Your marketing campaign has been designed to generate enquiries from potential franchisees. It is important that, prior to launching the campaign, you have a clear plan of the processes that will be used to deal with those enquiries. Without such processes in place you will run the risk of spending money on generating enquiries and then wasting the results of that expenditure by not making the best use of each lead generated by the marketing activity. Each stage of the process must be carefully thought through and then fully documented so that everyone who has a role to play in recruiting franchisees is quite clear on the desired results from each stage of the process.

THE BACKGROUND TO FRANCHISEE RECRUITMENT

• Recruiting franchisees involves a very different process from that of recruiting an employee. You will, undoubtedly, have recruited staff for your own business in the past. You had a relatively simple task – to determine whether the various applicants had the skills and experience you sought, and whether they would fit into and contribute to the strength of your current team. By virtue of the fact that they had applied for the job vacancy they had demonstrated that they were prepared to join your company and if you had indicated the salary available they were, presumably, happy with the proposed figure. Any job applicant worth his or her salt would have made sure that they had done some research into your company before applying, to make sure that yours was a company that they would wish to join. During the recruitment interview they are selling their skills and personality to you and you are deciding whether to buy them. When recruiting franchisees, however, the process is not so simple. The first element of the process may broadly equate to the research being done by the above applicant. They may know little or nothing about how your franchise, or any other business, operates and their initial concerns will be to discover precisely what it is you do and what they will have to do. The whole concept of franchising suggests that a suitably qualified franchisee can learn, from the franchisor, everything they need to know about running an outlet of the franchisor’s business. They may assume, therefore, that they need little or no experience in the particular field. It is for this reason that we often see potential franchisees responding to marketing messages from a wide variety of unrelated franchises. Their primary concern is that they want to run their own business, to be their own boss, and a franchise, perhaps any franchise, will allow them to do it. Once they have made the initial enquiry the whole process potentially becomes an interface between two buyers and two sellers. The franchisor views the franchisee as would any buyer – does this person look as though they will do what I need them to do? However he is also ‘selling’ the concept of his franchise to this tentative buyer. The franchisee is also forming a buyer’s view on what is being offered to him, but once he or she has decided they want to buy they then go into selling mode to convince the franchisor that they are the right person to become a franchisee.
• Is it franchise sales or franchisee recruitment? These two phrases are often used interchangeably within the franchising community but they do, potentially, describe very different processes. Selling usually involves nothing more complicated than a transaction between a willing buyer and a willing seller. Providing that the buyer has the financial ability to make the purchase and expresses a desire to do so the seller will happily take their money. There have been, and probably still are, examples of franchisors that have taken this view with regard to their franchisees. All too often they give no consideration to whether the franchisee is right for them, or their system for the franchisee. Result – ill-informed, poorly qualified franchisees who sooner or later are likely either to become disenchanted with the franchise or, worse still, fail financially. The franchisor may even have set out with the specific intention of allowing the franchisee to fail so that they can resell the same territory time and time again. Clearly this is not the action of an ethical franchisor. It may be, however, that the franchisor has unwittingly sacrificed the long-term prospects of the franchise for the short-term prospect of a franchise fee without fully appreciating the implications of what they are doing. Perhaps, in their anxiety to get the first few franchisees up and running, the franchisor has been less than scrupulous about their selection process. Unless the franchisee meets the franchisee profile (see Chapter 10) there is only a limited chance of their being successful. A franchisee that fails provides a franchisor with a number of problems:

• 1.the whole recruitment process must begin again to find a franchisee for the territory;
• 2.it will be doubly difficult to find a franchisee for a territory that has already experienced a failure;
• 3.potential franchisees for other territories may be put off by the existence of a failed outlet;
• 4.existing customers could be left without a source of supply during the ‘interregnum’ and move to another supplier;
• 5.the source of management services fees will dry up from that territory.

Clearly, while ‘selling’ is involved, the process must primarily be one of ‘recruitment’ to ensure that the right franchisee joins the network.

DEVELOPING THE RECRUITMENT PROCESS

Once the marketing process has generated enquiries from prospective franchisees the recruitment process must swing into action.

• What is the process designed to achieve? In the very simplest of terms – a flow of suitably qualified franchisees committed to the concept of developing their own business in the franchise format. At each step of the process there will be an interchange of information between franchisor and potential franchisee with a view to both parties satisfying themselves that they are right for each other. It is essential that both parties are able to make an informed decision on this. However, part of the strategy of franchising requires the franchisor to make some of their ‘trade secrets’ available to their franchisees. The control of this information is therefore critical if franchisors are to protect themselves from misuse of the information. The decision on when and how information is passed on is critical. Strategies must be developed so that this information is released on a ‘need to know’ basis as the recruitment process progresses.
• What are the options for the various stages? A typical recruitment programme will include some or all of the following activities, although not necessarily always in this order:

The franchise system itself, the culture of the franchisor company and the requirements of the franchisee profile, will all influence the eventual structure of the process.

• The response to the initial contact is critical – you only have one chance to make a first impression! It is important, therefore, that the recruitment process is fully developed prior to inviting expressions of interest in the franchise. By whatever means the potential franchisee makes contact, and this will largely be determined by the information and instructions that you have given in your marketing materials, the response should be swift and measured. Experience suggests that it is the franchisor who will need to drive the recruitment process forward and a clear time-scale for each section is desirable.

Possible contact options could be:

• (a)to visit the franchisor’s website and apply online. This will require an enquiry form to be produced using ‘obligatory fields’ to collect the enquirer’s contact data and, possibly, responses to some key qualifying information, e.g. confirmation of availability of funds or specific qualifications. This assumes the enquirer’s ability to access the internet, something that is probably not yet universal. However, for those with access it is a quick and easy method of initial contact;
• (b)to visit a specialised franchisee recruitment website and register interest in a particular franchise. This would then be passed on to the relevant franchisor;
• (c)to enquire by e-mail to the franchisor. For those with access this is a quick and easy method but may produce only the applicant’s e-mail address and no other contact information;
• (d)to write requesting further information. In this case there may be little opportunity to go through any pre-qualification process prior to the dispatch of a prospectus or other printed information;
• (f)to telephone the franchisor or their recruitment agent. This is probably the most desirable of the options, provided that the franchisor has a clear process for accepting such calls. The potential franchisee is in control of when the call is made and the respondent must be ready to deal with the enquiry when it occurs. A dedicated number for franchise recruitment will ensure that the recipient is forewarned that the incoming call is a franchise enquiry and will give them a moment to prepare themselves to receive it. Anyone who is likely to pick up the call, for example a switchboard operator, a receptionist or the franchise recruitment manager must all clearly understand the process to be followed on receipt of an enquiry. No member of staff should be allowed to handle a franchise enquiry who is not authorised to do so and fully conversant with the process. If no one is available to deal with the enquiry in detail, a response should be prepared for the caller to be informed of how the enquiry will be moved forward.

We have learned from anecdotal evidence from potential franchisees that a large number of requests for information go unanswered. To spend money on marketing activities and then to fail to follow up leads generated by those activities would seem to be senseless. However, we do know that a number of franchisors will admit, when questioned, that they do not follow up leads as assiduously as they should. What makes them throw away the chance of contacting a prospective franchisee? A number of things could be to blame:

• 1.it is often difficult to contact the enquirer by phone unless the recruiter is prepared to make phone calls in the evenings or at weekends outside the normal working day;
• 2.it is not unusual to have to make a number of contact calls before being able to speak to the applicant. It requires a great level of commitment to keep making the calls until contact is made;
• 3.all recruiters know that they will be lucky if they recruit two franchisees from every 100 enquiries, so the process is by its very nature time-consuming and potentially frustrating;
• 4.recruiting franchisees is often only part of the manager’s responsibilities and other activities may appear to demand priority attention.

Yet it is critical that all opportunities are persistently followed up if you are to hit even the two out of 100 rate.

If you feel that you or your staff cannot give the time or commitment to following up all the leads then consider passing on that role to one of the specialist recruitment or support agencies that exist to provide this service.

One of the ways of making the most of these leads is to encourage the applicants to contact you by telephone within normal working hours. If the enquirer instigates the contact then it will be at a time when they are free to speak to the recruitment manager. All that remains is for the recruitment manager to be available to speak to them!

A recent analysis of all 47 recruitment advertisements placed in a franchise exhibition edition of a specialist franchise magazine showed the following:

	Phone number	Mail address	E-mail address	Website
Total ads showing	46	5	39	27
Preferred contact method*	39	1	7	2

It is clear that most franchisors have chosen the telephone as the preferred contact method, although, interestingly, the one franchise that didn’t include a phone number at all in their advert was a company that operates a call answering service! If your marketing materials include a phrase such as ‘Call [Name] for a brief discussion of the franchise opportunity’ then the enquirer will at least be prepared to do more than simply ask for a brochure.

• Ensuring that the ‘must-have attributes of the franchisee profile are met is an important part of the initial contact. If an enquirer fails to meet any of these important criteria it is wasteful to spend any more time with them than is necessary to fulfil the requirement to be polite. Although they may not be suitable as a franchisee they may still be a potential customer for your product or service so be firm but polite in explaining why you feel you can take their interest no further.
• If they meet your primary criteria you will need to take them on to the next stage in the process. This may involve sending them a prospectus and application form or inviting them to a group presentation or ‘discovery day’. At each stage of the process you are looking for either the applicant or yourself to qualify themselves further or disqualify themselves. Every franchise has its own view on how difficult the qualification process should be. Some franchises take the view that unless the applicant is sufficiently motivated to take the lead in the process then they are not suitable. In such cases the franchisor may take the view that they will not pursue an enquiry any further than the initial contact, leaving the potential franchisee to make all the running and make any further contact. Other franchisors believe that they need to make the most of every applicant and will therefore constantly follow up all enquiries at each stage until either they have satisfied themselves that an enquirer is a suitable applicant or the potential franchisee has withdrawn their interest. Most franchisors would find the former view difficult to justify.
• The first face-to-face meeting provides both the franchisor and the applicant with the opportunity to begin to check in some detail whether they are suited for each other. This is the part of the process where both applicant and recruiter will regularly move from a buyer to a seller and back to buyer again. By the end of this first meeting both parties will normally know whether they wish to take the application any further. It is good practice before the end of the meeting for the recruiter to ask the applicant if they are still interested in the opportunity. If both parties are still interested then the process can move on to the next phase.
• Experience of a franchisee’s day-to-day activity will ensure that the applicant fully understands what they will be expected to do if they join the franchise. Many franchisors insist that applicants should spend some time with an existing franchisee before they move on to the next stage of the recruitment process. It is important that the applicant has a worthwhile experience during this period of franchisee accompaniment so choose very carefully among your franchisees to find the right person to provide this service.
• The ability and desire to grow a business will be high among the attributes you will be seeking from your franchisees. All too often we see examples of franchisees who fail fully to exploit the sales potential of their territories because they find that they can make a comfortable living at a lower level of activity. As a franchisor you will want your franchisees to develop their territories fully otherwise they will be limiting your own growth and profitability. By asking a franchisee to produce at least a draft business plan, including financial forecasts, you will be able to judge just how committed they are to growing their new business. Many legal advisers caution against the franchisor becoming involved in drawing up the franchisee’s business plan. They are concerned that if a franchisor plays too great a part in this process, for example setting anticipated sales or income levels, they may subsequently lay themselves open to litigation for misrepresentation if the franchisee fails to achieve those levels. However, the franchisor must play some part in providing information to the potential franchisee to assist them in preparing their business plan. Otherwise how will the franchisee discover likely levels of income or expenditure for this new business venture about which they know very little? One solution, which is increasingly being adopted by franchisors, is to appoint an independent third party, who has an understanding of their business, to assist the franchisee.
• There is no legal requirement for disclosure documentation in the UK. However, it is considered good practice to disclose voluntarily relevant information about the franchise and the people involved in it. The European Franchise Federation, in its Code of Ethics for Franchising, says: ‘In order to allow prospective Individual Franchisees to enter into any binding documentation with full knowledge, they shall be given a copy of the present Code of Ethics as well as full and accurate written disclosure of all information material to the franchise relationship, within a reasonable time prior to the execution of these binding documents.’ In The Ethics of Franchising, a British Franchise Association publication, Martin Mendelsohn proposes that the subjects for disclosure should cover:
  • 1.the business and financial position of the franchisor;
  • 2.the people involved in the franchise company;
  • 3.the franchise proposition;
  • 4.the franchisees;
  • 5.the financial projections;
  • 6.the contract.
  It is at this stage that the franchisee should be asked to take legal advice on the content of the franchise contract and to confirm to the franchisor in writing that they have taken such advice and that they will be willing to enter into the contract. It should be made clear that the role of the franchisee’s legal adviser in this instance is to advise them on the content of the contract, not to enter into any process of challenging the terms of the contract, as this will almost certainly be non-negotiable.
• A second meeting will be an opportunity for both franchisor and potential franchisee to discuss the proposal in more detail. By this time the applicant will probably be committed to pursuing the venture and the franchisor, besides taking the opportunity for a final appraisal of the applicant, will be looking to ensure that the franchisee is able and willing to proceed, i.e. has the funds in place, is prepared to sign the franchise agreement (contract) and wishes to move the matter forward.
• If both parties are ready to move forward the franchisor should make a formal offer to the franchisee. This offer will form part of the contract and should specify the basic terms on which the franchise is to be granted. In particular it should include a clear statement regarding the territory in which the franchisee will be allowed to operate. It is at this stage that the franchisor may ask the franchisee to confirm in writing that they have taken legal advice with regard to the franchise agreement and are prepared to move forward on the basis of that agreement. Some franchisors have a formal ‘pre-contract’ document that the franchisee must sign at this stage.
• To reserve their chosen territory franchisees are often required to make a financial deposit at this stage. This provides not only a sign of commitment but also an indemnity against any expenses that the franchisor might incur in relation to this franchisee if the franchisee is ultimately unable or decides not to move to complete the process. If a deposit is taken it is important that the franchisee fully understands the terms under which the deposit is taken. These should include:
  • (a)whether or not it is refundable in whole or in part, and what may be withheld of the deposit if the agreement is not completed. Most franchisors are prepared to return the deposit to a franchisee if they do not complete, less any costs they might have incurred relating to the grant of the franchise between the taking of the deposit and the franchisee’s withdrawal;
  • (b)a statement to the effect that the deposit will be wholly set against the initial franchisee fee when the agreement is completed.
  Some franchisors will retain the whole of the deposit if the franchisee fails to commence trading within a given reasonable period.
• Once all the preliminaries have been finalised the franchise agreement is completed by both parties. Both franchisor and franchisee are now bound by the terms of the agreement and have a clear commitment to each other’s success.

When franchisors are faced with a poor or failing franchisee they often come to the conclusion that ‘we should never have recruited him/her’. This is, more often than not, true. However, it is important that the franchisor should be able to analyse what went wrong in the recruitment process that allowed someone who is now clearly seen as unsuitable to be accepted as a franchisee.

Equally, if a franchisee becomes dissatisfied with the franchise, they will often say that their actual experience was at odds with what they were told during the recruitment process: ‘I was promised x or y’ or ‘I was told that my sales would be far greater than I have achieved’.

In both these circumstances it is important that the franchisor can go back to their original records to check these circumstances.

RECRUITMENT RECORDS

In the same way that a franchisor produces a franchise operations manual to specify the procedures and processes that a franchisee must follow, they should also have a franchisor operations manual that defines the procedures to be followed by the franchisor’s staff. In this way the franchisor able to ensure that everyone is using the same procedures to achieve any specific outcome. Perhaps one of the most important sections of this manual will refer to the recruitment process. As has been stated above, when problems arise with a franchisee it is often important to be able to refer back in detail to the time of their recruitment.

• Every contact from a potential franchisee should be recorded as the first part of the recruitment process. This first record should include basic information such as their name and contact details and the source of the lead. The latter information is useful for monitoring the results of various marketing activities. It will inform the franchisor of those activities that generate the most enquiries but, perhaps more importantly, it will also allow them to analyse which marketing activities resulted in the most sign-ups.
• Each stage of the recruitment process should be identified on the database and completed as each activity occurs. As has been said previously the initial process of contacting a potential franchisee by telephone is often both difficult and time-consuming. It is at this point that enquiries are most vulnerable to being allowed to slip through the net. Monitoring this stage of the process is therefore clearly very important.
• Define the information that is to be given and collected at each stage of the process and record that it has been completed. In the same way that a franchisor will have certain key qualifying questions to ask of potential franchisees at an early stage, so also will the applicant have questions to ask the franchisor. First and foremost he or she will probably want to know how much they will need to invest in the franchise and how much income it is likely to generate. The franchisor in his turn will want to know whether the potential franchisee has or will be able to raise the funds needed for the investment and also whether the franchisee is likely to be satisfied with the potential income opportunity. The recruitment manager can satisfy both these needs through judicious questioning and giving of information. The tactic of answering a question by asking another question can be of great use here. In answer to the applicant’s question, ‘How much will I earn?’ the recruiter can respond by asking, ‘How much do you want or need to earn?’ This will give an immediate insight into whether the franchise is likely to support the franchisee’s financial aspirations and allows the recruiter to reply in either a positive or negative way without mentioning specific figures. It is perhaps at this stage that the franchisor is most at risk of making a statement that is later ‘relied on’ by the franchisee and could later result in an action for misrepresentation. It is important that the franchisor controls the flow of information at every stage, as the need to obtain further information is often a key driver in getting the applicant to move to the next stage of the process.
• Set time-scales for each element of the process and then apply them. Those time-scales that relate to the franchisor’s activities can be applied rigidly whereas those relating to the potential franchisee are very much in the applicant’s control. However, if the time-scales are communicated to the franchisee and then prompts given if they are not fulfilled it will allow the franchisor to drive the process forward at something like his own desired pace.
• Record the outcome of each and every contact including details of key information given and received by both parties.
• Copies of any documentation given to or received from the applicant should be kept on file. It is important that where a franchisee may have taken information from a website, a copy of the contents of the website should be archived each time changes are made to it.

PREPARING TO START TRADING

Once the franchise agreement or a pre-contract has been completed, what may be considered the final stage of the recruitment process must commence – the preparation to start trading.

It is good practice to provide the franchisee with a detailed checklist of all the activities that need to be completed before trading can commence. This ensures that nothing gets missed in what can be a hectic and sometimes fraught period of time. This checklist may form part of the operations manual or may be a separate document given to the franchisee at a late stage in the recruitment process. It should include not simply a list of tasks to be completed but also, whenever possible, details of how best to go about completing them and any useful information that will make the process easier for the franchisee. This checklist might include activities such as:

• procurement of property from which to trade, including specifications on size and location;
• purchase of vehicles and equipment if not provided in a package by the franchisor;
• registration with relevant authorities, e.g. HM Revenue and Customs for taxation and VAT issues, local authorities or regulatory bodies;
• opening bank accounts, credit facilities etc.;
• staff recruitment;
• pre-trading research;
• launch marketing programmes;
• franchisee and staff training.

A well-planned and executed pre-opening phase will ensure a smooth and hopefully successful launch of the business, which is the final stage of the recruitment process.