Owner Working Requirements and Staffing Costs: What to Check Before Buying a Franchise in Japan

When considering a franchise, do you check not only the outlet’s profit, but also how many hours you will need to work to generate it? A franchise network gives you access to the franchisor’s systems and support, but franchisees are independent businesses. Before committing, compare your contractual working obligations with the staffing assumptions in the financial projections, and establish what it would take to operate without you on site.

1. Check the contract’s assumptions about the owner’s work

Statements in recruitment materials such as ‘no experience needed’ or ‘you can leave operations to a manager’ do not tell you what working requirements apply to you personally. Start by checking the contract and operations manual for obligations to work on site, restrictions on other employment or business activities, and conditions for appointing a manager.

The key distinction is that being responsible for the business is not the same as being required to remain on site. If the contract uses wording such as ‘devote yourself to managing the business’ or ‘directly supervise outlet operations’, ask for an explanation of what this means in practice.

Frame your questions to the franchisor around real operating situations:

• Must the owner personally work a minimum number of days or hours?
• Can you reduce your own on-site hours if you recruit a manager?
• Does appointing a manager require the franchisor’s approval or completion of training?
• Can family members run the outlet, or can someone other than the company’s representative manage it?
• Can you appoint someone to cover for you if illness or caring responsibilities prevent you from working?

Even if delegation to a manager is permitted, recruitment and training may take time, so you may not be able to hand over operations immediately after opening. Distinguish between what is permitted in principle and what is feasible at launch. Where approval is required, also check the assessment criteria, application procedure and process for receiving a decision.

2. Make your own and your family’s uncosted work visible

When reviewing the franchisor’s financial model, ask for the staff rota behind the labour cost calculation, rather than looking only at the total. Unless you know how many people are expected to work, at what times and for how many hours, you cannot judge whether the model is achievable at your outlet.

Do not check only the staffing needed to serve customers. Time is also needed for opening preparations, cleaning, food preparation, ordering, stocktaking, recruitment interviews, rota planning and staff training. If the owner is expected to handle all of these tasks, low employee costs do not necessarily mean a light workload for you.

Use the following table to compare the financial model with your own plan.

Item to check	What to establish about the franchisor’s assumptions	What to include in your own plan
Owner’s working hours	Days, hours and duties	The maximum hours you can sustain
Family members’ work	Whether unpaid or low-paid help is assumed	Their willingness to help and the cost of replacement staff
Manager provision	Whether salary, allowances and training time are included	Recruitment terms and time needed for training
Extra staff at busy times	Whether this is budgeted separately from normal staffing	Additional cover during peak periods
Absence cover	Who is expected to fill gaps	Arrangements for relief staff or a stand-in

For a sole trader in Japan, pay to the business owner is generally not a deductible business expense in the same way as employees’ wages. Judging whether your income adequately rewards your work solely by the profit shown in the accounts can therefore give a misleading picture. If you operate through a company, you should also check whether the projections include directors’ remuneration.

Separately from the accounting figures, estimate what it would cost to have someone else do your work. This is not a plan to outsource every task, but a way to understand how heavily the outlet depends on the owner’s labour. Consult a Japanese tax accountant about the tax treatment.

3. Model recruitment difficulties and time off for yourself

Once you have a basic rota, consider what happens if recruitment does not go to plan. The number of people you need to open is not the same as the number who will apply. Use local job advertisements to estimate the pay you will need to offer, travel allowances, recruitment costs and wages during training. Offering the statutory minimum wage alone may not attract the staff you need.

Beyond wages, staffing costs should include applicable employer contributions to social and labour insurance, premium pay for overtime and similar work, and cover for staff taking paid leave. To clarify which rules apply, explain your proposed employment arrangements to a Japanese labour and social security attorney, known as a shakai hoken romushi, or another suitably qualified adviser.

Compare at least these three operating plans:

1. Normal operations: You have the planned number of staff, and the owner works the hours envisaged.
2. Operations with recruitment difficulties: Vacancies persist, increasing recruitment costs and pressure on existing employees.
3. Operations without the owner: The manager or additional staff take on the owner’s duties.

For each scenario, assess the outlet’s finances separately from the money your household needs to live on. Repayment of loan principal is a cash outflow even though it is not an expense in the profit and loss account. You need to check not just whether the business makes a profit, but whether it can pay wages, meet loan repayments and provide for your living costs at the same time.

Even if the franchisor offers relief staff, do not assume they will always be available. Check eligibility conditions, notice requirements, geographical coverage, charges and circumstances in which support cannot be provided. If a plan works only on the assumption that you never take time off, revise it before signing the contract.

4. Understand the basis for requesting information and the franchisee’s responsibilities

Japan has no single comprehensive law governing all franchise agreements. However, Article 11 of the Small and Medium-sized Retail Business Promotion Act requires franchisors whose operations qualify as a ‘specified chain business’ under the Act to provide prospective franchisees with written information before signing, and to explain matters including the business outline and key contract terms. Not every brand falls within its scope: applicability depends on the nature of the business and the contractual arrangements.

The Japan Fair Trade Commission’s guidelines on franchise systems under the Antimonopoly Act apply to franchising generally, not just retail and food service. They set out information that should preferably be disclosed during franchise recruitment, as well as conduct that may raise competition concerns. Distinguish between statutory disclosure obligations and the disclosure recommended by the guidelines.

There is no general right to receive information about owner working requirements or staffing in whatever format you request. Nevertheless, these details are essential to assessing your workload, so it is important to ask for specific explanations of the contractual requirements and the assumptions behind the financial model.

General legislation, including the Civil Code, also applies to the contractual relationship. Where a franchisee employs staff, the franchisee is generally responsible as the employer for complying with legislation such as the Labour Standards Act and the Minimum Wage Act. Using a rota recommended by the franchisor does not mean that the franchisor takes on your employment responsibilities.

Practical takeaway: Compare the hours you are personally required to work under the contract, the hours assumed in the financial model and the hours you can sustainably work. If they differ, do not rush into joining until you have established who will cover the gap and what that will cost.