What to expect from your franchisor: the Operations Manual

With the National Franchise Exhibition 2017 fast approaching, if you are a potential franchisee it is time to start researching all the different opportunities that are open to you.  Thorough research and knowledge of how franchising works is imperative if you are going to invest wisely and find the franchise that will work for you.

With this in mind, the latest in our series of blogs What to expect from your franchisor should help set you on the track to success.  While the first in the series dealt with the franchise legal pack, our new blog will explain the importance of the Operations Manual; what it is, why you need one, what it should contain and what to be aware of.

What is an Operations Manual?

The importance of the Operations Manual cannot be overstated.  It is the bedrock of any franchise system and enshrines the unique elements and operating methods of the business that, in turn, create know-how.

In times gone by, an Operations Manual was always a printed document, usually kept in a folder, requiring franchisees to add or substitute pages from time to time in line with updates made by the franchisor.  More commonly now, the Operations Manual is maintained on a database or cloud system controlled by the franchisor.  It usually contains a suite of separate documents, and sometimes refers the franchisee to specific government regulations that apply to the franchisor’s particular industry.

Why do you need one?

Franchising is, of course, all about brand consistency.  You expect customers to be attracted to a particular brand, because they recognise it and trust it.  They will trust it because they know that the products and services will be provided to a consistent standard, no matter which franchisee they are dealing with.

The powerful presence, for example, of franchised coffee chains on British high streets is testament to this.  Their customers are not particularly interested in whether they are dealing with a franchisee or not.  It is the brand that they are associating with, their knowledge of the product offering and their expectations of good customer service.

It follows therefore that as a franchisee, you will need to deliver your franchise concept to your customers in meticulous compliance with a common set of instructions.

Taking the fast-food sector by way of example, not only does your menu range have to be the same in every outlet but you also need to have detailed instructions as to how each menu item is prepared and served.  It is no surprise that the operations manuals used by quick service restaurant concepts are hugely voluminous.  Each type of burger has precise details of construction.  Even down to things like the required weight of lettuce, and the positioning of each piece of pickle.

Together with your franchise agreement, the Operations Manual sets out exactly how your franchisor requires you to operate.

Your franchise agreement also gives a franchisor the right to terminate its franchisee’s operation if he or she is not acting in accordance with the operations manual.  So the content of the manual can be crucial to the success of your business.

What should an Operations Manual contain?

There is no obligatory format for an Operations Manual.  This is because every business format is unique, and therefore the process for supporting and interacting with franchisees will be different for every franchisor.

Some franchised systems have operations manuals which run to hundreds or even thousands of pages.  Others manage with a much shorter document.  But either way, it has to contain all the information that a franchisee will need for the purposes of operating their business consistently in accordance with the franchisor’s methods.

You can review a sample contents page below:

Operations Manual Outline

TOPIC	ITEM
Introduction	About the business Ownership of the manual and intellectual property rights in the manual Confidentiality Disclaimers Franchisor contact details: who to contact and how
Premises	Guidelines for selection and location of premises Recommended/nominated architects/agents Fit out specifications Fixtures & fittings Furniture Signage Required lease provision
Products & Services	Detailed specifications of your products and services “Core” (or mandatory) products and/or services that the franchisee must offer Discretionary services Procedures for providing products and/or services
Pricing	Recommended pricing
Equipment	Equipment to be purchased from franchisor / nominated supplier Equipment to be purchased by the franchisee
Stock	Stock to be purchased from franchisor / nominated supplier Stock to be purchased by the franchisee Minimum stock levels Ordering procedures
Franchisee start-up procedures	Any licences or regulatory approvals required? Setting up a limited company VAT registration requirements
Training	Initial training programme for franchisees Ongoing training Health and safety procedures
Customer service	Process for receiving orders, receiving payments, billing, customer record retention Customer feedback process Customer complaints procedure
IT	What systems (eg CRM) the franchisee must use IT support
Staff	Recruitment procedures and franchisor approval requirements Template terms and conditions HR policies and procedures Uniforms Standards of appearance and behaviour
Accounts and Records	Franchisee bank accounts, standing orders etc Fees payable by the franchisee, as per the franchise agreement Payment procedure for management service fee and/or any other fees payable to franchisor under the franchise agreement Reporting prodcedures, use of CRM or other systems Records management
Business Planning	Responsibility for franchise business plan Franchisor approvals required
Marketing & Advertising	Franchisee local marketing Franchisee participation in national marketing initiatives Use of social media Franchisor approvals required

The above gives you a general flavour of what a manual should contain.  Bear in mind that it is by no means comprehensive.  It provides you with a checklist of some of the key issues that tend to be covered off.  Every Operations Manual should be tailored to the individual franchise and would no doubt include additional specific elements.

What to be aware of

The content of an Operations Manual will, in a number of ways, reflect the content of your franchise agreement.  The franchise agreement should cross-refer to the manual extensively.

However, an Operations Manual has greater flexibility.  Your franchise agreement is more or less set in stone at the moment that you sign it.  But the Operations Manual may evolve over time.  So long as a franchise business remains fundamentally the same, the franchisor can change or add to his / her processes from time to time by publishing updates to the manual.

The franchisor must communicate these changes with you and it is a good idea for both parties to keep a record of those communications, in case any disputes arise later.

While it is unlikely that a franchisor will allow you to see the full operations manual ahead of signing a franchise agreement, once a Non-Disclosure Agreement (NDA) has been signed, they may share the headings of the document.  This will allow you to assess how comprehensive it is.

Given that the Operations Manual for your chosen franchise is likely to become your business bible, we recommend that you do request this as it will help you to evaluate what you can expect from your chosen franchisor, ensuring that these expectations align with the reality.

Goldstein Legal provides expert legal advice to franchisees. We will be attending the National Franchise Exhibition in Birmingham on 13^th and 14^th October.  If you are attending the show and would like to discuss a franchise opportunity with one of our franchise team, contact us today to book a free consultation, or simply visit us on stand no. B280 during the show.