Could your franchise be the next headline?
As a franchise organisation, your brand is your most important asset, but it can be challenged when your franchisees are left unsupported.
In November 2016, master franchisor of Yogurberry1 was hit with $146,000 in penalties imposed a precedent-setting Federal Court judgment against the frozen yoghurt chain. Fair Work Ombudsman (FWO) Natalie James said, “The result of this matter sends a clear warning to the operators of franchise networks in Australia that refusing to take responsibility for addressing exploitation in their networks is not a viable option.”
Australian franchisees operate in a challenging environment. Shifting workforce demographics, labour shortages, geographically dispersed operations and changing government regulations, such as the recent cancellation of the 457 visa, clamour for attention. At the same time, employees increasingly demand an easy to use, personalised experience throughout their employment journey.
For many franchises, these challenges drive an on-demand approach to building their workforce. Using a mix of employment models, such as part-time and shift or contract work, enables great flexibility for both the franchisee and employee. However, legacy tools and error-prone systems struggle to support this transition. Fragmented, out-dated or inadequate HR and payroll tools can reduce your agility and pose a risk.
With an estimated 70 per cent of operating costs coming from salaries, overtime and other compensation2 – any payroll error could be a significant risk to your profitability and growth. In fact according to Fair Work3, payroll recording keeping errors account for two thirds of all court proceedings they initiated between 1 July and 31 December 2016 – and the combined value of employer penalties issued for the breaches hit $1.8 million.
Despite these challenges, franchises still struggle with adopting more agile, integrative technology. Why? Forbes3 says the FUD factor – Fear, Uncertainty and Doubt – remains one barrier to adoption. Franchisees can be concerned that new offerings could upset their not-so-agile set-up. Put simply, this often comes down to a “better the devil you know” discussion and keeps franchises from achieving their full potential.
Have you considered how you can better support your franchisees through these challenges and help them to achieve greater business efficiency, stronger compliance and deeper insights?
Efficient time capture reduces costs
As franchises implement more flexible workforce models they often start bleeding money due to inaccurate and out-dated ERP and time capture systems. In short, fragmented payroll and HR systems can slow down organisations and make it difficult for franchises to accelerate their growth trajectory. Automating error prone manual processes for collecting and tracking employee time boosts efficiency and cost savings.
According to analyst Ventana, 62 per cent of companies that integrated their workforce management system to payroll said it reduced their payroll error rate4. Yet IMS Research and Gartner estimate that only between 1.5 to 3 per cent of spending on enterprise software solutions is dedicated to workforce management. This led HR Magazine5 to comment: “most organisations have not yet tapped the potential of comprehensive workforce management. As firms prioritise IT spending for the coming years, workforce management should be near the top of the list.”
Josh Bond, Senior Editor of Modern Materials Handling, writes: “Bad habits are sometimes so well established, that systems proven to dramatically improve labour efficiency seem incompatible with the prevailing culture of an operation6.” While this refers to manufacturing, where time is the very essence of productivity, these words could be equally applicable to franchises in the retail, services, F&B or any sector with hourly paid employees and temporary staff.
Payroll compliance mitigates risk
Gaps in compliance can lead to costly errors, penalties and reputation damage that can hurt a franchise. The stakes can be even higher for franchises that employ a wide range of staff covered by a number of different agreements/ awards. Regulations such as leave entitlements, notice of termination and minimum pay rates can vary from employee to employee. In fact 77 per cent of anonymous reports received by FWO were about rates of pay7.
The Ombudsman is also sending a clear message that rogue employers and responsible members of management can be held liable for non-compliance. In 2015-16 the FWO issued 63 per cent more infringement and compliance notices than in the previous year – with 92 per cent of every matter filed in court roping in an accessory, this included a master franchisor, franchisee, directors and human resource managers7.
Australian taxation laws are also complex and subject to change. The recent enactment of the Budget Savings (Omnibus) Bill 2016 made Single Touch Payroll (STP) a legislative requirement in Australia. Not since the introduction of Pay as you go (PAYG) in 2000, have we seen a piece of legislation with such a significant impact for employers and employees.
A breach also has another painful cost for franchisors: significant reputational damage. The 24-hour news cycle and social media is ready to put any business that breaks the law under the spotlight. Every last detail can be picked up and shared across the world within seconds.
Most employers want to do the right thing. Problems often arise because franchisees and those in charge of their payroll or human resources have a limited understanding of the application of Australian workplace and taxation law – which is often not their area of expertise.Having timely guidance and accurate payroll processes frees franchisees – so that they can focus on contributing more strategic value to their business.
Accurate insight drives dynamic rostering
Like every small business owner, franchisees have to balance the demands of daily operations while also planning for growth. Most franchises do not have a trusted HR advisor to turn to, making running a successful franchise tough. Franchisors can help their franchisees make better business decisions – especially with regards to teaching them about the value of capturing, understanding and interpreting their workforce data.
According to an influential article in HR Magazine8, “With an automated approach to workforce management, more data and context can be put in managers’ hands, creating better decisions. Being able to assign the right people, with the right skills, at the right time, and at the right cost directly supports an organisation’s ability to respond to fluctuating production goals without compromising quality. Aberdeen Group indicates that organisations using automated staff scheduling solutions have a 4 per cent higher workforce utilisation on average – an edge that creates substantial productivity gains.”
Aberdeen Group research9 reported that organisations achieving best-in-class performance in workforce optimisation see an 11 per cent year-over-year improvement in employee satisfaction, compared to just 2 per cent for all others. The use of automated time & attendance and scheduling solutions results in 8 to 20 per cent lower replacement costs (as a percentage of annual pay) for hourly workers, which can be attributed to the reduced cost of administration needed to manually manage such functions. Average revenue per full time employee also increased four times in organisations with automated absence/leave management technology.
Starting or growing a franchise business should be a very exciting venture, but if you are unsure where to find the answers, the process can quickly become stressful and confusing. Franchise organisations who offer timely support help their franchisees navigate these challenges with confidence and build stronger businesses.
ADP has worked with Australian businesses for over 35 years and has over 7000 clients. Globally, the ADP group is one of the largest providers of Human Capital Management and payroll solutions, with over 610,000 clients.
For more information contact ADP via:
1800 000 729
1. ‘$146,000 in penalties imposed in precedent-setting Court judgment against Yogurberry chain’, 3 November 2016, Fair Work Media Release
2. The advantages of workforce management’, 2014, HR Magazine
3. ‘New app, heavier penalties reinforce record-keeping as core business’ , 21 March, 2017, Fair Work Media Release
4. ‘Payroll Management Benchmark Research’, 2014, Ventana Research
5. Sambartolo, M. (2014) ‘The advantages of workforce management’, HR Magazine
6. Bond, J. (01 Dec 2012) ‘Labor management systems: The (very near) future of LMS’, Modern Materials Management
7. Fair Work Ombudsman Annual Report, 2015-16
8. Sambartolo, M. (2014) ‘The advantages of workforce management’, HR Magazine
9. ‘Total Workforce Management 2013: Absence Management’, 2013, Aberdeen Group