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Are you doing enough to protect your brand from the wrong type of publicity? 

Do you have visibility of your franchisee’s employment practices? If not, now is the time to find out.

International employment standards are changing rapidly, to a point where franchisors and franchisees could be seen as a joint employer. It won’t be long until this will have an impact on NZ employment legislation. Check out our recent blog post on this topic to read more about it [http://www.in2hr.co.nz/new-blog/is-your-franchise-ready-joint-employers].

As a master franchisor, you need to ensure that your franchisees are compliant with employment law. This means treating their employees fairly, maintaining accurate employment records and paying them at the correct rate. A recent ruling in Australia has seen the master franchisor, Yogurberry, penalised for the actions of their franchisees. We predict that these types of decisions will be seen in New Zealand before too long, so it’s best to be on top of this now.

Yogurberry

The frozen yogurt chain has recently come under fire for exploitation of its workers. Four Korean workers who held jobs under a Sydney franchisee were being paid as little as $8 an hour, well below the minimum wage . They were also not receiving the correct employment entitlements, such as superannuation.

Penalties totaling AU$146,000 have been handed out, with almost half of those penalties assigned to the master franchisor of the Yogurberry Group. The master franchisor has been deemed an accessory to the exploitation of the workers at the franchisee's Sydney outlet. The Fair Work Ombudsmen has ordered the Master Franchisor of Yogurberry to carry out an external HR audit of their system. This will ensure that all franchisees within the chain are compliant with employment law. All of the Yogurberry franchisees and their managers will require training on employment law.

Domino’s Pizza

Recently in Australia, Domino’s Pizza has been making headlines for underpayment to its staff. A Fairfax recording was released where allegations were made against a Domino’s Franchisee for receiving ‘kickbacks’. This means that a Domino’s franchisee was caught selling falsified employment agreements for immigration purposes. This was in the range of $100K-$150K for each agreement. 

Domino's Pizza in Australia are currently under investigation for these allegations. 

Franchisor Responsibility

The ruling for Yogurberry and the ongoing investigation of Domino’s sends a strong signal to franchisors that they remain responsible for their brand. 

What To Do Now

Because of these high profile international cases, The Ministry of Business, Innovation and Employment (MBIE) are looking to enforce correct practices across all areas of employment, including small business and franchising. They have stated that it is ‘time for franchisors to ensure franchisees are compliant with employment law’.

As a franchisor, you need to ensure that you have correct procedures in place for franchisee behavior. Your franchisees are required to abide by NZ employment law, so make the following considerations:

1)     You need to put thought into how and where your franchisees receive HR support

2)     Have the mechanisms in place to check on your franchisees’ businesses to ensure they are abiding by employment legislation. This will give you visibility of their practices and ways to mitigate risks to your brand. At in2HR, we call this conducting a Pulse Check on your franchisee.

3)      For new franchisees coming into your franchise, set them up for success by giving them in2HR’s franchisee on-boarding program. This provides them with tools and resources to transition from being an employee to being an employer. 

The Yogurberry case illustrates how costly it can be for the brand if their franchisees are not complying legally. Now is time to take action to prevent anything similar happening to your franchise.