Managing your people, as you move to franchise

The move to franchising for an established and successful business can be an attractive and compelling one. However, it comes with its pitfalls, particularly in terms of employment.

Managing your people

Managing your people, as you move to franchise

The move to franchising for an established and successful business can be an attractive and compelling one. However, it comes with its pitfalls, particularly in terms of employment. 

There are two major headaches for the majority of small business owners. Cash flow is the obvious one. “People woe” is usually the other. These concerns apply across industries and are certainly relevant in the franchising sector, too.

When it comes to the latter, getting the fundamentals fixed first is vital.  Workplace compliance is a complex and constantly changing beast, and this can be a huge challenge for franchisees.

In my experience franchisees and franchisors alike absolutely want to meet, and usually, exceed minimum statutory compliance requirements. Unfortunately, many lack the know-how or structure to do it properly. And if you are a business owner at the start of a franchising journey, these issues may not be foremost in your mind.

Until recently, such an approach would have simply stagnated opportunities for growth. Now, it risks crippling a business due to an increasingly litigious culture and growing opportunities for employees to stand up for their rights through tribunal.

However, good people strategies are about more than legal compliance. For a franchising company, a consistent, positive employment culture throughout the business can be beneficial for franchisor and franchisee alike, and vital to their prosperity. 

So there’s a lot to get right and hopefully the pointers laid out here will give you some pointers to think about.

Different employment structures you can use

There are many different franchise models, with a matching diverse array of frameworks for engaging staff. 

In the franchise sector – especially in service-based industries such as cleaning, hospitality, leisure and care – it is common to require greater workforce flexibility than conventional structures allow for. As a result, franchise staff are often engaged as workers or under self-employed contracts which may not be the correct categorisation.

As working habits and society in general continue to change, as flexible working and the gig economy become more common, employment pitfalls grow in proportion. Franchisees must ensure that their employment risks – and there are many – are minimised.

These considerations do not only affect franchisees. Franchisors should be under no illusions over the impact that mistakes by franchisees can have on the business as a whole.

New legislation is on the horizon as regards employment status or ‘good work’, as a result of a review into the gig economy in 2018 – we hope and expect this will clarify the current system of employment statuses, which can be highly confusing for those without expertise in this area.

However you and your franchisees are working, what is crucial is that contracts you have in place are a true reflection of the situation and not a sham. And all franchisors should provide good HR guidelines and resources to franchisees, to minimise risk and stop them getting it wrong. 

The importance of getting recruitment right

Just as the owner of a conventional business would hardly be expected to take on anyone into their workforce, franchisors face the additional risk of considerable damage to their brand by selecting inappropriate franchisees.

As a human resources business which has been franchising since 2005, we at The HR Dept recognise the vital importance of having the right people with appropriate skills and personality types filling any particular role.

We know that with franchises in particular, it takes a certain combination of qualities to make a success of the business.

Broadly speaking, there are three aspects to being a good franchisee: firstly, knowledge of what the business is going to trade in, be that products or services; secondly, an understanding of how to run a business; and finally (perhaps most importantly) having the drive and energy needed to build success.

Franchisors should therefore bear these factors in mind when setting up and executing their recruitment processes.

The fundamentals of recruiting franchisees are by and large similar to those used normally, albeit with one major difference.

While employees have the fall-back of management, their colleagues and internal HR processes to back them in times of difficulty, there can be considerable solo pressure in running a franchise business even if a franchisor has good central support structures in place.

So I would say you should bear in mind that resilience, drive, energy and self-sufficiency needs to be higher in franchisees than in conventional employees, and that recruitment should factor in these considerations.

Once you have recruited properly, looking after your people is of course crucial and health and safety in the workplace is becoming increasingly important. Every employer has a duty to protect the health, safety and wellbeing of their employees, ranging from the premises they work in to their mental health. Where HR breaches can result in tribunal, health and safety breaches can lead to criminal conviction. 

Using good HR to protect brand reputation

Running a successful is business is difficult and there are many pitfalls to be aware of in a rapidly-changing employment landscape. 

In the face of these pressures, franchisors and their franchisees should look after their employees with dignity and respect. It’s a moral duty but it’s a legal one, too.

Increasingly, good employment also makes good business sense. Employees are empowered like never before, not only legally but also in terms of using social media to potentially harm the reputation of their employer. Beware!

So while measures like zero hours contracts have their merits in terms of giving flexibility to employers and employees, these tactics should not be abused by either party. As an employer, you risk serious damage to your brand.

How then should franchisors and franchisees approach the employment of their staff? Without going deep into the complexities of employment law – which vary throughout the business spectrum and are too intricate to discuss here – there are some general rules which all franchisors and their franchisees should bear in mind.

Firstly, holiday pay must be paid at the same rate as normal. Where hours are variable this should be averaged out over the previous 12 weeks’ pay, including regular overtime, extra shifts and anti-social hours.

Secondly, franchisors should consider deduction from wages, a really complicated area which has particular relevance regarding deductions for uniforms where pay is close to the National Minimum Wage. Other permitted deductions, such as traffic fines in company vehicles, or for damage caused by negligence, must be clearly stated in a contract beforehand.

Finally, it’s worth offering some specific advice regarding employment of retail workers, who are given extra protection from deductions to their wages to cover, for example shortfalls and losses to inventory, stock or cash. Again, agreements here have to be written and pre-standing.

ABOUT THE AUTHOR
Sue Tumelty
Sue Tumelty
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