Please, Train Your Franchise Sales Force
Consider the timing and scope of the sales compliance training offered to your franchise sales personnel and for that matter, any area developers who have resale rights and responsibilities. Ask yourself whether that training is adequate in light of our incredibly litigious society and the fact that a vast majority of claims asserted by franchisees against franchisors include claims of: (1) improper disclosure; and (2) unlawful earnings claims.
As I’ve said time and again, financial performance representations typically provide a huge advantage to franchisors over non-disclosing competitors and lead to a bigger bite of the market-share-pie. However, only about half of all franchisors make FPRs in their Franchise Disclosure Document. A well-crafted Item 19 highlighting a franchisor’s strengths will serve as a powerful and effective sales tool that promotes rapid growth. An Item 19 also will reduce your liability by providing boundaries for the sales process, making it difficult for a prospective franchisee to claim that he or she relied on other misleading information. I cannot stress enough the importance of a solid Item 19.
In the hands of an inexperienced and untrained sales representative, however, FPRs can create problems. A sales rep may string together separate facts from the FDD to reach conclusions not otherwise stated in the Item 19, or may simply respond without thinking to a prospect’s questions about potential earnings. Seemingly harmless unlawful earnings claims can blossom into franchisee suits a few years down the road. They may also draw civil and criminal penalties from federal and state agencies. No sales training? That might be a jackpot for a franchisee and his or her lawyer. It’s important to ensure that your sales representatives not only know the limits of what they can and cannot say during the course of a sale, but also follow best documentation practices. These will allow you to show a squeaky clean sales process in the event of any future litigation. This becomes even more significant when using brokers, who have a limited connection with the franchisor and solely focus on making sales.
When is the last time your sales people had compliance training? The answer is probably never. Law firms, accounting firms, and consulting firms all can offer training for your sales staff. We’ve provided franchise law compliance training to numerous clients and their sales reps based on their particular FDDs and earnings representations. From an attorney’s standpoint, it brings us piece of mind to know that our clients are taking protective measures right from the start with each franchisee. It makes it much easier to handle disputes down the line. I encourage all franchisors to be proactive and to train their sales reps. If you don’t, you may get jackpotted later.Back