The Role of the Franchise Compliance Coordinator

When advising clients concerning their franchise operation, FranSource recommends that they designate a responsible employee to act as the Franchise Compliance Coordinator. This position entails implementing a franchise compliance program to ensure the company remains in compliance with all federal and state disclosure laws and regulations.

One of the primary responsibilities of the Compliance Coordinator is to work with your sales and marketing staff (including franchise brokers) in order to ensure that they are knowledgeable in terms of the information they are required to share and permitted to share with prospective Franchisees. This helps ensure that franchise sales personnel follow proper procedures related to the offer and sale of franchises.

A second responsibility entails their ensuring that the Disclosure Document and related Exhibits are kept up to date, at a minimum quarterly and annually, upon any “material change” to the document(s). In addition, the Compliance Coordinator is responsible for ensuring that state registration documents are amended and renewed on a timely basis. For example, registration and disclosure documents must be amended whenever there is a “material change” affecting the system or the company’s relationship with its Franchisees (at a minimum, registration renewals must be filed annually). The Coordinator will work with your franchise attorney to coordinate any required updates and state registration renewals.

The final role of the Coordinator relates to their maintaining files for each Franchisee as described below.

Franchise File Checklist

The following is a list of the documents and information that should be organized by the Compliance Coordinator and included in the Franchisee’s file (as applicable to your franchise operation). Some of this information will be maintained by the franchise sales personnel during the sales process. They should be made aware of the required information:

  • The date that first contact was made and by what method (phone, personal meeting, email, etc.)

  • Notes of all meetings and telephone conversations conducted with the Franchisee during the sales process, including dates, nature of the interactions, key notes, actions taken, and information/materials supplied

  • Copy of correspondence/emails (during the sales process) between the company/salesperson and the Franchisee

  • Record of credit reports, criminal background reports, and other screening data and decision procedures used to approve the Franchisee

  • Copy of signed Franchise Application, personal financial statement and other related forms

  • Signed “Acknowledgement of Receipt” of the FDD

  • Copy of the payment (i.e. check) for the initial franchise fee

  • Copy of the executed Franchise Agreement and other agreements and addendum (i.e. Deposits Agreement, Site Selection Addendum, Confidentiality Agreement)

  • Copy of the executed Franchisee Compliance Certification Form

Following the award of a franchise, the Compliance Coordinator should include the following forms and materials in the Franchisee’s file:

  • Documentation (or copies) related to the Franchisee’s receipt of all required licenses, permits and bonds relative to the Franchise Business

  • Proof of Insurance relative to the Franchise Business

  • Copy of the Franchisee’s lease and any “Lease Assignment Agreement” and/or addendum

  • A log that tracks the Franchisee’s payment of royalties, advertising fees, training fees, product purchases, etc. This information may be maintained electronically.

  • A log that tracks the Franchisee’s submission of any reports required to be submitted (i.e. royalty reports, annual tax returns, sales tax returns, list of employees, etc.). Copies of the required reports should also be maintained in the Franchisee’s file.

  • A log that tracks the Franchisee’s participation in meetings, online conferences, and other similar events. This information may be maintained electronically.

  • Copies of all key correspondence to and from the Franchisee

  • Copies of all complaints made against the Franchise Business by consumers and governmental agencies

  • Copy of inspection reports conducted at the Franchise Business

  • Copies of any “Notices to Cure” for defaults by the Franchisee under the Franchise Agreement

© 2009-2017 Stephen E. Vandegrift, all rights reserved
Steve Vandegrift is President of FranSource International, Inc., a full-service franchise development and consulting firm founded in 1997. FranSource works with both startup and existing franchisors, providing the support required to develop, launch and grow a successful franchise operation. Feel free to email Steve at steve@fransource.com with your comments and questions.

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