What is a Franchise Operations Manual?

Picture of Schuyler "Rocky" Reidel

Schuyler "Rocky" Reidel

Schuyler is the founder and managing attorney for Reidel Law Firm.

What is a Franchise Operations Manual?

Every franchise system needs a well drafted operations manual in place to grow and attract franchisees. The operations manual for a franchise covers all aspects of the business and provides the knowledge any franchisee needs to operate the business. It is where the franchise system explains its rules, standards, specifications, and procedures for any task in the business. Standardizing your franchise system with the help of well prepared operations manuals are a key to success for franchises of any size. Generally, the more time and effort put into developing your operations manual, the more successful your franchisees and therefore your franchise system will be.

An operations manual should be thought of as an asset to your franchise system. It is at the core of the intellectual property of how your business is structured and operates successfully. The manual should be written in a manner that is easy to understand, even for people not familiar with your industry. A typical franchise operations manual will include all the requirements for a franchisee to follow including: legal requirements for business structure, permits, etc., opening and closing procedures, accounting procedures, inventory management, personnel matters, liaison with franchisor, and other unique procedures for the franchise.

The first part of your operations manual should be the introduction, which explains how to use the manual and what other training materials or contact persons are available. It is good to explain the basic mission, history, and principles of the company here as well. After the introduction it is sometimes best to organize the manual in a chronological order. As franchisees are beginning the process to open up a unit, they often appreciate a week by week timeline of the tasks they should be accomplishing to get their unit open and making money. Many franchise operations manuals have milestones for each week for the franchisees to meet as they becomes initiated into the franchise system.

Next is the standard daily operations. A well drafted and thorough operations manual is essential to keep your franchisees standardized and high quality. This can include the food portions, food preparation process, recipes, and even the order lead times required for a food franchise. Other industries may include lead acquisition methodology, marketing, and inventory management. Anything that your franchise system requires as a standard procedure for your franchisees should be included here. Some franchisors next choose to offer comprehensive guidance on employing staff for the franchisee’s unit. Sometimes this results in legal obligations for the franchisor, so be sure to have a franchise attorney review this section and its implications.

A major component of the operations manual will be the guidelines and procedures for the legal business structure and how the accounting and payroll should be handled. The business structure of your franchisees is important for legal liability purposes, protecting both your franchisee and the franchise system itself. The accounting system of your franchise is an important component of how royalties are determined and relayed to the franchisor. The accounting system is often integrated among the franchisor and all franchisees. Some franchises determine royalties on a weekly basis, as most food franchises do, while other choose to report royalties on a monthly basis. Regardless of how you determine how to determine royalties and the accounting for your franchisees, the key is to have a written, detailed procedure for how it will all occur.

Often the last part of the operations manuals details how franchisees can report to their representative with the franchisor. Encouraging your franchisees to report on their experiences with the operations manual will help you improve your system for future franchisees. It is also a good idea to explain how your franchise system will continue to support your franchisees with training programs, marketing, technology, and even research.

While franchising can be an exciting and lucrative endeavor for any entrepreneur it must be approached with a methodical and well planned process. For a free consultation on franchising your business call Reidel Law Firm today at (832)510-3292 or use the contact form below.