Employer responsibilities in a franchise network: agree a clear division of roles

When you expand your existing business into a franchise network, you cannot simply extend your own approach to managing staff to units run by independent franchisees. Delivering a consistent customer promise requires shared operating practices, but employment decisions and obligations generally rest with the business that employs the staff. Establish a clear division of responsibilities before opening the first franchisee-run unit.

1. Separate oversight of the concept from employment decisions

In your own business, you may have made decisions about service delivery, shifts, pay and staff duties together. In a franchise network, these decisions need to be separated. The franchisor sets the concept requirements agreed in the franchise agreement, while the franchisee is responsible for their own staff and business risks.

A shared uniform, service process or product preparation instructions do not, in themselves, make the franchisor the employer of a franchisee’s staff. However, confusion can easily arise if the network’s founder continues to manage every unit as though it were their own: approving leave, allocating individual shifts or intervening directly in employees’ terms and conditions.

Draw up a responsibility matrix that identifies who makes each staffing decision. A starting point could be:

• Franchisor: sets out the skills required by the concept, service standards and shared operating methods.
• Franchisee as employer: recruits staff, enters into employment contracts, decides pay within the applicable rules and arranges shifts.
• Support to be agreed jointly: the network may provide recruitment templates, training materials and workforce planning tools.

Also record who approves decisions. Providing an employment contract template does not mean that the franchisor approves a particular appointment or takes responsibility for the terms of an individual employment contract.

A useful test is this: can the franchisee deal with a routine staffing issue without asking the network’s founder for permission to make an employment decision? If not, the division of responsibilities needs clarification.

2. Identify the obligations that apply in Finland

Finland has no specific franchising legislation, mandatory registration of franchise agreements or separate statutory franchise disclosure document. Cooperation between businesses is governed by legislation including the Contracts Act, the Competition Act and the Unfair Business Practices Act. The Finnish Franchising Association’s Code of Ethics is a form of self-regulation, not legislation.

For employment matters, key legislation includes the Employment Contracts Act, the Working Time Act, the Annual Holidays Act, the Occupational Safety and Health Act and the Occupational Health Care Act. You must also establish which collective agreement applies. A generally binding collective agreement may bind an employer even if they are not a member of an employers’ association. Belonging to a franchise network does not override these obligations.

As the employer, the franchisee’s business is responsible for matters such as paying wages, keeping working time records, arranging statutory insurance and providing preventive occupational health care for its employees. Administrative services supplied by the franchisor do not, in themselves, transfer statutory employer responsibilities to the service provider.

The franchisee’s own status must also be assessed correctly. Calling an agreement a franchise agreement does not, on its own, determine whether the arrangement is genuinely self-employment or an employment relationship. If it meets the criteria for an employment relationship in practice, the assessment is based on the actual circumstances and, where necessary, an overall assessment. Have a lawyer review the model, particularly if the franchisee is expected to work personally under very close day-to-day supervision.

3. Build two distinct levels into your staffing guidance

The network’s operations manual should distinguish between concept requirements and support materials intended for employers. This helps franchisees see what is a requirement for the network as a whole and what is an adaptable tool for managing their own business.

For example, concept guidelines may specify what an employee must know before serving customers independently. It remains the employer’s responsibility to ensure induction is provided, assess competence and organise work safely. An online course provided by the network can support this, but a course completion record alone is no substitute for workplace-specific instruction.

Make the division of responsibilities explicit in at least the following situations:

• A new employee starts: who provides training in the concept, and who explains the workplace risks?
• A working method changes: who supplies the instructions, and who ensures the new method is introduced safely?
• A shortcoming in an employee’s work is identified: to whom does the network’s representative report it?
• A unit needs a temporary replacement: who recruits them and arranges their induction?

Routine staffing concerns should be handled through the franchisee or their designated manager, rather than through direct management instructions from the network’s representative. Immediate safety risks must nevertheless be addressed as the situation requires.

If you provide shared HR templates, identify who maintains them and when they are due for review. An outdated form can spread quickly across the network. Explain clearly when franchisees must check whether a template is suitable, for example against the collective agreement that applies to their business.

4. Test the division of responsibilities against everyday disruptions

Before launching franchisee-run operations, work through the division of responsibilities in a tabletop exercise. Choose situations you currently resolve almost automatically in your existing business. The aim is to uncover decisions that have, until now, depended on you personally.

For example, an employee calls in sick before opening time. The franchise concept may require the unit to keep to agreed opening hours, but the franchisee, as employer, decides how to arrange cover and ensures compliance with working time rules. Agree separately how any service disruption will be communicated to the network and customers.

In another scenario, a specialist from the network notices a recurring service error. They document it and discuss the corrective action needed with the franchisee. The franchisee investigates whether the problem stems from skills, instructions, equipment or the way work is organised, and decides what management action, if any, to take.

After the exercise, record any missing decision-making authority, reporting channels and contact people. Make sure the franchise agreement, operations manual and day-to-day practice all reflect the same division of responsibilities. If the way you operate repeatedly requires departures from the documented responsibilities, revise the model before expanding.

Practical checklist: identify the employer, separate concept requirements from staffing decisions, and test responsibilities against everyday disruptions. A sustainable franchise network combines shared operating practices with a clearly defined employer role for the franchisee.