To reduce brand reputation risk, a franchisor should implement and ensure their franchisees operate using ethical and sustainable work practices.
Franchising relies on a good relationship between a franchisor and its franchisees. A franchisor’s success also depends on their franchisees’ success and vice-versa. Promoting fair workplaces by assuring ethical and sustainable work practices in a franchise model can be key to success or failure.
A well-structured franchise model is a mutually beneficial arrangement that provides franchisees with the right level of support to ensure success. Although it is the responsibility of each franchisee to comply with employment standards, franchisors should be concerned with the ability of the franchise as a whole to be compliant with employment legislation.
Breaches of employment standards will have a negative impact on the franchisor’s brand and affect all parties within the franchise.
Franchisors should have processes in place to ensure that all franchisees comply with New Zealand legislation. This should be standardised and documented centrally by franchise management and applied so that all franchisees will implement and act on it correctly.
Franchisors could use the following information to help assure ethical and sustainable work practises in their franchise models.
Managing risks throughout the life of the franchise contract
Franchisors should monitor and manage employment compliance risks (identify and mitigate) throughout the life of a franchise contract.
To gain assurance of ethical and sustainable work practices, a franchisor should monitor and manage employment compliance risks (identify and mitigate) throughout the life of a franchise contract. To gain assurance of ethical and sustainable work practices, a franchisor should monitor and manage employment compliance risks (identify and mitigate) throughout the life of a franchise contract.
Franchisors should focus on three key stages of the franchise contract life cycle:
- Pre-contract preparation
- Contract confirmation and documentation
- Monitoring during the life of the contract
Pre-contract preparation – prior to taking on new franchisees, a franchisor should undertake work to facilitate compliance with employment standards and ensure that the franchisee is set-up to succeed.
Franchise code of conduct statements
A franchise work practice policy or code of conduct should outline how the franchisor expects its franchisees to operate in order to continue operating within the franchise. It will usually include elements such as expected behaviours, business ethics, treatment of workers and environmental standards. It should include a statement that the franchisee will comply with all relevant legislation, which will cover all minimum employment rights and related legislation.
It is important to have this standardised across the franchise, so that all franchisees have a common understanding and commitment. This will ensure the brand’s reputation is upheld. Examples of statements to include in the code follow.
Example statement – The franchisor and its franchisees agree that they will:
- implement and maintain fair workplaces. Have zero tolerance for worker exploitation
- act in good faith
- meet any required employment and immigration related legal obligations
- encourage/assist other franchisees to meet their employment and immigration related legal obligations
- encourage open communication between employers and employees to try to avoid and resolve workplace issues
- consult with the employees in relation to any proposed changes that will significantly impact them
- try to resolve disputes promptly either directly with the other party or through mediation
- recognise they have a shared brand and mutual incentive for success
- act in accordance with this Code of Conduct, not just the contractual terms.
Also they should not impose conditions/obligations on the employees that are unreasonable, or overly onerous or unnecessary to protect their own interest.
Code of conduct expectation of the franchisees
The franchise code of conduct should outline how the franchisor expects its franchisees to treat their employees. Please note that this is important:
- as a condition of operating within the franchise (possibly included in the terms of contract)
- so that franchisees understand the importance of having a code of conduct for its employees.
This may include the following declarations.
Example statement – The following applies to all workers engaged on the franchise:
- They will receive lawful payment appropriate for their work, skills and experience for all the hours they work, including training and meetings.
- The franchisee will respect workers’ employment rights and ensure their franchise is free from illegal practices, including discrimination, harassment and corruption.
- Management systems will support good practice and clear accountability.
- The franchisee and its employees will handle all business dealings with the highest standards of integrity and honesty.
- Any business improvements in the franchise will fairly balance the needs of the franchisees, franchisor, customers and workers.
If a franchise is just starting out and is not yet ready to implement a detailed code of conduct the franchisor:
- may want to commit to complying (and ensuring franchisees comply) with employment standards.
- may want to release a brief statement informing employees of this together with a draft employment policy while a code of conduct is drafted.
The franchisor should involve any existing franchisees and employees in this process.