The relevance of the operations manual

Is a comprehensive and up-to-date operations manual an indispensable part of every franchise package, or is it merely a ‘nice to have’? 

By Kurt Illetschko

In this two-part article we examine the role of the operations manual and its importance in franchise networks. We also explain what an operations manual should contain and provide guidelines for its compilation and ongoing maintenance.

The status quo

Practically everyone involved with franchising pays lip service to the notion that without an operations manual (manual) there can be no franchise. In my experience, this noble sentiment doesn’t stand up to scrutiny. Franchisors who provide their franchisees with a manual that has been professionally compiled and is meticulously kept up-to-date to reflect current operating practices, are in the minority; the vast majority are less diligent.

I accept that every franchisor has a manual of sorts but in most cases its usefulness leaves much to be desired. Most of the manuals I have come across were placed into a locked cabinet soon after they had been compiled, allegedly to protect them from the prying eyes of competitors, soon to be forgotten. Updates were never done.

It is only when prospective franchisees ask to see the manual that it is dusted off and placed on controlled display. Most franchisors have a strict policy in place to the effect that before prospective franchisees are permitted to see the manual, they have to sign a secrecy undertaking. Even then, the manual will be shown to them from a safe distance. It is only after the franchise agreement has been signed that the franchisee receives a copy of the manual, with strict instructions to protect its confidentiality.

Suitably impressed, the franchisee keeps the manual under lock and key as well. The first few times he/she encounters operational problems they will pull it out of their safes and try to find the information they require. More often than not, the manual will fail to adequately address their specific problem, leading to disillusionment. Franchisees soon realise that it is more effective to phone someone at the franchisor’s office and ask them to solve the problem. This approach wastes a lot of time but this is not where it ends. When franchisees can’t get hold of anyone on the spot, they tend to improvise. One shudders to think what this can do to the reputation of the brand and the franchisee’s profitability.

The diagnosis

What we have here is a classic chicken-and-egg situation. Franchisors claim that they don’t bother too much with their operations manuals because, in their experience, franchisees don’t refer to them anyway. Franchisees agree but point out that this is only because the manuals are poorly compiled, incomplete and often hopelessly out of date. So what has gone wrong and how can we fix it? More importantly, is it worth fixing?

The legal position

Since 1 April 2011 when the Consumer Protection Act (CPA) came into effect, franchisors are under an implied obligation to have an effective manual in place. I am saying ‘implied’ because neither the CPA itself nor its Regulations make reference to the manual. However, the CPA clearly stipulates that franchisors are obliged to provide adequate training and render reasonable operational assistance to their franchisees.
Without a proper manual in place, delivery of training and adequate support will be difficult to prove, and should a disgruntled franchisee assert before the Consumer Tribunal or a Court of Law that the business failed because the franchisor did not provide reasonable assistance, it would be difficult to prove them wrong. This could result in serious legal, financial and reputational consequences.

The CPA regulates what a franchise agreement must contain. Accommodating these requirements sees to it that the typical franchise agreement is 75 to 100 pages long. Would one incorporate operational guidelines as well, the agreement would balloon to several hundred pages. Worse still, should the franchisor wish to make even the smallest operational change, it would necessitate a formal amendment to the franchise agreement, requiring the consent of both parties. This is clearly an impractical proposition.

Experienced franchise lawyers have recognised this and increasingly use the manual as an extension of the franchise agreement. The franchise agreement sets out the salient points of the arrangement in principle, with reference to detailed guidelines contained in the manual regarding implementation.

The advantage of this approach is that within the framework created by the franchise agreement, tactical changes can be made by means of a simple update to the manual. However, unless the manual has been expertly drafted and kept up-to-date, franchisors who are taken to task by disgruntled franchisees will find themselves at a serious disadvantage.

The solution

The solution is straightforward. Both prospective and established franchisors need to ensure the initial comprehensiveness and ongoing relevance of their manuals. For prospective franchisors, this means that the task of compiling the manual becomes a mammoth one. Established franchisors should have their manuals reviewed to ensure that they are in fact sufficiently detailed and also reflect current practices applied in their networks.

While manuals have always been important, the CPA indirectly increases their relevance to the successful operation of a franchise. Ideally, the manual should be written by an expert manual writer who knows what needs to be covered and how to present complex processes in simple language. Subject to the necessary resources being on-tap, the job can be tackled in-house and in the next issue I will provide step-by-step guidelines on how to do so. I must caution that, should the DIY option be chosen, the end product should be reviewed by an expert before distribution because much is at stake. Franchisors depend on the manual to promote systems efficiencies and safeguard brand integrity while franchisees expect it to help them grow their investment.

Manual Makers
franchise@intekom.co.za
+27 11 704 1838