How Businesses in China Can Validate Staff Rotas and Labour Costs Before Franchising

A company-owned outlet may appear profitable while relying on the owner regularly covering shifts, free support from head office or an experienced manager juggling several roles. Businesses preparing to build a franchise network in China should first establish whether a typical operator can trade reliably using the proposed rota, with reasonable staffing levels and legally compliant working arrangements, rather than relying on hidden labour to sustain profits on paper.

1. Account for hidden working hours

Article 7 of China’s Regulations on the Administration of Commercial Franchising requires franchisors to have a mature business model and the capacity to provide ongoing operational guidance, technical support, business training and related services. Rota validation is not a separate statutory test under the regulations, but it is an important management tool for assessing whether a business model can be replicated. Meeting the ‘two outlets, one year’ requirement does not, by itself, demonstrate that an outlet’s staffing arrangements are sound.

Start by recording actual working hours at company-owned outlets. Include not only employees on the payroll, but also work performed by owners, relatives, head-office supervisors and temporary support staff. Focus on recording:

• Time spent preparing to open, cleaning after closing and taking stock;
• Non-sales tasks such as receiving deliveries, replenishing stock, handling after-sales enquiries and conducting shift handovers;
• Time managers spend on rotas, recruitment, training and administration;
• Who covers staff absences, and for how long.

For example, if the owner takes stock every evening after closing, that task cannot simply disappear from the franchise model. The business should specify whether the franchisee will do it personally or a paid employee will handle it, showing the time commitment and cost of each option. A franchisee’s own labour is not ‘free’: it is an operating requirement that needs to be explained in advance.

2. Design shifts around tasks, rather than copying headcounts

A statement such as ‘each outlet needs a certain number of staff’ is easy to understand, but does not give franchisees enough guidance to run the business. Two outlets of the same size may need very different staffing arrangements because their opening hours, delivery schedules or services differ.

Start with a role and task matrix. For each task, specify when it occurs, the skills required, whether it can be combined with other duties and what happens if nobody carries it out. Then develop a core rota, handover arrangements and an absence-cover plan. For critical quality and safety tasks, do not assume that staff can cover an otherwise unattended role simply to keep the labour budget down.

Trials at company-owned outlets should cover a full operating cycle, including weekdays, weekends, delivery days and stocktaking days. The aim is not to find the lowest possible headcount, but to confirm that the plan remains workable when staff take normal breaks and time off, hand over duties or are absent in the ordinary course of business.

Rotas must also comply with applicable rules, including the Labour Law of the People’s Republic of China and the Labour Contract Law of the People’s Republic of China. Routine excessive working hours must not become a standard operating assumption. Nor should the actual employment relationship be disregarded simply because a contract labels someone ‘part-time’. Where special working-hours arrangements are involved, check the eligibility conditions and approval requirements.

3. Test whether the rota is replicable using full labour costs

Once the rota has been validated, calculate its associated costs. In addition to basic wages, include overtime pay, employer contributions to social insurance and the housing provident fund, recruitment, training, shift cover and other personnel expenses, as applicable. Wage levels and contribution rules may vary between cities. Head office should state the location, date and assumptions used in its calculations, rather than applying figures from a single company-owned outlet across China.

At a minimum, calculate costs separately for the following scenarios:

• An owner-operated franchise: Specify the roles the franchisee will perform and the expected working hours;
• An outlet run by an employed manager: Include the manager’s remuneration and any necessary management cover;
• Periods of staff shortages: Include the resources needed for recruitment, on-the-job training and temporary cover.

During validation, also monitor customer waiting times, errors, completion of cleaning tasks and signs of staff turnover. If labour costs fall but tasks are frequently delayed or the manager works overtime for prolonged periods, the model has not been improved: costs have merely been shifted or deferred.

Set internal approval criteria: someone is responsible for every critical task, cover arrangements are practical, actual working hours meet applicable requirements, and full labour costs are included in the financial projections. If these conditions are not met, adjust processes or operating arrangements before rolling out the model.

4. Ensure franchise recruitment materials reflect actual operating requirements

Turn the findings into tools franchisees can use, including a role and task matrix, sample rotas, a skills and cover matrix, and a staffing-cost template. An operations manual can explain the method, but a line telling franchisees to ‘adjust according to local circumstances’ is no substitute for testing whether staffing gaps can actually be filled.

China’s Regulations on the Administration of Commercial Franchising require franchisors to provide the prescribed information and the contract text in writing at least 30 days before the contract is signed. Disclosed information must be true, accurate and complete. When presenting staffing plans and cost calculations, head office should clearly distinguish between measured results, estimation assumptions and operational recommendations. A recommended headcount must not be presented as a guarantee of profitability.

If the operating model depends on the franchisee working full-time in the outlet, say so during franchise recruitment. If head office promises recruitment assistance or on-site training staff, the contract should specify the services, duration, fees and limits of responsibility. Do not promote a franchise as requiring ‘no management involvement’ while leaving the manager’s salary out of the financial projections.

Practical takeaway: Before offering franchises, use actual working-hour records from company-owned outlets to validate a workable rota, then calculate the full labour cost. Giving prospective franchisees a clear view of both the financial investment and the labour commitment is more valuable than presenting an attractive staffing figure.