Operations manual: what to check before buying a franchise

Buying a franchise means joining a network with a shared way of working. That approach is usually set out in the operations manual: the document that translates the business concept into specific tasks. Before signing, it is not enough to know that it exists. You need to understand the obligations it contains, how it relates to the contract and whether you can meet those obligations at your premises.

1. Check that it describes a workable operating method

An operations manual should do more than explain the brand’s visual identity. Its purpose is to describe how the business is run and replicated: opening and closing, service delivery, customer care, quality control, handling incidents and organising work, depending on the type of business.

Ask for an up-to-date contents list and an explanation of how the material is organised. There may be several documents, appendices or procedures hosted on a platform. What matters is identifying the full set, not just the file labelled ‘manual’.

To assess how useful it is, ask for a demonstration of both a routine process and an exceptional one. For example, how an order is handled and how a complaint is resolved. Check whether each procedure makes clear:

• Who needs to act and what training they need.
• Which steps they must follow and what resources they need.
• Which records or evidence of checks they must keep.
• When they must consult head office.

A sales description is not an operating procedure. If a prospective franchisee receives only general presentations, they cannot yet assess the practical scope of the operating method they are signing up to.

2. Ask for sufficient access without assuming an unlimited right

In Spain, Article 62 of Law 7/1996 on the Regulation of Retail Trade and Royal Decree 201/2010 set out specific rules on franchising. These include the transfer of the franchisor’s own substantial and distinctive know-how, together with ongoing assistance.

Pre-contractual information must be provided in writing at least 20 working days before signing a contract or preliminary agreement, or making any payment to the franchisor. Among other things, it must enable you to understand the characteristics of the franchise and the essential terms of the agreement.

This does not necessarily mean you are entitled to receive a complete copy of the manual before entering into the agreement. It may contain confidential know-how. The Royal Decree itself allows franchisors to require confidentiality in relation to the pre-contractual information provided.

A reasonable solution is to negotiate controlled access: access under a confidentiality undertaking, an in-person review or inspection by your adviser subject to confidentiality obligations. Also ask for a written list of the obligations that will affect your staffing, organisation and resources.

If confidentiality is required, check what information it covers, how you may use it and whether you can share it with your advisers. Protecting the operating method should not prevent you from understanding the obligations you are taking on.

3. Clarify the manual’s contractual status

The main risk arises when the contract requires compliance with a manual that the buyer has not been able to identify or examine sufficiently. Ask for its version, date and method of delivery to be specified, along with the documents that form part of it.

There is no universal rule that the manual always takes precedence over the contract, or vice versa. Their relationship must be clear in the agreement. A solicitor should pay particular attention to:

• Incorporation: how the manual becomes part of your contractual obligations.
• Order of precedence: which document takes priority if there are inconsistencies.
• Updates: who can approve them, how extensive they may be and how they are communicated.
• Breaches: the consequences of failing to follow a procedure and the opportunities available to remedy the breach.

Distinguish operating instructions from essential financial terms. A power to update procedures should not automatically be interpreted as unlimited authority to change any commitment. Negotiate clear limits and avoid accepting blanket references to future documents whose scope you do not know.

4. Test how it would work before committing

Use the procedures you have been able to review to map out a working day. Note the tasks, the people responsible, the materials needed and the checks required. The aim is not to copy the method, but to establish whether you can put it into practice with your planned set-up.

Pay attention to mandatory records and head office inspections: what will be checked, against which criteria and how you will be able to correct any shortcomings. Standards should be understandable and verifiable, rather than relying solely on vague assessments.

Remember, too, that following the manual does not replace compliance with the rules applicable to your premises. Employment, health and hygiene, consumer protection and data protection obligations must be addressed according to the activity and each party’s responsibilities.

Practical takeaway: before buying, identify the manual, review enough of its contents and agree its contractual status. Do not blindly accept operating rules that will later determine your day-to-day work.