Is Adam Bandt about to kill the franchise model?

First things first -  I do not agree with any exploitation of labour or condone underpaying staff. The 7-Eleven issue, and all the other related franchisee pay related issues with Grill’d, United and various others, are serious alleged breaches of Australian labour laws and needed to be addressed as such with the appropriate rectifications and punishments.

I do not agree, however, that sending the responsibility “up the line” to the franchisor is the best long term response to this situation.

The Australian economy is bolstered by small business. We have corporation laws that allow protection for those who want to have a go and try to make a small business work for them. With their success comes improved living standards, higher levels of employment and overall increase in economic conditions.

The franchise model has proven to increase chances of success for a small business operator. It general it assists the owner with the support such as systems, procedures and marketing, allowing the owner to focus on running his business.

This is where the I take issue with the new recommended franchise wages bill.

The escalation of responsibility of the employees to the franchisor is fundamentally wrong; this rests directly with the franchisee. The franchisee is running an independent small business under an agreed arrangement with the franchisor. The income, expenses, profits and tax liability all rest with the franchisee. Yes, there is the Code of Conduct to protect both parties, but this is not an instrument to absolve the franchisee of business risk and responsibility.

The fear begins when this concept is extrapolated further to bring in issues like payroll tax, or as is happening in the US with franchisee ineligibility to small business concessions. The “grouping” of the franchisee with the franchisor, where there is a legitimate separation of ownership and control between the two, could be the beginning of the end of the franchise model as we know it. And that’s scary.

What are your thoughts?