Buying a franchise: who is responsible for the outlet’s employees?

The brand provides operating procedures, uniforms and training. But that does not mean it takes responsibility for the people behind the counter. Before signing up to a franchise network, establish who will be the employer, who can direct employees’ work and what the mandatory staffing standards will actually cost you. Uncertainty here can turn a seemingly affordable concept into a business you cannot adequately staff or fund.

1. Separate brand rules from employer obligations

The Czech Republic has no specific franchise legislation. Franchise agreements are generally concluded as contracts not specifically defined by law under Section 1746(2) of Act No. 89/2012 Coll., the Civil Code. Nor is there a specific statutory disclosure document for prospective franchisees; general rules on pre-contractual dealings and disclosure obligations apply.

Employment relationships are governed primarily by Act No. 262/2006 Coll., the Labour Code. Act No. 435/2004 Coll., on Employment, regulates employment and certain related matters. A franchise agreement does not replace these rules and cannot deprive employees of their statutory rights.

A franchisee normally operates in their own name, on their own account and at their own risk. If their company enters into the employment contracts, that company is the employer, not head office. It is responsible in particular for pay, working time schedules, rest periods, working time records and workplace safety. Using an external accountant or receiving recruitment support from head office does not, in itself, transfer that responsibility.

Ask for a written allocation of roles: who signs employment contracts, who handles HR administration and who deals with employees. This allocation must reflect how the outlet actually operates, not just the wording of the agreement.

2. Translate staffing standards into realistic shift patterns

When assessing a franchise concept, a line marked ‘wages’ in a sample budget is not enough. Ask for a staffing model for an outlet with similar opening hours and a comparable range of services. Find out whether it is based on actual operations or simply on head office assumptions.

In particular, establish:

• How many people must be present at opening, during peak periods and at closing?
• Does the brand require specific roles, qualifications or cover for the manager?
• How much time is needed for preparation, cleaning, stocktakes and mandatory training outside trading hours?
• Who will cover holidays, sickness or an employee leaving?
• Does the model assume that the owner regularly works without any allowance for their pay?

Draw up a trial shift rota and have it checked by someone familiar with both employment law and payroll practice. Include breaks, rest periods and cover; simply multiplying opening hours by the number of staff is not enough.

Alongside gross wages, costs include statutory employer contributions, pay premiums applicable to the working arrangements, statutory wage compensation, recruitment and induction. Allow for occupational health services and medical examinations according to the specific requirements of the work involved. Update the budget using current rules, rather than an old brand presentation.

3. Clarify head office’s authority over recruitment and training

The franchisor may require particular service standards or completion of training. It is a different matter if it wants to approve every candidate, set shifts or demand a manager’s removal. Such requirements need clearly defined limits and legal review.

The agreement should distinguish between monitoring brand quality and managing employees. One practical approach is for head office to report shortcomings to a designated franchisee manager, who then takes any employment-related action. A franchisor’s request to replace someone does not, in itself, create lawful grounds for dismissing that employee.

For training, obtain confirmation of:

• who pays for attendance, travel, accommodation and any repeat training;
• whether training takes place before opening or on an ongoing basis;
• how quickly a replacement employee can be trained;
• what happens if head office cannot provide a training date when needed.

Mandatory work-related training cannot automatically be treated as unpaid employee leisure time. Its treatment must be assessed under the Czech Labour Code. Equally, training in sales standards does not fulfil all of an employer’s occupational health and safety obligations.

4. Check the arrangements for promised relief staff

Some franchise concepts offer support from a head office team during opening or staff shortages. Ask whether these people provide a standalone service, only deliver training, or will work under your day-to-day direction. Depending on the actual arrangements, rules on temporary assignment or agency work may apply. Calling the service ‘consultancy’ on an invoice is not enough.

Be equally cautious about recommendations that regular service staff work as self-employed contractors under a Czech trade licence. What matters is the true nature of the work. If it has the characteristics of dependent employment, an employment relationship cannot simply be replaced by invoicing. Seek an independent assessment before adopting such a model.

Practical takeaway: Before buying, prepare a clear allocation of staffing responsibilities, a realistic shift rota and a comprehensive payroll budget. Support from the franchise network is valuable, but the brand itself will not fulfil your obligations as an employer for you.