The franchising industry has been around for years and seen steady growth since the 1950’s. Quite a few investors are of the opinion that having a franchise outlet is a safer investment and rightly so. A franchise comes with a promise of a solid customer base, a tried and tested business model and a well established brand name. As per wikipedia.org, of the top 101 franchise list, 70 are based out of the USA alone.
Franchising involves a lot of paperwork and legal formalities. We have earlier discussed a Franchise Disclosure Document (FDD), another important piece of documentation is a “Franchise operations manual”.
What is a franchise operations manual?
A franchise operations manual is one of the most important documents that a franchisor creates during the franchising process. Simply put, it is a guide on what needs to be done and how it needs to be done. It is typically a manual with 100’s of pages and contains set guidelines and advice on each and every aspect of the company.
A good quality franchise manual is worth its weight in gold.
A franchise operations manual contains all the details and knowhow that makes a brand successful. It is therefore important to guard its contents and share it with only franchisees who have signed non-disclosure and privacy agreements. A few examples of what a franchise operations manual comprises are listed below:
- Manuals and instructions for an equipment or software a franchisor expects franchisees to use.
- If franchisees have to source their own supplies, attach a list of approved suppliers.
- Document containing guidelines on staff hiring, training, and motivation.
- Rules and regulations on health and safety.
- Brand management and visual branding protocols.
- Audits, compliances and monitoring practices, financial management tools and practices.
- Complaints management and grievance redressal procedures.
- Guidelines on business best practices.
- Sales and marketing ethical practices.
The manual contains detailed information about how things are done in a franchise, and may include pictures as well that may indicate the standards of operations and business of a franchise.
Let’s delve into what are the steps involved in writing an effective manual.
Steps to write an effective franchise operations manual
The franchise operations manual is an exhaustive document and writing one can seem to be a daunting task. However, breaking the information it should contain into its core parts, can simplify the drill. The information that an operations manual contains can be broadly classified as follows:
- The franchisor’s obligations and responsibilities
- The franchisee’s obligations and responsibilities
- The minimum standards expected across the franchise
Let us now look at an exhaustive step-by-step guide to writing a franchise operations manual:
1. Define the franchisor-franchisee relationship
Define clearly the responsibilities of both the franchisor and franchisee. Clearly list out details of the business association between the two parties. Also, write in detail:
- The process of setting up a new franchise unit and how it could develop it over time, keeping the investor/franchisee in mind.
- Provide all the necessary information that a franchisee should know for launching their business, like history of your brand, details of associates and parent company if any.
- The brand ‘vision’ and ‘mission’ statement.
- Details of other franchise units in the vicinity, if any.
- Define roles and responsibilities of top level management.
- Highlight the issues and the decisions that may impact the franchisor-franchisee relationship in the long-run.
2. Explain in detail the business procedures and processes
Now that you have explained the relationship between the two parties and the prerequisites and steps for setting up the franchise, the next step is to explain in detail how the business operates.
This part of the manual is the longest and one needs to be thorough and accurate to avoid franchise-wide inconsistencies. This section will elaborate on:
- Financial procedures, performance measurement parameters and list out the best practices to be followed for day to day operations.
- For example, in case of a restaurant menu to be served, price of each item on the menu, temperature at which food and drinks have to be served, crockery and cutlery to be used, packaging to be used for takeaways, cleaning schedule, storage processes, uniform of the staff, payroll processing date, POS software to be used, branding on the premises, minimum number of seats, layout etc.
- When writing about process flows for day to day operations, it is a good idea to create flowcharts for complex processes. Flowcharts will help readers understand these complex processes in an easy manner.
3. Disclose complete information about your brand identity and products
Give your investors an understanding of the franchise by describing what the brand stands for, your brand positioning and how you expect the franchisee to position your brand in their local area. Clearly mention details like:
- When and how should franchisees use the logo and other imagery.
- List out guidelines to ensure that the brand’s look and feel remains consistent in all communication be it digital or traditional. Mention fonts, colors, logos, and imagery to be used.
- List out guidelines about brand and product messaging tone and voice across platforms, to create and maintain a distinctive brand personality.
- Generic marketing guidelines and ethics followed by the company.
- Write in detail about your product range or services and how they have been priced.
- If you have a specific list of suppliers that you want the franchisee to use, attach a list of your preferred vendors.
- Attach a list of specific equipment and software that franchisees will need to use.
4. List your business policies clearly
Every brand has a policy and a set of rules and regulations. These policies must be clearly communicated to the franchisee.
For example, a hotel group may have a policy of treating any individual above 12 years of age as an adult for occupancy in a room and billing purposes. When drafting an operations manual for a potential franchisee, this policy must be clearly mentioned.
- The franchisor needs to define the scope within which decisions can be taken by the franchisee. This allows the franchisee to deal with day-to-day problems and issues without consulting the franchisor every time.
- The franchisor should explain how business tasks have to be handled and include any specific information relating to the running of the franchise.
- Outline health and safety regulations and any emergency procedures.
- List out policies regarding resource acquisition, vendor management, compliances etc.
5. Keep a separate section for HR related policies and issues
Employees are the backbone of any business. Without a reliable staff and a HR policy in place a business cannot be a success no matter how good the product may be. To ensure consistency provide the franchisee with the following details:
- Include a document explaining recruitment and staff training processes step by step. This will act as a guide for the franchisees when hiring, inducting and training employees.
- Provide information on what all audits are required and when it needs to be done.
- List out the employee compensation and benefits policy, reviews and appraisals policy, procedures for grievance redressal.
- Details about the committee to be set up for employees redressal.
- Policy for disciplinary issues, sexual misconduct or harassment at workplace.
- Provide a job description document outlining roles and responsibility of each individual. For example, XYZ is a famous Pizza chain. When they set up a new franchisee outlet it would need a restaurant manager, kitchen staff, cashier, delivery staff, waiters, janitors, security staff, building maintenance staff. The operations manual should contain details of the total number of staff required under each category, roles & responsibilities defined for each of them.
- Include pictures of uniforms for the staff.
- Provide a list of contact personnel in the franchisor's head office with details such as name, designation, role, contact number, email address and complete office address.
6. Thoroughly review your document
Once the manual is ready, review it thoroughly. It is advisable to get your legal team to review it as well. Make sure the layout and formatting is consistent throughout and the branding is prominent. A professional looking document will create a good impression on the potential investor and ensure that all guidelines mentioned are adhered to.
7. Publish the franchise operations manual
Publishing the manual digitally or in the traditional way is up to the brand. A franchisor may choose to get multiple print copies of the manual and distribute it to all its franchisees and agencies or publish it on an online portal or other secure space that franchisees have access to.
Points to remember when writing an operations manual
- Writers should be experienced: Writing a franchise operations manual is a time consuming and daunting task. It is a long, exhaustive and detailed document. Writing the operations manual requires time and knowledge of what to include. Hiring an experienced writer of franchise documents is a good idea. The writer can provide valuable inputs and help create a bespoke franchise document customized as per your brand's vision. Hiring a professional writer can safeguard you from misunderstanding or any issues that may arise due to an incomplete or inaccurate franchise operations manual.
- Attention to detail: Primarily an operations manual provides detailed information about the points that have been already mentioned in the franchise agreement. For example, the franchise agreement will have a list of franchisee obligations, the operations manual will elaborate how each of the responsibilities have to be met and fulfilled.
- Easy to understand: The franchise operations manual should be written in a simple to understand language and be unambiguous. A manual does not need a very polished and sophisticated language, it should be written in a language that can be understood by a wide variety of people and give franchisees all the information they need. The manual should also not be persuasive, and while the information in it can be customized towards potential franchisees, it should not be used to sell the franchise to them.
- Legally protect the manual: The operations manual is like a guide book of any business. It contains all the techniques, secrets and traits that make a brand successful, protecting the document against misuse is imperative for any franchisor. It is also important to consider liability issues when writing the manual, so it is advisable to consult an expert in franchise law and a professional editor.
Why does any business need an operations manual?
An operations manual helps maintain standards across the business network. People come to a McDonald’s or a Subway or a Domino’s because of the reputation these brands have and also expect a certain standard of products and service.
They also tend to associate a particular look and feel of the place with each brand. To be successful a brand operating on a franchise model needs to ensure uniform services at each of its franchisee’s as well as owned outlets.
The success of the brand is largely dependent on this uniformity. If this uniformity is not maintained, the brand’s reputation is likely to suffer mainly because of the following two reasons:
- The business will be perceived as unprofessional.
- If there is inconsistency even in one branch and the products and service are sub-standard, customers will associate the brand with such sub-standard levels. As a result they may avoid going to outlets in the franchise network and advise their friends and family to do the same.
Maintaining uniformity and consistency across the network is the top-most priority and instrumental in success of the franchise business model. Look at Subway or McDonald’s, no matter which corner of the world they are in, customers know what to expect at these places.
Customers across the globe enjoy the same taste and get a similar experience. In the absence of an operations manual, it would be impossible to maintain such uniformity and standards.
Operations manuals also ensure that all franchise units have the same IT systems, financial processes and health and safety procedures making tasks like incorporating information on communications and performance records into a single centralised system controlled by the franchisor a lot easier.
If franchisees are allowed to use their own software and run business according to their specifications, it would lead to significant issues and disparity across different units. It will also be a challenge for the franchisor to manage the franchise as a whole.