Franchise clinic spring 2008

Brian Duckett
Brian is Managing Director of Howarth Franchising and his area of expertise is franchise development in the UK and worldwide. He has earned his living solely from the franchising sector since 1976, initially as a franchisee, then a franchisor and now an advisor to businesses either considering or operating a franchised network.

Are there any recognised qualifications for franchisors and their staff?

The first country to introduce professional qualifications for franchise support staff was the USA, where the International Franchise Association (IFA) runs a Certified Franchise Executive (CFE) programme. Delegates to various training sessions and events, such as their annual convention, receive credits according to which events they attend and when they accrue sufficient credits they receive their CFE award. The Franchise Council of Australia (FCA) has since started something similar.

In the UK, the Franchise Training Centre (FTC) runs a series of one-day workshops, which can lead to the award of the Diploma in Franchise Management (DFM). Going through the Diploma programme gives franchise support staff a holistic view of the entire franchise management role, ranging from marketing a franchise and recruiting franchisees, through monitoring and motivating franchisees, to understanding franchisees' financial accounts, preparing business plans and avoiding litigation.

However it is also possible to simply attend just those workshops, which cover a specific role eg how to recruit franchisees, and to attend other sessions as and when they become relevant. To achieve DFM status a diploma candidate must also complete a dissertation, which shows how some of the things that have been learned during the training programme have been successfully implemented in the workplace to the benefit of both the franchisor and its franchisees, which can also help with the employer's Investors in People status.

Élise Billy

Élise Billy is founder of EXB Legal, specialist franchise lawyers. Prior to founding her specialist firms, Élise worked at major city law firms and international businesses and has direct commercial experience from running internet and consultancy businesses.

Under what circumstances do we have to refund the deposit to a potential franchisee who does not go ahead?

Usually this will be set out in the deposit agreement that you and the potential franchisee sign when the deposit is paid. If you do not have a deposit agreement, I strongly recommend that you have one prepared if you are going to take deposits from potential franchisees. Legally, the deposit agreement can say anything that you want in relation to refund of the deposit as long as it is made clear in advance. However, there are ethical guidelines from the bfa and in addition you should consider that an unfair deposit agreement is likely to deter potential franchisees and prevent them from progressing to the next stage.

Generally, a potential franchisee who does not proceed should get back his or her deposit in full or minus any direct costs that you have incurred. This does not therefore include deductions for your time or for general administration, but could include for example any demonstrated legal costs. Ideally, the maximum amount of deposit that can be deducted should be capped to a modest limit and set out in the deposit agreement.  

It is up to you as the franchisor to ensure that you minimise your potential losses and costs in relation to a potential franchisee, so that you do not incur significant costs before a franchisee has committed to the main franchise agreement. For example, it would be inadvisable to order equipment or vehicles for a franchisee until they have signed the main agreement and paid the upfront fee for the package. By minimising your costs, you can ensure that you can cover yourself without having to take an excessive deposit or make large deductions that could damage your reputation.

Maurice Logie

Maurice is a director for bfa affiliate member, Moreland Insurance. He is responsible for business development and specifically the francover.com brand.

What is professional indemnity insurance and should a franchisor have it?
 
Professional indemnity insurance is cover to protect a business in terms of its legal liability for advice given to clients and also to protect itself for legal liability for any errors or omissions made.

In the case of franchisors there is clearly a legal relationship in terms of the franchise agreement. A professional indemnity policy (PI) can offer the additional safety net that ensures that if any legal action is contemplated by the franchisee, then the insurers will handle this claim.

For example a franchisee may allege that the franchisor has given defective or insufficient advice in the context of running a particular franchise, and as a result, the franchisee is financially disadvantaged. Even if the resultant claim proves to be unsubstantiated, the PI policy will cover the legal costs associated with defending the claim.

The purpose of professional indemnity insurance for a franchisor is therefore to ‘sit behind’ the franchise agreement and make sure that any alleged shortcomings on the part of the franchisor have minimal impact in terms of financial implications to the business. Also from a relationship point of view the franchisor is able to pass on to their insurer the responsibility of handling the claim thus, in effect, allowing the dispute to be dealt with ‘at arm’s length’.

I would recommend that all franchisors seriously consider the merits of professional indemnity insurance for their business.

William Offen

William Offen is Managing Director of Peoplenomics® and has taught thousands of people how to sell in the UK, USA and South Africa. His teaching is based not on the usual, often cynical, methods of selling but on achieving success through high quality people interaction.

I am concerned about the lack of sales experience some of my potential franchisees have. How can I develop their skills and increase their confidence in sales effectively?

Telling prospective franchisees that their new career involves selling can stop them in their tracks, especially if they are one of the greater majority of the population that believe the ‘act’ of selling is something that should be treated with utmost suspicion.

For some potential franchisees, convincing them that they can sell can be challenge and failure to do so, means that good talented franchisees are lost at the first post. It is important to be clear about the type of skill it is and understand what training is required.

First it is necessary to see selling for what it is – simple interaction between people and something that we all do every day. With selling reduced to an ordinary process your franchisees will become confident with everyone they meet and will enjoy their interaction with people whatever the reason for it at any particular time.  

To develop your franchisee’s skills in sales is a matter of developing their communication and interaction skills, which will give them the confidence to deal effectively with potential customers and clients. The added bonus for them is that it will spill over into their personal lives and allow them to grow as individuals. The added bonus for you is that you will gain not only high quality sales, but also gain great ambassadors for your business.