Franchise Package Elements – The Operations Manual

What you need to know about compiling an effective Operations Manual before embarking on your franchise expansion plan.

By Lindy Barbour

In our previous article we discussed the importance of a proven pilot and the franchise package elements as the key ingredients in the franchise expansion plan. In fact, the franchise package elements are critical to the franchisor’s ability to establish and maintain a successful and prosperous relationship with his franchisees.

The franchise package should include the following:

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

Over the next several issues we will be addressing the elements of the franchise package individually and we start off by taking a look at the Operations Manual. As franchise consultants we are often contacted by prospective franchisors labouring under the impression that they only require a Franchise Agreement in order to pursue their franchise expansion plan. However, the Operations Manual and other elements of the franchise package are critical and will, hopefully, in the best interests of ethical franchising, eventually be required by law.

The Operations Manual should incorporate all aspects of the business system as well as the intellectual property the franchisor is transferring to the franchisee. In short, everything a third party would require to run the business successfully. A franchisee investing in your brand and business is paying a premium for the ‘homework’ already completed and the ‘school fees’ already paid. These lessons, however, are of no use unless the best practices and templates are documented in a user-friendly format. Even though as franchisor you should be available on an ongoing basis to fulfil the role of business advisor, it is the Operations Manual that should contain all the day-to-day information required for running the business.

A typical error when compiling an Operations Manual is a manual that contains only operational practices specifically related to the franchised business. The Operations Manual of a quick service restaurant, for example, should not only include the menu and the recipes, but should incorporate business management sections such as:

- Financial management;
- Key performance ratios;
- HR/IR;
- Customer service;
- Stock management;
- Sales and related targets;
- Marketing (including local area marketing);
- Supply, including procurement and ordering;
- Emergency procedures; and
- A directory of all relevant contact details.

It is also advisable to incorporate a ‘pre-opening’ section in the Operations Manual detailing 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 and with a clear timeframe or countdown to opening.

An all-encompassing Operations Manual detailing all the policies and procedures required to operate the business is an integral part of managing franchisees and the consistency of the business format. It is far easier to enforce policies and procedures if they are clearly set out. The Operations Manual is a living document and should 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. Furthermore, the Operations Manual forms the basis for the franchise training.

It is important that the manual be compiled in a user-friendly format that suits the business and the profile of the operator. While there is no golden rule for compiling an Operation Manual, consider that bullet points are easier to read than long, drawn out sentences and templates for reporting and other documentation should rather be included as annexures and not form part of the body of the document. Also consider that your business may require more visuals, diagrams or flowcharts than words, and remember that size is not directly proportional to quality.

When it comes to the format of the manual, some franchisors opt to make it available electronically, via an intranet or via the web with password access. This is usually accompanied by tools such as easy search options and help button functions to make it easier to use. Hard copies, if this is your preference, can be made more user-friendly by dividing it into colour-coded sections. Either way, franchisees should be required to acknowledge the receipt and 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) and tackle it one section at a time. Start with the sections that are most crucial to the success of the business. You may decide to draw on the expertise and resources at your disposal by assigning certain sections to different people within the existing business. If you already have a network of franchisees, engage them by assigning sections based on where identified pockets of best practice exist. You may even 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. A good Operations Manual is the heart of your business and the key to success for your franchisees – take care to ensure it is user-friendly and relevant to your business!

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www.franchize.co.za
lindy@franchize.co.za
+27 11 803 0665