Franchise Operations Manual
Operations Manual
Table of Contents
The content of a custom Franchise Operations Manual is usually more complicated than most people realize. The outline below is only a SAMPLE outline that we use as a starting point to create your custom outline. In the case of a manual rewrite, we would use your existing outline as a starting point and then draw from this outline for missing headings headings or content. You may click on the heading “Establishment of Business Form” below to see a samp le excerpt.
1. 1. INTRODUCTION TO THE MANUAL o
Manual Organization Organization
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Ownership of the Manual
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Purpose of this Manual
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Importance of Confidentiality Keeping the Manual Current
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Submitting Suggestions
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Disclaimer
2. 2. INTRODUCTION TO YOUR FRANCHISE SYSTEM o
Welcome Letter
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History of the Company
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Who to Call
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Overview of Services Provided to Franchisees
Site Selection
Lease Approval
Initial Training
Other Initial Support
Grand Opening Support
Ongoing Training and Support
Suggested Retail Prices
Approved Suppliers Suppliers Marketing
Internet
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Overview of Your Responsibilities
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Visits From Us
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Fees
3. 3. PRE-OPENING PROCEDURES o
Introduction
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Establishment Of Business Form
Business Structure
Overview of Entity Choices
Liability Protection
Income Taxation
Other Factors in Entity Choice
Bottom Line
Where to Form Your Entity
Naming Your Entity
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Assumed Name Certificate
Site Selection Process
Site Selection Criteriaa
Market Analysis
Seeking Approval of Proposed Sites
Lease Considerations
Seeking Approval of Lease
Licenses, Permits and Taxes
Introduction
Business Licenses and Permits
Optional Certifications
Tax Registrations and Payments
State Information Web Sites
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Administration
Additional Resources
Training
Scheduling Initial Training
Initial Training Program
Food Safety Training
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Setting Up Your Facility
Building Out the Facility
Construction Specifications
Required Fixtures, Furnishings, Equipment and Services
POS and Computer Systems
Sign Requirements
List of Approved Suppliers
Initial Inventory and Supplies
Required Items
List of Approved Suppliers
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Utilities / Services
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Uniforms
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Bank Accounts
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Main Business Account
Operating Account
Insurance Coverage
General Insurance Requirements
Minimum Coverage Amounts
Insurance Company Requirements
Grand Opening
Notification
Two Weeks Out – Direct Mail
Soft Opening – Publicity
Week One
Week Two
Week Three
VIP Invites
The First Company Meeting
Pre-Opening Checklist
4. 4. PERSONNEL o
Introduction
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Employment Law Basics
Employee Rights / Employer Responsibilities
Federal Regulations on Employment Relationships
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State Employment Laws
OSHA
Federal Standards
State OSHA Programs
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Preparing to Hire Your First Employee
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Job Responsibilities and Ideal Employee Profiles
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Responsibilities
Profile of Ideal Employees
Job Descriptions
Recruiting Employees
Sources of Employee Candidates
Job Advertisements
Requirements to Advertise Open Positions
Job Applications
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Application Form Confidentiality of Applications
Interviewing Job Applicants
Preparing For Interviews
Conducting Successful Interviews
Questions to Avoid
Background Checks on Job Applicants
General Tips on Background Checks
Special Rules for Certain Records
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Pre-Employment Testing
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Miscellaneous Hiring Issues
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New Employee Paperwork
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Additional Steps in Hiring Process
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New Employee Orientation
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New Employee Training
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Personnel Policies
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Introduction
Communicating Work Rules
Paying Your Employees
Wages
Minimum Wage
Benefits
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Employee Scheduling
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Employee Management Forms
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Employee Morale / Motivation
Introduction
Factors of Good Morale
Signs of Bad Morale
Improving Morale and Motivation
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Performance Evaluations
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Employee Discipline
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Resignation / Termination
Resignation
Termination
Post-Separation Procedures
Final Paychecks
Explaining Termination to Other Employees
Giving References
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Summary of Good Employee Management Practices
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Getting Legal Help with Employment Law Issues
5. 5. DAILY OPERATING PROCEDURES o
Introduction
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Required Days / Hours of Operation
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Customer Service Procedures
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Customer Service Philosophy
Customer Feedback
Customer Complaints
Our Customer Complaint Policy
Refund Requests
Miscellaneous Customer Services
Dry-Cleaning
Lost and Found
Service Procedures
Greeting Customers Answering the Telephone
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Understanding the Product Offerings
Working / Interacting with Customers
Job Descriptions
Suggestive Selling Techniques
Passive Selling Versus Active Selling
Merchandising Procedures
Visual Merchandising Standards
Merchandising Products
Using Signage
Meal Preparation Procedures (This section would apply only to food service businesses)
Prepping Procedures
Setting Up Preparation Stations
Recipes for All Items
Preparation Procedures for All Items
Maintaining Inventory
Dishwashing / Sanitation Procedures
Opening / Closing Checklists
Opening Checklist
Closing Checklist
Transacting Sales
Entering Orders Using the POS System
Cash Handling Procedures
Accepting Personal Checks
Accepting Credit Cards
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Atmosphere
Suggested Prices
Gift Certificates
Issuing Gift Certificates
Redeeming Gift Certificates
Inventory Management
Product Ordering Procedures
Ordering from Approved Suppliers
Changing Approved Suppliers
Product Receiving Procedures
Storing Procedures
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Labeling and Rotating Inventory
Spoilage
Operational and Financial Reporting
Features of the POS System
Generating Reports
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Analyzing Reports Sample Reports
Franchise Fees and Reporting Requirements
Royalty Payment
Marketing Fee
Required Reports
Financial Statements
Loss Prevention Techniques
Cash
Inventory
Required Cleaning and Maintenance
Daily Cleaning and Maintenance
Weekly Cleaning and Maintenance
Monthly Cleaning and Maintenance
Safety Procedures
Preventing Accidents and Injuries
Crisis Management Policy
Reporting Accidents
Worker’s Compensation Issues
Fire Safety
Robbery / Burglary
Unruly Customers
Using the Alarm System
6. 6. SALES PROCEDURES o
Introduction
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The Sales Process
Identifying the Customer’s Needs
Building Rapport with the Customer
Handling Objections
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Understanding Your Competition
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Competitive Advantages
7. 7. MARKETING o
Promoting our Business in Your Area
Your General Obligations
Guidelines for Using Marks
Marketing Standards
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Logo Specifications
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Required Marketing Expenditures
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System Marketing
Local Marketing Requirements
Regional Cooperative Advertising
Grand Opening Marketing
Local Marketing
Introduction
Direct Mail
Radio
Television
Billboards
Magazines
Newspapers
Yellow Pages
Internet
Networking
Word of Mouth / Customer Referrals
Public Relations / Community Involvement
Press Releases
Better Business Bureau
Local Chamber of Commerce
Team Sponsorships
Community Service / Charitable Activities
Obtaining Marketing Approval
8. 8. ADDITIONAL RESOURCES o
Web Sites For Small Businesses
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Web Sites For Organizations
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Web Sites For Employment Laws
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Web Site For Tax Information
9. 9. MANAGEMENT DOCUMENTS o
Daily Cash Sheet
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Absence Policy
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Applicant Information Release
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Sample Applicant Rejection Letter
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Sample Applicant Acknowledgment Letter
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COBRA
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Sample Collection Letter
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Time Spent During Work Hours
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Customer Satisfaction Survey
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Discipline Documentation Form
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Drug Test Consent Form
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Electronic Funds Transfer Authorization
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Emergency Instructions
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Job Application
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General Work Rules
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Holiday / Vacation Policy
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Restroom Inspection Worksheet
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Sexual Harassment Policy
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Smoking Policy
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Termination Meeting Checklist
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Employee Time Records
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Checkl ist For Handling Workers’ Compensation Claims
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Workplace Safety Rules
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Employee Data Form
Establishment of Business Form The following is an excerpt from Section 3 - PRE-OPENING PROCEDURES.
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Business Structure
Before you begin operating the Franchised Business, you will probably want to form an entity to serve as the operator. An entity is a legal fiction which allows a business to take on a separate existence apart from its owners, even though the owners still control the business.
There are many different types of entities recognized by the laws of most states (and by the IRS). However, for most franchisees who choose to form an entity, the best choice will usually be between:
a C-corporation; or an S-corporation; or a limited liability company (LLC). While this section provides some general information about the selection and formation of a business entity, there is no substitute for the advice of an experienced business lawyer and CPA. We suggest that you consult with your own professional advisors for more detailed information on this topic.
Overview of Entity Choices
Sole Proprietorship: If you choose not to form an entity to operate the Franchise Business, then you will be considered a sole proprietorship (if the franchise is owned by a single individual). A sole proprietorship exists when a single individual operates a business and owns all of the assets. A sole proprietor is personally liable for all debts and obligations of the business. Under a sole proprietorship, the life of the business is limited to the life of the individual proprietor. The sole proprietorship makes no legal distinction between personal and business debts, and it does not require a separate income tax return.
General Partnership: A general partnership exists when two or more individuals or businesses join to operate a business. A general partnership is a separate business entity, but creditors can still look to the partners’ personal assets for satisfaction of debts. If the franchise is owned by 2 or more individuals, then the individuals will usually be considered to be partners in a general partnership. General partners share equally in income and liabilities. A general partnership must file an annual partnership income tax return (separate from the partners’ personal returns).
Limited Partnership: A limited partnership is similar to a general partnership, but 1 or more of the partners will be general partners, and 1 or more of the partners will be limited partners. Creditors can still look to the general partners’ personal assets for satisfaction of debts, while the limited partners are usually shielded from this kind of liability. A limited partnership must be registered with the appropriate governmental office (typically the secretary of state’s office or the state department of corporations). A limited partnership must file an annual partnership income tax return (separate from the partners’
personal returns).
Corporation: A corporation is created when two or more individuals, partnerships, or other entities join together to form a separate entity for the purpose of operating a business. A corporation has a separate legal identity from its owners. The
corporation offers protection to the business owners’ personal assets from debts and liabilities relating to the operation of the corporation. A corporation must be registered with the appropriate governmental office (typically the secretary of state’s
office or the state department of corporations). Taxation of the corporation depends on the type of corporation formed.
Limited Liability Company: An LLC is an unincorporated business entity which shares some of the aspects of corporations and partnerships, but which has more flexibility. The LLC is designed to provide its owners with limited liability and passthrough tax advantages without the restrictions imposed on corporations and limited partnerships. An LLC must be registered with the appropriate governmental office (typically the secretary of state’s office or the state department of corporations).
Liability Protection
The most important reason you might want to operate the Franchised Business through an entity (instead of as a sole proprietor) is to shield yourself from personal liability for the debts or other obligations of the Franchised Business. A Ccorporation, an S-corporation or an LLC all offer this type of protection. A general partnership or a limited partnership does not offer this type of protection for all owners.
If you operate the Franchised Business as a sole proprietor, for example, you would be personally liable for all of the debts and other obligations of the Franchised Business. This means that you would be personally liable for unpaid debts (such as rent, wages and taxes), contract claims (such as under supply contracts and service contracts), and tort damages (such as if a customer was injured as a result of your business activities). Most business owners seek to avoid these types of personal liabilities by the use of a legal entity to own and operate the business.
Contrast this example with the situation where the Franchised Business is operated as an entity, such as a corporation or a limited liability company. In this situation, the entity (and not its owners) would be liable for unpaid debts, contract claims, and tort damages. Any lawsuit or other legal action to recover on this liability would be filed against the entity and not its owners. Only the assets of the entity would be at risk for the satisfaction of this liability. (Of course, if there are independent legal grounds for imposing liability on the owners, then an entity cannot shield the owners from the consequences of their own wrongdoing.)
Income Taxation
The method of taxation of an entity can have a significant impact on your decision. For example, C-corporations are generally taxed differently than S-corporations, LLCs and partnerships (but an LLC may be able to choose to be taxed as a C-corporation if it wants to).
A C-corporation is taxed on it s income at the corporate level at special corporate rates. If the C-corporation makes distributions to its owners, then these distributions would normally be treated as dividends and would be taxed (again) at the owners level. This results in “double taxation” of the same funds. For this reason, C-corporations are usually not the most
tax-efficient choice. However, C-corporations do have other tax benefits – namely C-corporations can provide certain types of employee benefits (such as medical benefits, retirement plans, and tuition payments) on a tax-free basis.
S-Corporations are taxed differently. They are not taxed at the corporate level. Instead, they are considered to be a “passthrough entity.” This means that the income (or losses) of the S-corporation are “passed through” the corporation to the owners, who are then taxed at the owner level. So, the use of an S-corporation avoids the double-tax problem. Additionally, S-Corporations are easier to administer. But, they do not qualify for the tax-free employee benefits that C-corporations do. Another benefit of S-corporations is that their dividends paid to the ir owners are exempt from social se curity taxation (assuming that the S-corporation owners are paid a reasonable salary).
General partnerships and limited partnerships are also pass-through entities. They do not pay taxes at the partnership level. Instead the income and losses of the business are passed through to the partners.
LLCs can generally choose to be taxed as a corporation (meaning a C-corporation) or a partnership (meaning as a passthrough entity). Most LLCs choose to be taxed as a partnership in order to avoid the double-taxation problem.
Administration
Corporations are relatively expensive to administer. Additionally, there are fairly rigid rules for maintaining corporate formalities, such as requirements for periodic board meetings, shareholder meetings, corporate minutes, records of shareholders, etc. If the corporate formalities are not maintained, then there is a risk that the corporate entity would be disregarded and the owners could be held personally liable for the corporation’s debts or other obligations. The rules for LLCs, on the other hand, are much more relaxed. LLCs are much easier to administer than corporations.
Other Factors in Entity Choice
There are many factors that can affect your choice of entity. Of course, not all factors are of the same level of importance, and not all factors are important to all people. Here is a list of other factors that may be significant in your decision on forming an entity:
the number and relationship of co-owners; the size and complexity of the entity; and any regulatory requirements relating to the particular business activity. Bottom Line
In most states, LLCs are cheap, they provide the best asset protection, and they have the flexibility to be taxed as a partnership or a corporation. But, you should check with your lawyer and CPA to find out what is best for your particular situation.
Where to Form Your Entity
The laws relating to the organization and administration of entities vary from state to state. Some states, like Delaware and Nevada, have a reputation for being business-friendly, because of state laws that protect the privacy of entity ownership information, low (or no) state taxes, etc. But, unless your business will be located in Delaware or Nevada, there will be little reason for you to form an entity in either of those states. Usually, the best choice is to form the entity in your own state.
Naming Your Entity
If you choose to form an entity and you have determined which type of entity to form, you will need to select a name for your entity. There are restrictions about what name you can use.
Do not use the name that is the same as or similar to the name of another entity that is already registered in your state. This is prohibited under state law. Do not use the words “corporation” or “incorporated” (or any abbreviations of these words) unless your entity is a
corporation. This is prohibited under state law. Do not use any of our Marks in the name of your entity. This is prohibited under the Franchise Agreement. Do choose a professional-sounding name. Your entity name will appear in your contracts and in other places where your customers and suppliers will see it. Do not choose a name that is long or confusing. Do not use profanity or off-color puns in your entity name. Assumed Name Certificate
Regardless of whether you will operate the Franchised Business as a sole proprietorship, corporation, partnership or LLC, you must file an assumed name certificate with the appropriate governmental office. The assumed name certificate is sometimes called a trade name certificate or a fictitious business name certificate or a d/b/a registration. The appropriate governmental office is usually the county clerk, but you may be required to file at the state level and/or the city level. The purpose of this filing is so that the general public will be informed of the registered agent for a business and where official contact with the business can be made.
Each jurisdiction uses a different form. Generally, the required information includes, the name of the business, the street address of the business, the name of the business owner(s), the type of business to be conducted, and the expected period of operation. The expected period of operation should correspond to the initial term of the Franchise Agreement. Usually,
each owner must sign the certificate and all signatures must be notarized. Fees generally range from $10 to $100. In some jurisdictions, you will need to pla ce a fictitious name notice in a local newspaper for a certain amount of time.
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