Run ‘your’ business, not your predecessor’s


It is often said that humans are social animals – we want to be part of something bigger than ourselves. Our connection to community and the adage ‘it takes a village to raise a child’ is a well-known reflection of this.

For people starting out in business it’s much the same. While there are many inspiring stories of people building new businesses from the ground up, many people prefer to take on a tried-and-true, established business.

This is where franchising comes in. Taking over a franchise is one of the easiest ways to get started in business. All the systems are in place, trained staff are already available, and by and large the marketing is left to the franchisor, so you don’t have to worry about expensive advertisements in prime-time TV slots.

However, those who take over a franchise without giving every aspect of the business a critical examination could easily end up taking over little more than a persistent headache. Despite this, by keeping a few key points in mind, you can get your new business running on the right foot.

The sins of your predecessor shouldn’t become yours

Regrettably, it seems that some franchisees go into business understanding plenty about supply and demand, inventory management, and account keeping, and next to nothing about the laws of employment.

These franchisees seemingly expect to simply be able to pick up whatever the old franchisee did, and blithely carry on along the same path. Those who take this approach ought to be wary, as down that path lies the very real prospect of a financial disaster.

The adage that ‘ignorance of the law is no defence’ holds as true today as it did when first uttered; copying someone else’s ignorance is similarly no defence.

Before taking on a new business, you must always make sure for yourself that you know what industrial instrument – be it a modern award or enterprise agreement – will apply to your employees. The best way to do this is to seek professional advice from a specialist in employment law.

Communicate about shifting obligations

Ensuring that you meet your obligations under relevant legislation (specifically, for our purposes, the Fair Work Act 2009) starts with clear communication with the old franchisor when you are considering buying their business.

When businesses change hands, and staff move from one employer to the other, one of the main questions that a new franchisee needs to ask is – what is going to happen to employee entitlements?

That first question is a question of debt, in that employee leave entitlements are a liability owed to the employee by the business. New franchisees should be clear about whether they will be taking on these liabilities or if the old franchisee will pay them out before the transfer; this will affect both the value of the business at the time of sale and the leave liability owed to those employees by the new franchisee.

In a similar vein, new franchisees should always seek legal advice before employing any staff from the old franchisee, as there are number of technical legal rules around the concepts of ‘service’ and ‘continuity of service’ that, if not properly understood and managed, can come to bite the unsuspecting hirer through unfair dismissal proceedings.

Love thy neighbour, but check his maths

When taking over a new franchise you will doubtless, having read this article, make sure that you aren’t repeating any mistakes made by your predecessor.

Similarly, it is important to make sure that you are operating in accordance with the law, regardless of what your colleagues or neighbours in your shopping precinct tell you. Just because another business is doing things differently doesn’t mean that they are right – it can simply mean that they are wrong and have yet to be caught!

A recent example of this is occurred in Easter this year, the National Retail Association’s employment law hotline was flooded with calls asking which days were public holidays, often accompanied by the assertion that ‘another shop in the centre isn’t paying public holiday rates because they say it’s not a public holiday’. These business owners – a lot of them franchisees – did the right thing by checking; if they had copied their neighbour, in most cases they would have been wrong.

The ‘follow the herd’ mentality has previously been seen in franchise networks. One of the key findings from the Fair Work Ombudsman’s 7-Eleven investigation was that franchisees were copying each other’s methods of breaching their obligations under industrial laws, usually justified by one reason or another but nevertheless being incorrect. The fact that these businesses copied others breaching the law in no way protected them from liability.

Learn what affects you

There is nothing worse than coming into a business, everything is going smoothly, and then suddenly someone tells you of some obscure law which means you’ve actually mucked things up already.

While many industrial laws are set in stone, and changes are often advertised well in advance, you need to be careful that you truly understand what affects you. Don’t just read the headline – read the article too.

This is particularly true if you are going into a retail business; by July 2019, the modern award for the retail industry will have seen five changes to rates of pay in two years, with at least four more to follow by March 2021.

Laws around trading hours and public holidays also change from year to year – often thanks to the exercise of ministerial power through government “Gazette Notices” – so you must never presume that what you did last year will be correct this year. You need to know to look out for these changes, as more interesting headlines often sweep them to the bottom of the newsreel. 

‘Own’ your business

Taking on a franchise business is a bold statement to the world at large that you are competent, and confident, enough to be both your own boss and the boss of your employees.

Embrace this and do things properly from the start. Get your own independent legal advice, and don’t be afraid to shake things up if and when it’s needed.

As the National Retail Association’s Senior Workplace Advisor and Associate, Alexander Millman provides advice and representation to a collective network of more than 28,000 retail, fast food and quick service outlets nationwide. While specialising in the complexities of employment law, Mr Millman also advises and represents members across general commercial litigation in various State courts.

The National Retail Association is Australia’s largest and most diverse industry association. As a not-for-profit organisation its members range from small, family-owned and operated businesses to leading national brands and span nearly every retail category including fashion, groceries, department stores, household goods, hardware, fast food, cafes and services. The NRA is the only retail industry association to deliver practical legal advice through its wholly owned and incorporated legal practice, NRA Legal.