Many disputes between franchisors and franchisees can be traced back to the franchise sales process. Examples include:
- Alleged violations by the franchisor of federal or state disclosure laws.
- Awarding a franchise to a franchisee that was not qualified to operate the business.
- Inadequate communications of each parties expectations during the sales process.
Stark & Stark’s 360° Proactive Sales Compliance approach is focused on proactively implementing certain measures during the sales process to minimize the likelihood of subsequent legal disputes with franchisees.
Sales Compliance Training
Our 360° Proactive Sales Compliance program begins with an assessment of your development team’s current knowledge base of disclosure laws. During the assessment process, we will:
- Mystery shop your development team: Our “prospect” will be asking certain questions that are designed to test your franchise sales staff’s knowledge of franchise disclosure laws.
- Provide written examinations for your sales staff to determine their current level of knowledge with respect to franchise disclosure requirements.
- Observe a discovery day.
- Review franchisor’s records to ascertain how your System is currently conducting and documenting the sales process.
The assessment portion of the 360°Proactive Sales Compliance program is designed to test not just whether your sales staff is aware of disclosure requirements, but whether they are also able to apply their knowledge during the sales process.
Once the assessment process is completed, Stark & Stark’s franchise group will then provide a sales compliance seminar at your corporate headquarters that is tailored to addressing any gaps in awareness of disclosure laws. Your development team will also be invited to attend follow up refresher training seminars conducted at our Princeton, New Jersey office.
Stark & Stark’s Franchise Group will also provide you with our recommendations regarding best practices to document the sales process, and any recommendations we have based on our observation of a discovery day.
Qualifications of Franchisees
Franchisors increase the likelihood of legal disputes when they award franchises who do not meet certain qualifications. The 360° Sales Compliance Program includes Stark & Stark’s Prospect Qualification Matrix, to assist a Franchisor in evaluating the qualifications of its prospects.
The communications between the franchisor and prospective franchisee during the sales process can set the tone for the entire relationship. The communications process begins at the first contact with the prospective franchisee asking for additional information and filling out an initial application. During the initial discussions between a franchisor and a prospective franchise, there is no better time for each party to articulate their own expectations as to what they are hoping to achieve and what each side expects from the other. Too often, this aspect of the sales process is completely overlooked, and the franchisor does not learn that a franchisee may not be a good fit or well suited to operate a franchise until after the franchise is awarded.
Most franchise systems manage their communications with a prospective franchisee during the sales process to:
- Determine if the prospect has the adequate financial resources to purchase the franchise; and
- Articulate the benefits of the franchise system to prospects in an effort to convince them to purchase a franchise.
This model does not provide the parties with an opportunity to fully communicate each other’s expectations should they move forward as franchise partners.
Be sure to visit the other sections of Stark & Stark’s Proactive Franchise Solutions:
- Proactive Operational Compliance
- Franchisee Validation Audits
- Disclosure Document Audits
- Proactive Communications
- Disaster Preparedness
Stark & Stark’s Franchise Group will assist you to effectively manage the communications during the sales process, beginning with the initial discussion through their attendance at discovery day. For questions, or additional information on how Stark & Stark can help you & your franchise system, please contact Adam J. Siegelheim, Chair of Stark & Stark’s Franchise group at 609.791.7003 or via email, firstname.lastname@example.org.