You may be coming into franchise ownership with a good business background. You may even be fortunate enough to understand the basics of hiring, managing and even how to run payroll. If you are interested in owning a franchise that has a reputation for being “well run”, before you buy is a good time to gain an understanding of all that is involved with leading, hiring and managing employees.
Why Should I Care?
Not understanding labor laws can be costly. If you want to protect your P & L from penalties, fines, complaints and lawsuits, here are some numbers to be aware of:
- Failure to pay overtime can results in 2-3 years of back wages per affected employees, plus the cost of payroll taxes.
- An incomplete Form I9 can cost on average $1100 per form.
- Punitive & Compensatory damages for Harassment, Discrimination and Americans with Disabilities Act violations average $50,000 – $300,000.
Other costs to consider:
- 1 -2 times the position’s annual salary – statistically speaking, this is what a resigning or terminated employee will cost your business. Do you know how to hire wisely?
- Higher than necessary state unemployment tax costs. Every employee that successfully claims unemployment will increase your payroll costs. Do you know how to defend yourself during the claims process?
At minimum, every business, franchise or not, should have the following: Labor Law Posters, Employee Handbook, Labor Law Compliance Plan and Job Descriptions. They should also have standard processes and forms for Hiring, New Hire Orientation, Annual Reviews and Employee Counseling (also known as Corrective or Disciplinary Action). Are these provided? Who will help you customize these documents?
Far too often a new franchise owner thinks they get Human Resource Management support from the franchisor, and are disappointed to find out (post purchase) that the corporate office has no intention of involving themselves your daily operations. Other key questions to answer include:
- What payroll service should you choose?
- Do they offer benefits administration and worker’s compensation insurance?
- What time and attendance software is offered to keep accurate records of hours worked?
- How will you orient and train new hires?
- Who will keep you abreast of federal and state labor law obligations and changes?
- Who can you turn to for help in answering questions and preventing you or your supervisors from making mistakes?
You would think that the larger the franchise operation, or the more expensive the franchise, the more support you get. NOT always true. Even if the franchisor does not have internal HR support they may have strategic partnerships with preferred vendors who can offer you support at a discounted rate. Make sure you get all your HR support questions and concerns answered before you buy.