At the best of times an employer failing to meet workplace
obligations can face some serious consequences. If that employer is
part of a franchise system, the effects of that failure radiates to
the whole brand and franchise network. In the news, Pizza Hut,
McDonald's, 7- Eleven and more recently Dominos have all been
caught in scandals involving the underpayment and manipulation of
employee wages and entitlements by franchisees within their
networks. Whilst at the moment, the legal ramifications is on the
franchisee and not the franchisor, the proposed amendments to the
Fair Work Act changes that.
As a franchisor however, whatever the size of your franchise
system, it is important that you minimise the risk to your brand by
taking practical steps to help your franchisees understand and meet
their obligations. The prudent franchisor should be doing this,
irrespective of whether or not the proposed legislation comes into
How can you help your franchise system?
At the most basic level, every franchisor should have a
provision in their franchise agreement requiring its franchisees to
comply with workplace laws. However, it is no longer sufficient to
have this and do nothing else. Protecting the brand and the
franchise network should be the first priority for every franchisor
and to do so would mean that there needs to be crosses and checks
in place that ensure compliance. Just as it is important to include
a provision in the franchise agreement regarding compliance with
workplace laws, it is imperative that franchisors also maintain a
system and have policies in place which enable and support
compliance by franchisees. Franchisors can incorporate fair work
provisions into their operating systems and manuals, helping create
clarity and consistency about conditions of employment across the
A franchisor can ensure compliance by its franchisees by not
only providing training on workplace laws during the initial
training period for a franchisee but by also having the right tools
and processes in place. This would include:
Having systems in place which provide franchisees with access
to human resources and or industrial relations information;
Making available to franchisees or giving them guidance on
where they can access information relating to pay rates and
entitlements, and providing templates for employment contracts and
the like; and,
Having policies and procedures in place for the handling of
disputes which may arise between an employee and the
However, as we have seen recently, having a system in place does
nothing to ensure compliance so it's important for a franchisor
to monitor compliance by regularly checking that their franchisees
are complying with workplace laws. Again, at the most basic level,
a franchise agreement should include provisions which allows the
franchisor the ability to audit and check compliance by the
franchisee in relation to workplace laws. More importantly for a
franchisor, is how they monitor that compliance and the things that
they can do to address issues before they become a problem.
Monitoring compliance would include a franchisor undertaking some
of the following:
Carrying out random audits on the franchisee requesting
information relating to their employees including, employment
contracts, employee payslips and records;-
Requiring franchisees to report into the system information
relating to their employees and the steps they are taking to ensure
workplace compliance; and,
Requiring franchisees to report any discrepancies or issues
that are likely to arise or have arisen as a result of an employee
or workplace compliance.
Whilst there is no guarantee that the proposed legislation will
be enacted, franchisors shouldn't wait to prepare for the new
requirements - they should be looking at their systems and start
thinking about their compliance strategy now.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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