The recruitment and selection process in line with the Dutch Franchise Act

For many franchise organizations, consistently attracting and finding suitable franchisees is a significant challenge. It is a time-consuming process where the speed and success depend entirely on the right recruitment and selection process.

The Franchise Act has been in effect since January 1, 2021. This forces all franchisors to align the recruitment and selection process with the Franchise Act. If an action is not in line with the Franchise Act, such as improperly setting up the recruitment and selection process, there may be cases of error, fraud, or acquisition fraud. In addition to the legal consequences, the practical implications can be just as significant: annulment of the agreement with accompanying repayments and/or compensation payable by the franchisor.

It is therefore crucial to align the current recruitment and selection process with the Franchise Act.

The main changes from the Franchise Act:

• Since January 1, 2021, franchise organizations are legally required to provide all relevant information to new candidate-franchisees, so they can make an informed decision on whether to join the formula. The best way to arrange this is through a Pre-contractual Information Document (PID). At least four weeks before the franchise agreement is signed, all information must be provided to the candidate-franchisee. Moreover, the information obligation in the Franchise Act is mutual. The franchisor can also ask the franchisee to hand over certain important information.
• There is an obligation to observe a stand-still period of four weeks during the selection process. During this period, no additional conditions may be imposed or changes made that could negatively or burdensomely affect the candidate-franchisee.

What does the Franchise Act mean for recruitment and selection processes?

Since the implementation of the Franchise Act, many questions have arisen about what the correct recruitment and selection process is. We answer some of these questions below:

1. What is a correct recruitment and selection process in line with the Franchise Act?

1. A prospective franchisee applies through the recruitment channel
2. Telephone intake interview or information session
3. First selection interview with a confidentiality agreement
4. Franchise Entrepreneurs Assessment as part of the suitability research for the franchisee
5. Second selection interview
6. Internship/shadow day
7. Providing the Pre-contractual Information Document, including franchise agreement.
8. Stand-still period of at least four weeks
9. Further preparation by the franchisee
10. Start of the new franchisee

2. I don't work with a structured selection process. Where should I start to properly set up this process?

Start with the development of several documents to bring structure. Consider a franchise brochure, a confidentiality agreement, PowerPoints for the first and second selection interviews, and a Pre-contractual Information document to be provided to the franchisee. Then build a dossier for each prospective franchisee in which all communication and research into the suitability of the prospective franchisee is stored.

3. What should be included in a franchisee dossier during the recruitment and selection process?

Proof is becoming increasingly important with the Franchise Act. In a franchisee dossier, all information about the candidate-franchisee is recorded. Consider interview reports, CVs, motivations, assessment results, provided information, email traffic, etc. In short, everything that contributes to the research into the suitability of the prospective franchisee.

4. What activities can and should I undertake during the four-week stand-still period?

As a franchisor, continue to pay attention to the prospective franchisee during the stand-still period. During this period, the prospective franchisee may run several internship days with the franchise formula or there may be discussions about the design of the franchise agreement. Be careful, however, that no changes may be made during the stand-still period that are disadvantageous to the franchisee. If you do, the four-week stand-still period starts anew.

5. What activities can and should the prospective franchisee undertake during the four-week stand-still period?

In addition to the franchisor's information obligation, there is also an obligation for the franchisee to conduct research. During the stand-still period, a franchisee has a duty of investigation. This period can be used, for example, to study the received information, write a business plan, develop a financial plan, seek advice from an expert if desired, and potentially come to further questions or discussions about the content and execution of the intended franchise agreement.

Bringing recruitment & selection process in line with the Dutch Franchise Act

The questions above are just a small selection of the questions recruitment consultants receive. They are daily engaged in effectively setting up recruitment and selection processes in line with the Franchise Act, both for starting formulas and providing check-ups for already existing formulas. Once well set up, they carefully and critically select franchisees for franchise organizations.

The challenge remains to find candidates who are not only suitable as franchisees but also fit well with the DNA of the franchise formula simultaneously.

In addition, recruitment consultants specialize in attracting and selecting (prospective) franchisees who want to enter into a long-term partnership. They know better than anyone that successful collaboration between franchisee and franchisor is crucial in franchising. Consider the connection between both parties, the franchisee's competencies, and his or her passion for the franchise formula.

More information?

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