In Australia, recent data published by Griffith University and IBISWorld, shows franchising is growing between 2.5% and 3.1 % per annum. Franchising employs nearly half a million people and generates additional benefits to the economy, through the social enterprises common amongst small business operating in local communities.
Consequentially, governments should be supporting franchising as a major engine of small business. Instead, the issue of “joint employer” is being played out globally, often driven by the labour movement, which is currently focused on franchising as a way of reshaping an old debate.
The fundamental benefits of franchising, that ability to be in your own business but not be on your own, supported by good franchise systems that provide help and assistance to ensure that franchisor success comes from the success of franchisees, is now being used against it to build the case that if a franchisor can control the price of a pizza, then they should be liable for the employment practices of the franchisee.
We recently surveyed 160 Australian franchise CEOs, representing over 22,000 franchised units regarding the proposed reforms to the Fair Work Act which will have the effect of creating a contingent employer liability for franchisors where they fail to take reasonable steps to prevent work place relations breaches by their franchisees.
Starting with the premise that everyone should receive their lawful entitlements with respect to wages and conditions, the survey identified that franchise systems would need to undertake a significant amount of additional work if the legislation is introduced across a range of identified measures; 54% identified a significant additional cost and change to existing business practices; 71% expected costs of the actions over the first 12 months to exceed $20,000 with a further 22% anticipating costs greater than $100,000; 17% would need to fundamentally review whether they continued with a franchise model; and 4% said they would cease franchising.
The frustrating aspect to this debate is that franchisees already have better systems and processes in place to protect the brand, the franchise network and franchisee employees when compared to the rest of their small business competitors and yet, the debate on franchising and joint employment continues around the world.
Looking to the future we need to support the lobbying efforts of our franchising associations, educate franchise employees so they understand who they are employed by, and lobby governments to preserve the current legislation that works for all.
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