Cold heavy oil production with sand (CHOPS) technique has successfully improved oil recovery from heavy oil reservoirs due to high permeability channels resulted from sand failure and foamy oil flow enhancing heavy oil movability. However, impacts of the sand failure and the foamy oil flow on multiphase fluid flow features are still not properly understood. In this paper, an effective and systematic framework has been proposed to characterize the multiphase fluid flow and determine the three‐phase relative permeability of CHOPS processes. A recently developed sand failure criterion and a relative permeability model have been integrated with a reservoir simulator to simulate the CHOPS process. The unknown parameters involved in the systematic framework are intelligently determined by an iterative ensemble smoother (IES) algorithm, which also enables sensitivity analysis on CHOPS production profiles. Subsequently, the proposed framework is tested through a laboratory CHOPS experiment. We obtained not only fairly history‐matched production data (i.e., cumulative oil, gas, and sand production), but also satisfactorily converged three‐phase relative permeability curves by iteratively assimilating production profiles of the CHOPS experiment. It has also been found that using two sets of three‐phase relative permeability is capable of representing the segment‐type nature of the multiphase flow and reproducing the transition stage on the production profiles. Furthermore, the comparison between two sets of three‐phase relative permeability indicates that the sand failure phenomenon yields a reduced residual oil saturation and an increased oil/gas relative permeability. In addition, the sensitivity analysis demonstrates that the segment‐type nature of production profiles results from the variation of key impact factors dominating the multiphase fluid flow in CHOPS processes. Overall, the proposed systematic framework can not only reproduce the physical phenomena of sand failure and foamy oil, but also provide a convenient tool to characterize the multiphase flow in CHOPS processes.