The Franchise sector has been under the watchful eye of the Fair Work Ombudsman with large well known franchises Subway, Caltex and 7Eleven investigated for failing to comply with Australian legislation. With such large brands coming under fire, there is even more reason for franchise owners to be super diligent.
These high profile investigations seek to crack down on franchise owners who are non-compliant with the current Australian franchise laws, including the care and support for employees. This also serves as a reminder to franchisees that although a franchisor is available to provide guidance and support, you are in charge of operating your own business and managing employees.
Issues Faced By Franchisee Owners
In the case of Subway, legal action was taken against a franchisee husband and wife team, owning Subway outlets in Artarmon and Stanmore. The Fair Work Ombudsman (FWO) alleges that a Chinese national was underpaid a total of $16,346 for work carried out between the two outlets.
The Subway employee had lodged a request for assistance as it had been discovered that the employee was underpaid her minimum hourly rate, casual loading and penalty rates for evening, weekend and public holiday work. A special clothing allowance was also underpaid. Through the investigation the worker was able to be back paid in full earlier this year.
Investigations also showed the couple were breaking the law regarding record keeping and pay slips while not informing employees of their terms of engagement and classification. The couple now face penalties of over $54,000 for their actions.
7Eleven has also faced similar allegations as it was found that a number of 7Eleven franchisees underpaid their employees while falsifying store data. It was reported that some franchisee owners were paying staff as little as $10 an hour before tax.
The FWO had received persistent reports from 7Eleven staff in regards to underpaid wages which prompted a full investigation. From the inquiry it was found that some 7Eleven franchisees had paid staff below the minimum rate and falsified store data to conceal their conduct.
Investigations were also conducted into 7Eleven’s liability for its franchisees conduct. In order for 7Eleven to be found liable it would have to be proven that 7Eleven had knowingly been involved in the contraventions. In this case, there was found to be insufficient evidence to suggest 7Eleven was liable.
Similar to Subway and 7Eleven, the FWO were called to investigate claims employees were being underpaid throughout the Caltex franchise network. Before an audit was conducted the FWO informed the Caltex franchise of their intentions. This gave the franchise time to inform franchisees of the pending investigation in hopes to encourage compliance across the 600 franchisee outlets.
While Caltex were publically supportive of the audit, the matter impacted on the public image of the brand as a whole. This case highlights the importance of franchisors and franchisees to work within the rules of the law.
What You Can Do to Avoid This Situation
1. Check the Franchise Design Model & Internal Compliance
One of the most important things you can do as a franchisee owner is to check whether the franchise design model actively encourages you to reduce employee pays or withhold entitlements. You also want to ensure that the model does not limit the franchisees ability to control business expenses or the ability to increase profits.If there is ever any suggestion that this kind of conduct is acceptable then you should seek legal help in order to have applicable sections updated or completely removed from the model.
Alternatively, if you are a franchisor and become aware that one of your franchisees are not following your franchise design model then you need to take action to ensure that they do become compliant. You have spent time developing policies, procedures and systems that work to ensure success for each franchisee and these should be followed.
2. External Franchisee Compliance
As a franchisee there are a number of actions you are required to take care of as a business owner. This includes workplace health and safety, tax, insurance, fair work practises and superannuation. If you choose not to comply with these rules and laws then you run the risk of facing harsh penalties.If a franchisee chooses to take the risk it can have a negative effect on the whole brand, rather than just one outlet. If any non-compliance is made public it can have a negative effect on the whole brand along with the franchise outlet in question.
As a franchisor, ensuring that all franchisees follow the law is very important. Not only will it protect your business but it will protect the brand you have worked hard to develop and expand. At the end of the day, customers that are not happy with a franchisee outlet will vote with their feet and take their business elsewhere.
3. Seek Legal Help & Support
Knowing your responsibilities as a franchisor and franchisee is important. Before you enter into any contracts you should always seek legal advice and support from a firm like Baybridge Advisory.This way you can ensure that all business models, compliance contracts and information is up to date and follows the latest rules and regulations specified for the franchise industry.
At Baybridge Advisory we work closely with our clients to develop a strategy that works well for both the franchisor and franchisees. We tailor all development strategies to your business to achieve your desired goals. Our team always offer high quality guidance, support and resources to ensure your business model is compliant with Australian laws.
If you are unsure if your franchise business is compliant with the law then contact Baybridge Advisory today.
Why our clients choose us?
- Getting franchise enquiries, but not sure what to do?
- Are you experiencing rapid growth and market attention?
- Is managing staff becoming a constant headache and time consuming?
- Is your cash flow limited for funding future growth?
- Have you proven your business concept?
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