How a Franchise Agreement and a Franchise Disclosure Document differ
There are two documents that are of vital importance...
One of the hallmarks of good franchise systems is that they have invested significant time and money in the development of standard operating procedures and policies. These operating procedures are most commonly detailed in a series of operations manuals that a franchisor will lend to its franchisees to use in the day-to-day operation of his/her franchise.
One of the great values of acquiring a franchise is obtaining the right to use the franchisor's operating procedures as they are detailed in the operations manuals. As such, anyone who is considering acquiring a franchise will want to ensure that the franchisor has well developed operations manuals. Those manuals may be in binder form, on disk or even available through internet access or some other electronic means, although the form of the operations manuals is certainly not as important as the content. What a prospective franchisee should ensure is that the franchise system in which he or she is considering acquiring a franchise has actually spent the time, money and effort to develop detailed and well thought-out operations manuals.
The contents of operations manuals will vary between franchise systems. In essence, good operations manuals really are a detailed roadmap of how the franchise is to be operated on a daily basis and provides a resource to franchisees with respect to practical issues that may arise in operating a franchise. Commonly, operations manuals will detail such things as:
- The design, décor and construction specifications of the franchise
- Mandatory hours of operation
- Approved product lists
- Approved or recommended supplier lists
- Details on how financial reports must be prepared and how they are to be provided to the franchisor
- Product preparation, ingredients and contents
- Human resources, including hiring and dismissal of employees
- Employee policies and job functions
- Training of employees
- Accounting requirements
- Safety and security policies
- Cleaning and sanitation
- Customer satisfaction policies
- Return policies
Some franchisors will allow a prospective franchisee to review the contents of their operations manuals prior to actually signing a franchise agreement as long as the prospective franchisee agrees to maintain the confidentiality of the contents of the operations manuals. Other franchisors will only allow franchisees to review an index to their operations manuals as they are concerned about protecting the value of their operating procedures for not only themselves but for the benefit of their system franchisees.
The real key for a potential franchisee is less about reviewing the operations manuals in detail but knowing that detailed operating procedures are in place and that these procedures are working and a benefit for the current franchisees of the system. This information can be easily obtained by a prospective franchisee by speaking to current franchisees about their experience with and the value of the operating procedures and policies of the franchisor.
