‘We are very focused on the muffins’: Regulation of and compliance with industrial relations in franchises

Abstract

The highly successful franchising approach contains features of both large and small firms. We develop a ‘diverse accountabilities’ model of franchise organisation of employment relations, acknowledging the limitations of agency theory in explaining differences between franchisors’ treatment of product and employment matters, particularly those associated with compliance with industrial legislation and awards. The model was broadly consistent with existing literature and our own multiple-case study of Australian food franchises. High rates of compliance with industrial relations (IR) standards were unlikely. The involvement of franchisors in franchisees’ IR activities appeared to vary substantially, but was always well below that provided in other human resource management (HRM) or product-related issues. Evaluation and monitoring of franchisee behaviour is often neglected, and instead the consequences of non-compliance, if discovered, are potentially serious for the franchisee. Our approach helps explain the treatment of IR in terms of financial benefits for franchisors of operating a business model with marketing and product management features – and to some extent HRM features – of a large business, but the IR characteristics of small businesses.