FRANCHISE DEVELOPMENT: Franchise Package Elements – The Operations Manual

As discussed in last month’s article, the proven pilot and the franchise package elements are the key ingredients of franchising. The franchise package must be in place in order to establish and build on a successful and prosperous relationship between the franchisor and the franchisee.

The franchise package should include the following:

  • An Operations Manual;
  • Legal Agreements – The Franchise Agreement;
  • Disclosure Document;
  • The Franchise prospectus and Recruitment and Selection Programme.

We will take a closer look at the Operations Manual as it will incorporate all aspects of the business system and the intellectual property you are transferring to a third party franchisee. As franchise consultants we often receive calls from prospective franchisors, they believe that their only requirement to purse the franchise expansion is a Franchise Agreement. The Operations Manual and the other elements referred to above however are critical and will hopefully in the bests interests of ethical franchising eventually be required by law.

The Operations Manual should contain all the essential information that a third party requires to run the business successfully. A franchisee investing in your brand and business is paying a premium for the “homework” you have already completed and the “school fees” in the way of the lessons you have learned over time. These lessons are of no use unless the best practices and templates are documented in a user friendly format. Although as franchisor you will be available on an ongoing basis in your capacity as a business advisor it is the Operations Manual that should contain all the day to day information required for the running of the business. In addition to this it is also advised that there is a “pre-opening” section to the manual with the set up plan and applications required prior to opening the franchise. The roles and responsibilities of each party (franchisee, franchisor and other contractors) could be as simple as a detailed spreadsheet or project plan. This should indicate what is to be done, by whom with a clear timeframe or countdown to opening.

A typical error is an Operations Manual which contains only operational practices specifically related to the franchised business. An example of this is a quick service restaurant – the Operations Manual should not only include the menu and the recipes. It should also include business management sections such as:

  • financial management;
  • key performance ratios,
  • HR/ IR; customer service;
  • Stock management;
  • Sales and related target;
  • Marketing (including local area marketing);
  • Supply including procurement and ordering;
  • Emergency procedures; and
  • A directory of all relevant contact details.

It is essential that all the policies and procedures required to operate the business are laid out clearly and explicitly in an all-encompassing manual. It is an integral part of managing franchisees and the consistency of your business format. It is far easier to enforce policies and procedures if they are clearly set out. Furthermore, the Operations Manual is the basis for the franchise training. The Operations Manual is a living document and can be amended and updated as the business model is refined. The Franchise Agreement should clearly state that the franchisees are obligated to adhere to the manual and its updates.

It is important that the manual is compiled in a user-friendly format. Bullet points are far easier to read than long drawn sentences. There is no golden rule as to how to put an Operations Manual together and it must be remembered that the size is not directly proportional to the quality. The manual must suit the business and the profile of the operator in order to ensure it is used effectively. Your business may require more visuals, diagrams or flowcharts than words for example. Any documents such as report templates and other forms should be included as annexures as opposed to being incorporated in the body of the document.

When it comes to the format of the manual some franchisors opt to make it available electronically – an intranet or the web via password access. This is accompanied by tools to make it easier to use – such as easy search options and help button functions. Other franchisors still choose to issue a hard copy and this can be made more user friendly by dividing it into sections and colour coding it accordingly. Either way you should ensure your franchisee acknowledges receipt and the confidentiality thereof in writing.

It may seem daunting at the outset, but start by creating a skeleton or framework (in other words a comprehensive table of contents), tackle a section at a time and the document will start to take shape. Start with the sections that are most crucial to the success of your business. You may decide to assign certain sections to different people in the existing business in order to draw on the expertise and resources that you have at your disposal. If you already have a network of franchisees engage them by assigning sections based on where identified pockets of best practice exist. You can slowly add to it and refine it over time. You may choose to appoint an external party to compile the manual for you but as you know your business best you can not be absolved of all responsibility.

So in summary: draw up a table of contents, draft the chapters and then edit and review. Ensure it is relevant to your business and user friendly! A good Operations Manual is the heart of your business and the key to success of your franchisees!

Lindy Barbour
Franchize Directions
(011) 803 0665 / This email address is being protected from spambots. You need JavaScript enabled to view it.