If it Isn’t Written, it Isn’t Performed
Documentation of a franchise
There are really only two types of documentation you require to be a franchisor; a Franchise Disclosure Document and an Operations Manual. However, these two documents are the lifeblood of your business, your franchisees’ business, your brand consistency, and your ability to achieve and maintain franchise consistency.
Franchisor documentation matters because franchising turns one company’s way of doing business into a system other people must be able to understand, follow, and replicate. The Franchise Disclosure Document explains the franchise offering and legal relationship. The Operations Manual explains how the business should be operated. If those documents are weak, incomplete, or disconnected from the real business, the franchise system starts with avoidable confusion.
The Franchise Disclosure Document
If you are considering franchising your business, you likely already know in general what an FDD is. Though it goes beyond the scope of this website to address every segment of a franchise disclosure document, the book How and Why to Franchise Your Business dives into the details about each segment of the FDD.
The Difference Between The Franchise Disclosure And The Franchise Agreement
The franchise agreement is contained within the franchise disclosure document, but is really a completely separate document. The Disclosure section of the FDD is all about disclosing the history of the franchisor and the key terms of the franchise relationship. The franchise agreement is the legal document which governs the relationship between the franchisee and the franchisor for the term of the franchise. Early mistakes in either of these can cause long-term problems within a franchise system. This is one of the key reasons why seeking experienced counsel is so important!
The Operations Manual
The Operations Manual is the document that guides the franchisee day-to-day in operating the business. It should address overall business concepts, operational concepts, and franchise-specific requirements, for example:
Business-Specific:
- Corporate Structure
- Finance
- Hiring Procedures
- Licensing
Operations-Specific:
- Marketing
- Pre-opening Checklist
- Closing Checklist
Franchise-Specific:
- Trademark requirements
- Reporting and Audits
- Transfer and Renewal
- Resale
These lists are by no means exhaustive; a good rule of thumb is that any operation that a franchisee or an employee will perform at least once a year should be documented.
Having each and every process documented not only allows for brand enforcement and consistency, but also removes ambiguity in exactly what the expectations are for the franchisee.
The segments of the Operations Manual should be written by either the individuals who actually perform the duties or a management team member who has held that position. This person should receive direction and a template from an individual or team tasked with the creation of the overall document. Centralized oversight is necessary to ensure that the individual processes and procedures come together as a cohesive document.
This can sound like a daunting process, and though it is not an easy undertaking, a good franchise consultant can help guide you through it in a reasonably quick and painless fashion.
The best time to think seriously about documentation is before you are trying to support franchisees at scale. If your process is not written down, it is hard to teach. If it is hard to teach, it is hard to inspect. If it is hard to inspect, it is hard to improve. That is why documentation is not just a legal or administrative step in becoming a franchisor. It is part of building the operating foundation of the franchise system.
The Book on Franchising
Written by our President Michael Peterson, this book was written to be the go-to for a new or would-be franchisor. It was written with someone from outside our industry in mind. It delves deeply into such topics as preparing to become a franchisor, the legal repercussions of franchising, how to recruit the right candidates, and how to manage a franchise system.
How and Why to Franchise Your Business will guide you in building a successful team of experts to help you create the stellar franchise brand that you dream of! If you just want to pick it up, here are the paperback and Kindle versions on Amazon.
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