The Franchise Operations Manual
The franchise operations manual is the how-to guide used by franchisors to communicate system standards and requirements to franchisees. Information contained in the operations manual typically relates to training, development of the franchised business, operating standards, system procedures, marketing, approved suppliers and other information related to the on-going operations of the franchised business.
Franchisors are required to disclose the table of contents of their operations manual in Item 11 of their FDD. Because operations manuals contain confidential information that is only shared between franchisor and franchisee, other than the table of contents, the operations manual itself is not disclosed in a franchisor’s FDD. The operations manual can take many forms from traditional printed materials to online digital guides and videos.
Below we discuss further the role of the operations manual, who prepares it and, the content included.
The Role of the Operations Manual
For franchisors, the operations manual is an important tool used to organize, document, and communicate the operational requirements, systems, and procedures for franchisee training and the establishing and running the franchised business. Although operational in nature, the operations manual also serves an important legal role as it is the primary instrument by which a franchisor will communicate mandatory and required systems and procedures to be followed by franchisees. Within the typical FDD and franchise agreement there are numerous references to the “confidential operations manual” and the legal requirement that franchisees comply with the systems and procedures that the franchisor includes in the operations manual and as the franchisor may modify and supplement from time to time.
Who Prepares the Operations Manual
Operations manuals evolve over time. What your manual looks like on day 1 will be very different from what it will look like 2, 3, and 4 years from now. Ultimately it’s up to you to prepare and continuously update your operations manual. However, when you’re just starting out its always a good idea to have your franchise lawyer and franchise consultants involved in the process.
Type of Content That Should be Included in Your Operations Manual
Operations manuals typically include the following topics and information:
- Confidentiality and Legal Notice – Initially the operations manual should include information disclosing that the contents of the manual are confidential, should not be shared, and should not be publicly disclosed. This section should also explain the role of the manual and how it relates to the franchise agreement and system standards that the franchisee will be expected to follow.
- Brand and Team Introduction – This section should be all about the story behind your brand, your founders, your customers, what makes your brand unique, and your management team. This should also include a directory and information about who franchisees should contact in for support and assistance.
- Development of the Franchised Business – This section should cover every milestone that a franchisee should be expected to complete from the date of signing his or her franchise agreement right to the grand opening of the franchised business. Depending on the type of business this section should topics like securing a location, build-out and construction, purchase requirements, inventory requirements, initial training, pre-opening assistance, and grand opening marketing. There’s more, but the point is that this section should be the road map for taking the franchise from where they are today to the opening of their new business.
- Training and How To – This section should cover everything from initial training, pre-opening training, on-going training and the day-to-day operations of the franchised business including making the products you sell and performing the services that you provide.
- Operating Systems and Requirements – This section should cover the your entire supply chain including approved suppliers and vendors, inventory requirements, point of sale systems, and standards and specifications for all key components, services, and products required for day-to-day operations.
- Marketing and Business Development – This section should cover all of the steps involved in marketing and promoting the franchised business. Including system requirements related to approved media, approved marketing ads, use of social media, use of digital marketing and the system website.
- More – There’s much more to an operations manual and, many will depend on your industry, your business, and the systems that you develop and put in place.