or work with a franchise development team, your participation in the development of the operations manual will be critical because your operations manual needs to reflect your business and your systems. When it comes to developing your operations manual it is critical that you avoid the generic and get to the heart of what your business is all about and how franchisees can duplicate your brand and success. When working with franchisors in our Franchise Launch Program, we have programs where our clients prepare their own operations manual and one where our team works closely with our clients and we lead the way in developing your operations manual.

Type of Content That Should be Included in Your Operations Manual

Consider that the goal of your operations manual should be to accomplish the following objectives:

  • Introduce your new franchisee to your management team, your brand and your mission as a business;
  • Inform and educate you franchisees about how your franchise system operates, your relationship with them and the exclusive manufacturers and supplies that you require that they use;
  • Inform and educate your franchisees about the steps involved in building-out and establishing their franchised locations and outlets;
  • Inform and educate your franchisees about how to conduct and manage the day-to-day operations of the franchised business;
  • Inform and educate your franchisees about their administrative and reporting obligations.

Below we have identified some but not all of the information goals that your operations manual should accomplish and a sampling of what a portion of the table of contents may look like:

Information Goal 1: Your Story and Mission

The first information goal that your operations manual should achieve is to convey "your story", "the story of your business and the business that they are about to invest in". Don't underestimate the significance of communicating your story as part of the franchising process will be to empower your franchisees to duplicate your brand. In many ways franchisees will, in certain aspects but not legally, be your business partners and it is important that they share the same "mindset" as to the business, customers and the unique selling proposition of your business. As to this topic, a sample table of contents, may include:

  • Our Story;
  • Our Founders and Management Team;
  • Who Our Customers Are;
  • The Services That We Offer (Overview only);
  • The Products That We Sell (Overview only); and
  • How We Deliver Value to our Customers; and

Information Goal 2: What The Business Does and How It Does It

The second goal that your operations manual should achieve is to educate (not merely describe) the services your business provides, the products that you offer and how you deliver or provide these services and/or products. This second section is the "how to" section and should be extremely detailed. As to this topic, a sample table of contents, may include:

  • The Services and Products that we Offer (Detailed how to's);
  • How to Provide our Services;
  • How to Develop, Prepare and Provide our Products;
  • The Steps to Providing [Describe your service];
  • The Steps to Producing [Describe your products];
  • Pricing: How to Price or Provide Estimates for [describe your service];
  • Pricing: How to Price [describe your products];
  • Exclusive Suppliers of [Products or Services that You Provide];
  • Customer Service;
  • Managing Employees;
  • Utilizing Your [point of sale / business management] Systems; and
  • Reporting Revenues and Performance Data

Information Goal 3: Marketing and Business Development

The third goal that your manual should achieve is to educate your franchisees about their obligation to market and develop their business. This is a critical section since, much more often than not, successful franchisees are not those working "in the business", i.e. providing the service or selling product but, rather, those continuously working to market, promote and manage the franchise business. That is, teaching franchisees to work "on their franchised business" but not "in their franchised business". As to this topic, a sample table of contents, may include:

  • The right mindset for building a successful business;
  • Marketing Strategies Approved by Us with Examples;
  • The Role of Direct Mail with Examples;
  • The Role of Print Media with Examples;
  • Use of Our Website;
  • Use of Social Media;
  • Email Marketing;
  • Newsletters;
  • Use of Groupon and Similar "pre-sale discount" Sites; and
  • Using [Customer Relationship Management] Systems

Information Goal 4: Approved Products, Suppliers and Suppliers

The fourth information goal that your manual should achieve is to provide franchisees with complete detail as to establishing and operating their franchised business. This section should include detail and lists relating to issues such as approved build-out plans, requirements and restrictions for signage, lists of approved suppliers, recipes and step-by-step instructions for services and/or products. Basically a reference tool. As to this topic, a sample table of contents, may include:

  • Buildout and Construction Requirements and Plans;
  • Approved Suppliers;
  • Approved Products and Services;
  • Insurance that You Must Maintain;
  • Logging into our CRM System;
  • Scripts for Answering Phone Calls;
  • Scripts for responding to emails;
  • Requesting Approval of Other Vendors; and
  • Order forms.

Of course, there will be significant variation depending on your business and your industry. It is important to understand that your operations is a "living document" that, over time, will be adjusted, modified and supplemented. Developing the right operations manual will take you a long way toward establishing a solid foundation with your franchisees and maintaining control over your franchise system.

Charles Internicola

by Charles Internicola
National Business and Franchise Lawyer

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