Recruitment advice for franchisors

Nurturing talent

With the new year fuelling the desire for a new career amongst many, how can franchisors be sure they get the cream of the crop? Jonathan Chadd reveals

 

The recruitment of high quality franchisees is a critical issue for all franchisors who spend a great deal of money each year seeking to attract the right candidates to take up their franchise offering.

 

Beware of over enthusiasm!

 

When a keen prospective franchisee comes along, it is very tempting for those responsible for recruitment to become over enthusiastic about the benefits to be obtained from the franchise, and the returns, which the franchisee can expect to achieve. More legal claims are brought against franchisors on the grounds of misrepresentation from disgruntled franchisees than from any other cause. Make sure, therefore, that the information provided is accurate. Encourage prospective candidates to talk to your own franchisees, particularly those that are following the system properly and performing well.

 

Check your prospectus on a regular basis and ensure that the information contained in it is accurate and that any figures presented to the franchisee clearly identify the basis upon which they have been produced. If such figures are projections then be particularly careful to explain in detail how they are arrived at. Include appropriate disclaimers and ideally have your prospectus checked by your solicitor before it is published.

 

Above all undertake your own due diligence on the prospective franchisee to check out whether they really are suitable as appears. Whilst you may have invested a great deal of money in securing the lead that has resulted in them appearing in front of you, remember, you are going to spend even more time and money in setting them up as a franchisee and providing support. If you select the wrong candidate, then all of that time and expense may be wasted.

 

Streamline procedures

 

Having decided to offer a franchise to a prospective franchisee ensure you have the procedures in place to move the transaction forward to a swift conclusion. Experienced franchise lawyers will be able to offer you procedures, which ensure that the franchise agreement is prepared, tailored to the transaction, and provided to the franchisee and its solicitors without delay. Any queries raised by the franchisee or its solicitors should be responded to promptly and directly. Avoiding any issues only delays the process. Make sure your documentation makes it clear to the franchisee both the initial obligations he is taking on, what he will be receiving in return for his franchise fee.

 

Where premises are concerned there are ways to get around the sometimes considerable delays, which can result from franchisee's solicitors not being familiar with the property requirements of the franchise and/or landlord's solicitors not appreciating that the completion date needs to fit in with a shop fit. Once again your solicitors should be able to advise on this issue and devise procedures that keep down the cost to all parties whilst streamlining the process.

 

Franchisors need to remember that for a prospective franchisee taking up a franchise is usually a huge step. It may be the first time they have ever been self-employed and many are committing substantial sums to the new business venture. Ensure that you give them the necessary time and attention required to instil confidence and provide them with the maximum chance of making a success of the franchise. All too often franchisors will sometimes forget remarkably quickly after the agreement has been signed how keen they were to recruit the franchisee concerned and how valuable that franchisee is to the growth of the network. By reminding yourself of those facts you are more likely to ensure that you provide the vital support services needed for the franchisee to get their businesses off to a flying start.

 

Of course mistakes are made and when they are it is often better to acknowledge them sooner, rather than later. If it is obvious that a franchisee is simply not going to make a success of the business, rather than struggle on with each party becoming frustrated and the franchisee losing large sums of money from a business failing, it would be better to negotiate a parting of the waves and/or a sale of the business to a third party than struggle on in the hope that things will change for the better.

 

Jonathan Chadd MA (Oxon) is a solicitor and partner at Leathes Prior Solicitors where he heads the franchise and intellectual property team. Leathes Prior is affiliated to the British Franchise Association and Jonathan is acknowledged by both the Legal 500 and Chambers Legal Directories as a "leader" in franchising law.

 

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