Employment law and franchises

Taking on a franchise has loads of benefits for starting your first business. Don’t know how to market your product? The franchisor does. How do you compete with multinationals? Franchises act like a cooperative in this regard. But how do you legally hire and fire your team (plus everything else in-between)? Well, from an employment perspective, this is where you do need to understand that you’re still an employer in your own right…albeit franchisors now stand to bear some of the burden for you getting it right too.

If you’ve taken on a franchise, I bet you already know that managing people (their remuneration, performance, behaviours and development) is something that takes time to learn, especially if you’ve never managed this side of a business before.

The benefits of a good franchise arrangement is the franchisor has already thought of this and will have systems of work, processes and guidance available for you to refer to and thus meet best practice…and the relevant laws and regulations governing your workplace.

And it’s probably a good thing too given the obligations around franchises in Australia have been under a spotlight in recent months after changes to the Fair Work Act 2009 last year (the Fair Work Amendment (Protecting Vulnerable Workers) Bill 2017 to be precise).

This includes meeting two key requirements you have as an employer:

  1. The compliance behind employing staff: for example, have you got the right terms and conditions for them? Do your records reflect all the necessary detail to meet the law? Are employing correctly?
  2. Managing performance: for example, do you conduct discipline fairly? How do you terminate someone’s employment?

For franchisors

  • Franchisors can now be held legally responsible if their franchisees don’t follow workplace laws.
  • Franchisors have an obligation to help their franchisees understand and meet their responsibilities under workplace laws. By doing so, franchisors can minimise their legal and reputational risks.

For franchisees

  • The key for a franchisee is to understand that if they employ staff they have the same workplace responsibilities as other employers.

So what should you do if you’re a franchisee? Well broadly speaking, a franchisee should:

  1. familiarise yourself with the franchise policies and procedures. If it was ever needed, an industrial regulator will look to see you have followed both the law and your company processes.
  2. review relevant employment laws for your workplace (if your businesses is a Pty Ltd, this can be done through the Fair Work Ombudsman)

This second step will make sure you address such obligations as:

The benefits of making sure you are acting lawfully (and best practice) will be that you dramatically minimise your exposure to breaches of workplace laws such as claims for wages and unfair dismissal.

Given that franchise operations are a very hot topic right now, being part of the ‘herd’ will give you greater market power but also make you much more visible and in the line of fire when it comes to oversight by the industry regulators.

Relying on a defence that the “franchisor didn’t advise you” won’t satisfy either of the industrial regulators when it comes to your legal obligations.

For more information:

Thanks for reading and click the subscribe button below to keep up to date on articles such as these, links to other resources and our own FREE tools and advice.