For any business owner that wants to begin operating under a franchise model, developing an operations manual is a significant step. The franchise operations manual is not a legal document in itself. However, it runs through specific details of how the franchisee should run a franchise through practical explanations of the day-to-day operational tasks.
The Operations Manual Can Bind a Franchisee
As noted above, the operations manual is not a legal document. That being said, it is standard practice for the franchise agreement to refer to the operations manual. Through this reference, the franchisee may also be bound by the terms of the manual as it forms part of the contractual terms of the franchise agreement. How the operations manual is drafted is then critical, and it is important to delineate the content that the franchisee should take as recommendations and the content that a franchisee is obliged to follow. Recommendations can come in the form of a description of your franchise’s core values whereas obligations can come in the form of key performance indicators.
What Should I Include in the Operations Manual?
The operations manual is usually quite detailed and includes aspects of the business that are needed to maintain consistency among all franchisees. When developing your operations manual, you should begin thinking about the following areas:
- Products (what can/cannot be sold);
- Suppliers (where can a franchisee purchase products);
- Prices for goods and/or services;
- Use of any software;
- Use of technological equipment;
- Marketing strategies;
- Performance targets; and
- Compliance standards.
When Should I Provide the Operations Manual?
As the operations manual usually includes details that are confidential in nature, many franchisors are hesitant in providing the operations manual to potential franchisees in the first instance. After the franchisor can gauge better the seriousness of a potential franchisee, they usually provide the franchise agreement and disclosure documents before providing the operations manual. As an extra precaution, many franchisors require the potential franchisee to sign a confidentiality or non-disclosure agreement before providing a copy of the operations manual.
The franchise agreement and disclosure document are not the only documents that a potential franchisor will need to set up their franchise. The operations manual is often one of the most detailed and comprehensive documents that need to be prepared, and the franchisor should take their time to ensure that the document is as detailed as possible.
Questions on how to draft your franchise’s Operations Manual? Let our franchise lawyers know on 1300 544 755.