The profitability of each franchise depends on the franchisee successfully absorbing the franchisor’s know-how and faithfully replicating the business system uniformly across the network. It’s no overstatement to say that a true business-format franchise cannot exist without a practical, effective operations manual.
Author: Penny Hopkinson, Founder of Manual Writers International
A franchise is a business relationship between a franchisor and a franchisee. The franchisor is the owner of an established business who offers to sell or licence their business model to the franchisee. The franchisee is the person or entity who buys into that business model and agrees to operate it according to the franchisor’s specifications.
Franchisees must receive appropriate support and guidance from the franchisor to achieve operational excellence in all business areas. Support includes initial, ongoing and development training and the operations manual, which focuses on success and profit through continual improvement – the constant effort to improve processes, products, and services.
Why provide an operations manual?
After the franchise agreement has been signed, the operations manual is the essential tool in the franchisee’s box to set up the new franchise and run the business daily. A comprehensive, practical, up-to-date manual is at the heart of every successful franchise.
It is a comprehensive guide for the franchise owner/manager and their team on how to:
- Conduct business ethically.
- Create a secure, profitable, and lasting business.
- Protect the franchisor’s system and the franchisee’s investment.
- Maintain quality standards and consistency of products and services.
- Guarantee that the brand is presented professionally and consistently.
- Work together more efficiently and effectively – i.e. franchisees can potentially do less and accomplish more.
- Implement an ongoing monitoring system to ensure quality management and compliance.
- Avoid recruiting team members who do not share the same traits and values as the franchisor.
- Troubleshoot problems and find solutions.
- Resolve any disputes between the franchisor and franchisee, such as breach of the agreement.
- Renew the franchise term or sell the business.
Further, the process of documenting the franchisor’s know-how and the business system allows you to:
- Hone and sharpen your business model.
- Emphasise the value of the franchise offered to your franchisees.
- Be precise with who is a good fit (or not) for the business and how best to engage with them.
Creating an operations manual also protects the franchisor’s Intellectual Property (IP) because it will be copyright protected.
Some franchisees may argue that the operations manual is written merely to protect the franchisor. But this is not true of any ethical franchisor with whom I have worked to create a new manual, upgrade or convert one.
While a well-written operations manual needs to underpin the franchise agreement obligations with which all franchisees must comply, it must be balanced by documenting those obligations with which the franchisor must comply. Central to these obligations is confirmation in the manual that you will support your franchisees with advice and guidance because you want them to succeed – and become profitable.
What happens if you don’t have an operations manual?
If you don’t provide your franchisees with an operations manual:
- Because it is a contractual obligation, you will breach a fundamental requirement of the franchise agreement when the first franchisee signs up.
- If there’s no operations manual, you will also be in breach of the franchise agreement because you won’t be able to reflect any changes, modifications, or techniques to the content and keep it up-to-date.
- Your know-how and the business system will be unprotected, and anyone working in the business can steal your ideas to start a similar business. It can be challenging to prove that they are ‘passing off’ the franchisor’s business concept and operations as theirs.
Your franchisees won’t be able to take full advantage of your know-how and faithfully replicate your business system. So, they will use their interpretation which may be wrong. Almost certainly, your system will not be applied uniformly across the network – the basic concept of a successful franchise. Franchisees are likely to be off-brand, leading to confusion among customers if different messages, logos and non-standard colours are used in marketing and promotion.
The repercussions can be catastrophic. Say a franchisee fails to operate according to the laws and regulations covering all food businesses that protect the consumer in many parts of the world because these businesses are considered a potential danger. The franchisee operates purely on instinct and what they know from cooking at home. An elderly customer becomes ill with food poisoning after eating a chicken sandwich – and dies – because of cross-contamination. The franchise is closed by the local health authorities, and the franchisee is prosecuted and fined. This is reported in the local, regional, and national news resulting in permanent damage to the brand.
Customers must be 100% confident that the outlet prepares and serves excellent safe food the first time, every time, in a hygienic risk-free environment. Therefore, the franchisor should have operated and fully documented a comprehensive food safety management system across the whole food supply chain – from growers or manufacturers, through distribution and preparation – to the customer’s plate.
How do you define know-how?
Know-how is defined as confidentially or closely held information. This will be in the form of technical data, formulas, standards, technical information, specifications, processes, methods, handbooks, raw materials – i.e. all information, knowledge, assistance, trade practices and secrets – and improvements.
An established franchisor’s know-how will have been accumulated over many years – much of it learned the hard way. Know-how will likely be scattered like confetti in files across a digital network. Even in a mature franchise, much good content may reside in a team member’s head. In a newly established franchise, know-how may live purely in the founder’s head. Therefore, asking the right questions to obtain this content is key to getting the information necessary to replicate a process faithfully.
What is a business system?
The business system is how the franchisee will meet customer expectations by implementing a systematic approach to analysing, measuring, comparing, and testing all the possibilities of what the customer wants – or doesn’t want. A robust business system, capable of surviving the highs and lows of a business cycle, is at the heart of any high-performing franchise model and should provide the franchisee with a process to fix their operations – e.g. by performing internal or external audits.
A sound business system will help the franchisor and franchisee reduce costs and prevent the erosion of profits. Applying it to safety, hygiene, quality, or getting the job done promptly will give them practical, efficient, and repeatable results. It should also provide a clear plan to develop the business and improve top-line performance.
A sound recruitment system, for example, will aim to retain team members for longer and provide suitable training and techniques that enable them to complete their work more efficiently and effectively. Procedures should allow the franchise to integrate new team members swiftly and make it easy for them to understand their role within the franchise. Being able to suggest new ideas to improve the business is critical. Franchisees should seek to harness their team members’ views and creativity and, in the process, increase their engagement.
How the complete business system works should be rigorously tested and improved. Mistakes will have been made – and corrected – so that the franchisee can benefit from their first day to their last.
What are standard operating procedures?
The franchisor’s know-how and business system will be presented in the operations manual as a structured set of Standard Operating Procedures – commonly known as SOPs. SOPs capture organisational knowledge for all repeatable core processes. The franchisor’s objective is to ensure that the franchisee gets a reliable result – the first time, every time. To quote Aristotle: ‘We are what we repeatedly do. Excellence, then, is not an act but a habit’.
An SOP needs to be flexible, take what is good and working well, and improve upon it. When replicated across a franchisee network, this results in three powerful interdependent pillars of a franchise:
- Quality
- Consistency; and
- Conformity
Quality is everything that adds up to providing complete customer satisfaction so that the franchisee can build on the franchisor’s desire to be the customer’s No.1 Choice – e.g. extensive choice of locations, highly trained personnel, longer opening hours. It is superior in knowledge, selling skills and all-around professionalism, essential in communicating the franchisor’s vision and brand values – it’s their DNA. This will lead to more loyal customers who become great brand advocates. – and ultimately, raving fans for life. A raving fan is more loyal, spends more, and refers more unsolicited leads.
Consistency needs to be applied to every process – i.e., the people the franchisee recruits, the training they provide, and the services and products they sell. However, these processes must be sufficiently flexible to cope with potential external economic, political, legal, demographic, social, competitive, global, and technological influences affecting a business’s smooth running. A perfect example of multiple effects is the Covid-19 pandemic.
Regulatory compliance and compliance with the franchisor’s requirements and policies form the bedrock of a franchise. The franchisee’s obligations and those of the franchisor will be set out in the franchise agreement. However, it is the job of the standard operating procedures to underpin the terms under which the franchisee will operate with the operational detail necessary for compliance. Non-compliance can be costly when the consequences are financial penalties, court costs, and suspension of services.
Every process should be described using logical, easy-to-follow steps as if the content writer followed the procedures in their mind’s eye. These steps will be tracked as needed, revised continuously – and improved. This is the recipe for efficiency, growth, and profit so the business can scale forward.
What is the difference between operating and operational?
We often hear people asking for what they want, such as ‘good’, ‘the right size, or ‘on time’, ‘regularly’ or ‘frequently’. These words mean something to the person using them. They also mean something to the person hearing them. But will the two meanings be the same? Only the use of operational definitions can guarantee a correct interpretation.
A definition explains what something means. An operational definition does much more. It describes how something should be observed, measured, or decided. Without explanations, ambiguity can quickly arise. The training seeks to qualify operational definitions and demonstrate that only the highest quality service and product standards are acceptable. When initial training has been completed, the operations manual becomes every franchisee’s terms of reference.
However, operational definitions are required to describe sufficiently all the steps necessary to complete a given task to the required quality standards.
An operational process is an organised set of activities or tasks that leads to excellence for a specific service or product. Usually, it addresses what, when, why, who, and how questions.
For example:
- What is the process?
- When is this required?
- Why is it necessary – i.e. outcomes, results and payoffs?
- Who is responsible for meeting the franchisor’s minimum operating requirements – franchisee/manager or specific team member role?
- What are the obligations of the franchisor – e.g. granting approvals?
- What will happen if the franchisee doesn’t conform to the specification?
- How will the process be performed, checked, and measured?
- What tools and resources are available to assist the activities or tasks?
In a food service franchise, the easy option would be to tell the franchisees that cleaning must be done frequently. But this means nothing. The franchisor would need to explain what must be cleaned (kitchen floor, equipment, surfaces), what must be used to clean them (list of approved cleaning solutions), how these solutions should be used, what are the logical steps in carrying out the work, how often cleaning will take place, and at what times.
Operating checklists are convenient as aides-mémoires – e.g. a store standards checklist to be used by the franchise owner/manager to ensure that all jobs are completed.
My franchise is a relatively simple concept. Surely there can’t be many procedures to document?
Franchisors with simple concepts are often surprised when we draw up a comprehensive blueprint for the contents of their manual from the franchise agreement and other Intellectual Property (IP).
When you identify all the critical processes for setting up the new franchise and the daily, weekly, monthly, quarterly, and annual routines that franchisees and their teams must perform to your quality standards which must be measured, analysed, and improved, the information will be substantial.
Operations manual or knowledge management system?
Over the years, manuals have evolved from the paper-based tome of the 80s and 90s, gathering dust on a shelf, to digital content accessed through a password-protected franchisee portal or cloud-based system.
The original hard copy manual was cumbersome and difficult to read and use. Just pages and pages of close type and text with few bullet points, which made reading tiring. No thought had been given to graphic white space. All those headlines in capitals in bold with underlining and copious exclamation marks had put off readers entirely. Franchisees found this condescending.
Updates were a nightmare. Franchisees were issued with a list and hard copies of the updated sheets to insert in the binder and swap out the out-of-date sheets. Many franchisees shoved the new sheets into the front, which fell into a heap and were ignored if the manual was consulted. It became apparent that most franchisees weren’t using their operations manual. But they guessed running the business after initial training, even if they received many customer complaints and recorded a few serious accidents.
The time and costs involved in creating and printing the operations manual in this format were huge. It was disheartening to realise that much of this investment was lost.
By 2008, clients such as Costa Coffee had ceased to print hard copy versions in favour of putting the many volumes of the Costa System for the Brand Partners’ Operational Manual on password-protected CD-ROMs. These were cheaper to produce and easy to distribute. By then, we had developed a tried and tested systematised approach – a three-step methodical approach for creating all operations manuals.
In 2013 we started to explore the use of password-protected cloud-based services such as Dropbox or Microsoft Sharepoint, franchisee portals/intranets, and a Learning Management Systems (LMS) for the AA / BSM Driving School Instructors’ Manual.
The AA / BSM Driving School System consists of tried, trusted, proven processes and operational procedures backed by a century of cumulative know-how and support systems. The AA / BSM Driving School System is much more than an operating framework. It provides franchisees with everything they need to set up, operate, and develop their business as a driving instructor and make them part of the unique AA family. As a small team, the Training Academy did not have the resource or expertise in-house to develop the type of professional operations manual that a premium brand such as theirs demanded.
Our three-step methodical approach for developing all operations manuals breaks down the process into a series of easily manageable tasks. This included creating a structure, acquiring content, and editing the rough draft through to the finished product, and we tailored the process to the AA’s specific requirements. One size can never fit all in a franchise.
This meant spending time upfront to develop a logical, clear, and consistent structure. A key role was to steer and mentor in-house content owners through the process and liaise with the IT department to ensure that the design of the operations manual would be compatible with the LMS.
Today, we organise a franchisor’s know-how and business system using a slimmed-down password-protected Core Operating Brand Standards Manual underpinned by a comprehensive knowledge management system with multimedia. This includes text, audio, images, animations, or ‘how to’ instructional videos converted to strategically placed QR (Quick Response) codes which can be read using a smartphone camera. This provides a single resource that can be updated as and when required. It has proven to be a popular format, and the content is more engaging for franchisees and their teams with different learning styles and levels.
Using hyperlinks strategically, we connect the Core Operating Brand Standards Manual to the vast quantity of digital information held across the network, which has been sifted, organised and streamlined. This makes it easier for franchisees to read and logical to update as and when any amendments or modifications to the business system need to be integrated.
Creating or upgrading an operations manual can be challenging and time-consuming. We start with a user-friendly framework: Introduction, People, Marketing & Promotion, Day-to-Day Operations and Business Development, Growth & Profit.
Briefly, this will cover:
- The franchise’s history, up-to-date market data, the ‘partnership between franchisor and franchisee’, and how to use the knowledge management system. We affirm that the franchisee has made a wise choice and that their business will have the best prospect of success if they follow the franchisor’s business system.
- Minimum Operating Requirements to underpin the franchise agreement and other legal requirements.
- Operational procedures that describe the features – advantages – benefits-outcomes of doing things ‘The [Brand’s] Way’.
- A clear understanding of the difference between standard operating procedures, best practice and guidelines.
- A proven mechanism demonstrates how to measure, analyse, and improve their business – weekly, month-by-month and year-on-year.
- Targeted support demonstrates that the franchisee is never alone and that advice and guidance are welcomed in every aspect of running their own business.
- An up-to-date Resource Library that delivers a ‘goldmine’ of valuable tools to underpin core content – e.g. ‘how to’ instructions, hints & tips, examples, and samples.
- Comprehensive content that is fully searchable to save their time – and yours.
- A simple branded page format, sans serif typeface (font) and sufficient graphic white space to make the content easy to read.
- A seamless updating process that is simple to implement as and when changes need to be made – not three, six or 12 months later.
- A consultation process to engage with franchisees on the content at least twice a year.
- The appointment of a franchisee panel when an upgrade or conversion becomes unavoidable.
Regardless of its format, the operations manual must be fit for purpose – i.e.
- Up-to-date
- Relevant
- Detailed (operational)
- Well written and easy to understand
- Readable (without waffle and jargon)
- Well laid out (a simple page design)
- Easy to navigate (fully searchable)
Access to The Manual will be provided for the duration of the agreement and is for exclusive use by the franchisee/manager and their staff. However, all content remains the sole and exclusive property of the franchisor. Password access will be withdrawn immediately when a team member leaves or the agreement is terminated.
What’s next in the evolution of an operations manual?
Technology can now provide a solution enabling franchisors to facilitate more straightforward operations, manual development, and better engagement objectives. Procedures can be digital, accessible, and easier to exchange. Information is more detailed, more effective, and more efficient. Franchisors can now engage with their franchisees to create, share, and update knowledge in their preferred language using a centralised knowledge-sharing platform and a fast way to deliver behavioural change.
Instead of text-heavy content, the operations manual will be developed via a self-serve content creation process that significantly reduces the cost of manual creation.
For example:
- All precise, media-rich, step-by-step ‘how to’ instructions can be created on any mobile phone.
- This encourages the capture of mandatory procedures and best practice quickly and simply.
- The self-serve content creation process delivers instant knowledge about how to deliver franchise standards day-to-day – at the point of need.
- Instant multi-lingual language capability is in-built for those with franchise operations in non-English speaking countries or with non-English-speaking team members.
- It includes text-to-voice capability – to read instructions aloud for those with reading difficulties.
- It enables franchisors to analyse what works and keep on improving.
- Continuous improvement is easy because information can be updated everywhere instantly.
- Customers typically see a 10 x Return on Investment, with bottom line revenues increasing across all sectors.
- It enables franchisors to better protect and uphold brand values by providing clear instructions on ‘how to’ do ‘this’ at the point of need.
- All data is secure, and only those with password access can see instructions.
- It facilitates audit and accountability – so that franchisors can track who has watched what, where, and when.
We live in a YouTube, Instagram, Tik Tok society. Attention spans have become shorter. If we want to know how to do anything, we search the internet for the answer and find what we want immediately. As people have less time and everything becomes more digital, changes faster, and becomes more complex, franchisors need to employ quicker, leaner, knowledge-sharing solutions. Already this is happening in manufacturing. The revolution in operations, manual development, and franchising, is imminent.
About the author
Penny Hopkinson is the founder of Manual Writers International, established in 1986, to help franchisors create their operations manuals using a simple three-step strategy.In 2011, she was appointed a Companion of the British Franchise Association in recognition of an outstanding personal contribution to the development of franchising in the UK.
Her latest book, ‘Manual Magic: Create the Operations Manual Your Franchisees Need to Succeed’, will be published early in 2023.
penny@manual-writers.com
www.manual-writers.com
Posted: 20th September, 2022