The recruitment and selection process in line with the Franchise Act

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

The Dutch Franchise Act has been in effect since January 1, 2021. This compels all franchisors to align their recruitment and selection processes with the Franchise Act. Any action that is not compliant with the Franchise Act, such as failing to properly organize the recruitment and selection process, may constitute error, deceit, or acquisition fraud. Besides the legal consequences, the practical consequences can be just as significant: termination of the agreement, with associated refunds and/or compensation payable by the franchisor.

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

The most important changes in the Franchise Act:

• Since January 1, 2021, franchise organizations are legally required to provide all relevant information to new prospective franchisees so they can make a well-informed decision about joining the franchise. The best way to arrange this is through a Pre-contractual Information Document (PID). All information must be provided to the prospective franchisee at least four weeks before the franchise agreement is signed. The information obligation in the Franchise Act is reciprocal. The franchisor can therefore also ask the franchisee to provide certain important information.
• There is a requirement to observe a four-week standstill period during the selection process. During this period, no additional conditions may be imposed or changes implemented that could have a negative or onerous effect on the prospective franchisee.

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

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

1. What constitutes a proper recruitment and selection process in accordance with the Franchise Act?

1. A prospective franchisee applies through the recruitment channel
2. Telephone intake interview or information meeting
3. First selection interview with the provision of a confidentiality agreement
4. Franchise Entrepreneur Assessment as part of the franchisee suitability assessment
5. Second selection interview
6. Internship/shadowing day
7. Provision of the Pre-contractual Information Document, including the franchise agreement
8. Standstill period of at least four weeks
9. Further preparation by the franchisee
10. Start of the new franchisee

2. I don't use a structured selection process. Where should I begin to properly organize this process?

Start by developing several documents to create structure. Consider, as a basis, a franchise brochure, a confidentiality agreement, PowerPoint presentations for the first and second selection interviews, and a Pre-contractual Information Document to be provided to the franchisee. Then, build a file for each prospective franchisee, documenting all communications and research into the prospective franchisee's suitability.

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

Evidence is becoming increasingly important under the Franchise Act. A franchisee file contains all information about the prospective franchisee. This includes interview reports, resumes, motivation letters, assessment results, information provided, email correspondence, etc. In short, everything that contributes to the investigation into the prospective franchisee's suitability.

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

As a franchisor, continue to pay attention to the prospective franchisee during the standstill period. During this period, the prospective franchisee may participate in a few internships with the franchise formula, or discussions about the draft franchise agreement may take place. Please note, however, that during the standstill period, no changes may be made that are detrimental to the franchisee. If you do so, the four-week standstill period will restart.

5. What activities may and must the prospective franchisee undertake during the four-week standstill period?

The franchisor's duty to provide information is balanced by the franchisee's duty to investigate. During the standstill period, a franchisee has a duty to investigate. They can use this period, for example, to review the information received, write a business plan, develop a financial plan, seek expert advice if desired, and, if necessary, ask further questions or consult with others to determine the content and implementation of the intended franchise agreement.

Aligning the recruitment and selection process with the Franchise Act

The questions above are just a small selection of the questions our recruitment consultants receive. They work daily to effectively implement recruitment and selection processes in accordance with the Franchise Act, both for new franchises and for conducting check-ups for existing franchises. Once this process is properly implemented, they carefully and critically select franchisees for franchise organizations.

The challenge remains to find candidates who are not only suitable as franchisees but also a good fit with the franchise formula's DNA.

In addition, our recruitment consultants specialize in attracting and selecting (prospective) franchisees who want to enter into a long-term partnership. As a result, they understand better than anyone that successful collaboration between franchisee and franchisor is crucial in franchising. Consider the chemistry between both parties, the franchisee's competencies, and their passion for the franchise formula.

More information?

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