Franchise Operations Manual, everything you need to know
To get to the bottom of this very sensitive topic for the functioning of any franchise, let us start with a first question:
What is the Franchise Operations Manual?
Without wishing to be blasphemous, the operations manual is to franchising what the Bible is to Catholics. In fact, it is an essential document because it describes, in precise detail – when done well – procedures, practices and guidelines that franchisees must follow in order to run a business, respecting the franchisor’s directives.
To be best realised by the franchisor, an operating manual must comply with three rules. The first: it must be clearly written in simple language because this is the only way to avoid misinterpretation. The second: be detailed in its content and in the course of this article we will find out what it contains. Furthermore, for the series, ‘the eye also wants its part’, the aesthetic component is important. We refer, in particular, to the layout, which must be clean and supported by graphics and other expedients that make it easier to read.
What is the “know-how”?
The operating manual becomes the document that allows an initial transfer of know-how. The latter is to be understood as the repertoire of knowledge and experience, relating to the business model and all organisational, technical and promotional aspects, that the franchisor makes available to its franchisees. The transfer of know-how is one of the most delicate activities in a franchise, so much so that it is decisive in the success of the chain. Moreover, know-how helps us to remember that franchising is not just a contract between two parties, but an operational model, already tested, tried and tested, and which is transferred by an entrepreneur in order to strengthen the business and help it scale quickly.
What should it include?
If the franchisor has a secret, rest assured that it will be contained in the operating manual. It is precisely for this reason that this document is provided by the franchisor to the franchisee only after the contract has been signed with all the safeguards that this guarantees regarding confidentiality and the sanctions provided for the disclosure of relevant documents.
Having said that, let us look specifically at all that an operating manual must include. First, the description of the business, with a focus on the franchisor’s mission and values. Then another aspect it includes is the standards for brand use (logo, colours and marketing and communication material).
It then goes into the specifics of operations with practical information on opening and closing the shop, how to manage stock and sales procedures.
An operations manual also contains guidance on how to select, train and manage staff, customers and complaints. It also contains information on marketing strategies and promotional programmes, administration and finance. And again on quality control procedures and compliance with the standards set by the franchise. Here is a skeleton of a potential operating manual. You can view it by clicking here.
How much does it cost to produce an operating manual for franchising?
From what we have written so far, it is evident that there is a lot of work behind the production of an operations manual, but how much does it cost to produce it?
Let us imagine that we have launched a format that is in its infancy. On average, the production of a manual by an external company can cost around EUR 10,000. However, when we are talking about a business that is just starting out, with a simple business model that will have between eight and nine steps to be analysed, the cost can even drop by almost half (6 thousand euros) taking into account the low complexity of the business.
One rule always applies: better to spend more before than to have (many) problems afterwards. As we shall see in the next paragraph, making gross errors in the drafting of an operating manual can cause the franchisor great legal headaches.
Why is it risky to rely on a ‘do-it-yourself’ operating manual and what consequences can it have?
Capita che molti ci chiedano cosa succede se stipulano dei contratti senza aver realizzato prima un manuale operativo. Questo è un approccio che noi sconsigliamo perché se non possiedi un manuale significa che non sei riuscito a trasmettere il tuo know how che, come abbiamo detto in precedenza, rappresenta il pilastro che regge tutto il tuo progetto di franchising.
Inoltre, c’è da considerare i rischi legali. Il manuale operativo va considerato infatti come un’estensione del contratto di franchising ed è fondamentale a fini giuridici. Per capirlo, basta osservare quali sono le cause più ricorrenti per cui franchisor e franchisee finiscono in un contenzioso giudiziario e spesso il motivo è proprio il mancato trasferimento del know how, che viene definito nel manuale operativo e poi successivamente nelle attività formative previste dal franchisor.
Insomma, se hai realizzato un buon manuale operativo, puoi stipulare dei contratti che sono legalmente inattaccabili.
FAQ Section
Law No. 129 of 6 May 2004 sets out the rules defining the commercial franchise contract between franchisor and franchisee. It explicitly refers to know-how as an integral part of the commercial affiliation contract. Specifically, the regulations explain that:
“Know-how, considered as a complex of notions or in the precise configuration and composition of its elements, is not generally known or easily accessible; by substantial, that the know-how comprises knowledge indispensable to the franchisee for the use, sale, resale, management or organisation of the contract goods or services; by identified, that the know-how must be described in a sufficiently comprehensive manner, such as to make it possible to verify whether it fulfils the criteria of secrecy and substantiality.
As we have seen, the operations manual is the essential document for the transfer of know-how from franchisor to franchisees.
There are several reasons for the positive impact of an operations manual on a business. Three are the most important.
An operations manual promotes the standardisation of activities. Common, shared rules ensure that all branches operate uniformly, maintaining the same quality and service standards, while reducing the likelihood of operational errors.
An operating manual facilitates franchise expansion. Having standardised processes makes it easier to replicate the business model by opening new outlets.
An operations manual avoids conflicts. The existence of a written document that defines the roles and responsibilities of the parties involved in a franchise reduces potential conflicts and also improves cooperation between franchisor and franchisee.
An operations manual should not be thought of as a static document, but as a text that can change over time, according to changes in three fundamental areas for any business: customer habits, market developments, and technological transformations. To ensure that an operating manual is always up-to-date, a franchisor can adopt various strategies. It can, for example, create a multidisciplinary team (marketing, operations, human resources) that highlights the model’s transformations over time. To keep it up-to-date, a franchisor may also involve franchisees, through surveys and questionnaires, to understand, for example, how to improve operating procedures. Or it can work on training by taking courses in the sector to anticipate market or technological trends, or participate in events and seminars to gather new information that can then be implemented in the business model.
Un manuale operativo non va immaginato come un documento statico, ma come un testo che sa mutare nel tempo, in base ai cambiamenti in tre aree fondamentali per ogni business, le abitudini della clientela, le evoluzioni del mercato, le trasformazioni tecnologiche. Per far sì che un manuale operativo sia sempre aggiornato un franchisor può adottare diverse strategie. Può, per esempio, creare un team multidisciplinare (marketing, operation, risorse umane) che evidenzi le trasformazioni del modello nel tempo. Per aggiornarlo, un franchisor può anche coinvolgere i franchisee, attraverso sondaggi e questionari, per comprendere, per esempio, come migliorare le procedure operative. O ancora può lavorare sull’ambito della formazione seguendo corsi nel settore per anticipare delle tendenze di mercato o tecnologiche, o ancora partecipare a eventi e seminari per raccogliere nuove informazioni da implementare poi nel modello di business.
Since the operating manual is one of the tools used to transfer know-how, certainly in order to assess its effectiveness a franchisor can take into account a number of key performance indicators, so-called KPIs, ranging from sales and profits to the measurement of customer satisfaction. However, since it is a tool designed for franchisees, the best way to assess its effectiveness is to give franchisees the opportunity to gather feedback on the clarity, usefulness and practicality of the information (through surveys) and then organise meetings to gather suggestions for improvement.