Franchising and staff responsibilities: separate support from line management

When you turn an existing business into a franchise network, your management role changes. In company-owned outlets, you can manage staff directly. With a franchisee, you are instead working with an independent business. Before expanding, you therefore need to decide how to communicate franchise standards without taking over the franchisee’s day-to-day management of staff. Here is a practical way to draw that boundary.

1. Start by establishing who actually employs the staff

Franchising is based on cooperation between independent parties. When the franchisee’s business hires staff, that business is their employer. The fact that staff work under your brand does not, in itself, make your business their employer.

This becomes particularly important if you have previously handled all staffing matters yourself. The habit of calling an employee to change the day’s staffing arrangements can carry over into the franchise relationship, even though responsibilities are now divided differently.

Start by listing the staffing decisions made in your current business:

• Who recruits staff and signs employment contracts?
• Who decides on pay, rotas, annual leave and absences?
• Who manages the work and handles conflicts?
• Who is responsible for workplace health and safety and monitoring risks?

Then identify which organisation should handle each issue under the franchise arrangement. Distinguish between providing tools and making decisions. For example, you can offer an interview template without choosing whom the franchisee should employ.

Do not rely solely on the agreement describing the parties as independent. How the relationship works in practice may also matter in a legal assessment.

2. Set franchise standards without writing staff rotas

A franchise network needs shared ways of working. That does not mean the franchisor needs to decide every employee’s daily tasks.

Start by distinguishing between operational requirements and staffing decisions. A franchise standard might, for example, require a particular service to be delivered only by someone with documented competence. The franchisee then needs to plan recruitment, training and staffing to meet that requirement.

Customer service is another example. You can describe the service customers should receive and the steps involved. The franchisee organises the work to deliver this within the terms of the agreement.

Review your existing management instructions and sort them into three groups:

• Shared franchise standards: requirements the outlet must meet under the agreement.
• Recommended tools: such as staffing templates and discussion guides.
• Local employer decisions: matters the franchisee should handle independently.

Make the distinction clear. A recommended staffing template should not be presented as a mandatory rota. Nor should you label a staffing decision as a franchise standard simply to gain greater influence.

Check that the requirements are compatible with applicable employment law, workplace health and safety rules, and any collective agreements. The franchisee needs to be able to meet both its obligations as an employer and the terms of the franchise agreement.

3. Establish a communication channel that works day to day

Appoint a responsible contact person within the franchisee’s business. Questions about staffing, performance and work organisation should normally go to that person, rather than directly to individual employees.

Suppose your franchise standards manager notices during a visit that customer service is falling short. An appropriate procedure would be to document the observation, explain which franchise standard is affected and ask the franchisee to respond with corrective measures. Reallocating staff shifts or reprimanding an employee yourself, by contrast, risks blurring the division of responsibilities.

This does not rule out direct contact. Joint training, technical support and practical demonstrations can be valuable. In those situations, explain the purpose of the contact and who will make any subsequent staffing decisions.

Also decide how urgent situations should be handled. An immediate safety risk must not be left unaddressed while waiting for a scheduled meeting. Have a procedure for warning those affected, contacting the responsible management and documenting what happened. This procedure does not replace each party’s statutory obligations.

Train your own support teams too. A clear division of responsibilities is of little use if your employees continue to act as managers of the franchisee’s staff.

4. Agree the division of responsibilities before signing

Sweden has no comprehensive legislation specifically governing franchising. However, the Act (2006:484) on Franchisors’ Duty to Disclose Information applies. It requires franchisors to provide clear, understandable written information about the agreement’s implications and relevant circumstances well before the franchise agreement is signed.

You should therefore explain how staff-related support works where it is significant to the relationship. If the franchisee must purchase training or other services, this needs to be disclosed along with the relevant financial terms. Do not promise a central HR function if the offering actually consists only of templates and advice.

The disclosure legislation does not replace other rules. The Swedish Contracts Act is relevant to the contractual relationship, while employer-related matters require consideration of legislation including the Employment Protection Act, the Co-Determination Act and the Work Environment Act. Have a lawyer review any arrangement in which you intend to exercise extensive influence over the franchisee’s staff.

Practical takeaway: Draw up a simple responsibility map before opening the first franchise outlet. Specify who sets franchise standards, who provides support and who makes staffing decisions. Test it against real day-to-day situations before the relationship begins.