Operations manual

On a franchise resale, the operations manual is one of the documents to ask about in diligence. The Canadian Franchise Association describes it as explaining how a franchisee is to replicate the franchise’s system at the location. BDC says a franchisee must follow the operating manuals, along with staffing requirements, set opening hours and required quality levels. Read it alongside the franchise agreement, which the CFA says outlines the system-specific responsibilities required of the franchisee.

What to ask about it

Ask whether the franchisor requires an incoming owner to operate to the manual, and how that sits with the agreement. The answer on what to check in the franchise agreement shows where the two documents meet.

• Whether the franchisor can change the manual after signing, and how changes are notified.
• Whether the agreement treats a breach of the manual as a default, and how a default is raised.
• Whether the buyer may read the current edition before closing, if the franchisor treats it as confidential.
• Whether the location meets the manual today, and whether the franchisor’s franchise transfer approval depends on it.