Appoint a Franchise Recruitment Broker in New Zealand

A recruitment broker can help an established business find its first franchisees, but outsourcing introductions does not outsource responsibility for the recruitment process. Before appointing anyone, decide exactly what they will do, whether their work requires a licence and how they will be paid. A clear appointment helps protect both your business and prospective members of your franchise community.

1. Check the role and licensing requirements

Start with the transaction, rather than the job title. A consultant offering recruitment strategy is not necessarily doing the same work as an intermediary negotiating the sale of a business. Calling someone a ‘franchise consultant’ does not settle their legal obligations.

The Real Estate Agents Act 2008 is relevant to business brokerage in New Zealand. A franchisor offering a new franchise on its own behalf can generally do so without a real estate agent’s licence, provided it is not acting for a third party. That does not automatically extend to an external intermediary.

A business broker acting in the sale of an existing franchise business to an incoming franchisee needs the appropriate real estate licensing. For a new franchise appointment, ask a New Zealand lawyer to check the proposed intermediary’s actual activities against the Act before work begins.

Give your lawyer a written description covering:

• Whether the opportunity is a new franchise or the sale of an existing business.
• Who owns the business or rights being offered.
• Whether the intermediary will advertise, introduce candidates, negotiate or handle money.
• Who the intermediary represents and who pays them.

Where licensing is required, verify it through the public register maintained by the Real Estate Authority. Do not treat experience in franchising as a substitute for the necessary licence.

2. Define authority before candidates are approached

Your appointment should distinguish introductions from decisions. A broker may identify suitable candidates and organise meetings without having authority to approve a franchisee, alter fees or promise territorial exclusivity.

Create a short authority schedule alongside the broker’s contract. Specify which materials they may distribute, which questions they may answer and which matters must come back to you. Reserve final franchisee approval and any contractual departures to named people within your business.

New Zealand has no franchise-specific legislation or government franchise registration process. General laws still apply, including the Fair Trading Act 1986, which prohibits misleading or deceptive conduct, unsubstantiated representations and unconscionable conduct in trade. Using an intermediary does not make inaccurate recruitment statements harmless.

Require the broker to record material conversations and forward requests for concessions. If a candidate asks whether a particular location is guaranteed or whether fees can be reduced, the answer should follow your approval process rather than an informal sales promise.

Also prohibit unapproved sub-agents. You need to know who is representing your opportunity and what information they are using.

3. Make commission and expenses unambiguous

A commission arrangement should reward an appropriate introduction without pressuring either party into a premature commitment. Document the payment trigger precisely rather than relying on phrases such as ‘successful placement’.

Ask the appointment agreement to address:

• Any retainer, advertising expenditure and approval limits.
• Whether commission becomes due on signing, payment or another defined milestone.
• What happens if the candidate withdraws or the transaction does not complete.
• How duplicate introductions and candidates already in your database are handled.
• Whether commission can remain payable after the appointment ends, and for which named candidates.
• Whether amounts include or exclude GST.

Settle who can receive candidate payments and obtain legal advice before allowing a broker to hold deposits. Payment handling should never be left to an improvised arrangement.

Ask about referral payments from lawyers, lenders or other advisers. Candidates should understand relevant commercial relationships; your lawyer should confirm what needs to be disclosed. Do not describe a paid referral as an independent recommendation without checking that description is justified.

4. Control the candidate handover

Agree a handover checklist before the first introduction. It should record the candidate’s identity, relevant experience, information received, outstanding questions and any proposed commitments. Handle personal information consistently with the Privacy Act 2020, including explaining relevant collection and sharing arrangements.

Membership of the Franchise Association of New Zealand is voluntary, but its Code of Practice and Ethics binds members. Under the Code, disclosure must be provided at least 14 days before signing a franchise agreement or becoming bound by a preliminary agreement to proceed. Your broker’s timetable must accommodate those requirements where applicable.

Keep responsibility for document delivery and timing with a named person. A broker’s expectation of a quick completion must not determine when a candidate signs.

Practical takeaway: Before authorising recruitment, have your lawyer review the broker’s role, licensing position, authority and payment terms. Then test the handover process with a fictional candidate so everyone knows where introductions end and your decisions begin.