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Franchisor’s approach to ethical and sustainable work practices
Information for franchisors to support fair and lawful treatment of workers across your franchise.
Successful franchising relies on good relationships between you and your franchisees — your success depends on theirs and vice-versa. Because they use your brand, one franchisee’s actions can affect the whole franchise’s reputation.
Making sure your franchisees have ethical and sustainable work practices — like treating workers fairly and following employment law — is essential to protecting your business and brand as well as the right thing to do. Breaches of employment law harm not just one franchisee, but the whole franchise, including workers.
Find out more about ethical and sustainable work practices:
Make sure franchisees have ethical and sustainable work practices
You should have processes in place to ensure that all franchisees comply with employment law and treat workers lawfully and fairly.
They should cover the whole franchise contract lifecycle:
- pre-contract preparation (including due diligence)
- contract confirmation and documentation
- monitoring during the life of the contract.
Make sure your processes are clear, consistent and written down so all franchisees can follow them properly. You can also set your franchisees up for success by providing resources like training, template employment agreements and a code of conduct for them to use.
Below we suggest what you can do to ensure your franchisees have ethical and sustainable work practices.
Develop a code of conduct
Create a code of conduct that outlines how franchisees (as employers) and their employees should behave and treat others, and how you expect your franchisees to operate.
Your code of conduct should:
- apply to all franchisees and be a condition of operating in the franchise
- cover, at a minimum, expected behaviours, business ethics and treatment of workers
- include a statement that the franchisee will comply with all relevant legislation
- explain how employees can speak up if they believe their employer is breaching the code
- clearly explain the franchise brand’s values and how people using the brand should behave.
It’s important to have this standardised across the franchise so that all franchisees have a common understanding and commitment. It will also help maintain your brand’s reputation.
You should involve any existing franchisees when developing your code of conduct. Franchisees may also need to consult with their employees before they implement the code.
The franchisor and its franchisees agree that they will:
- implement and maintain fair workplaces, having zero tolerance for worker exploitation and breaches of employment law
- act in good faith
- meet all required employment-related legal obligations
- encourage other franchisees to meet their employment-related legal obligations
- encourage open communication between employers and employees to help avoid and resolve workplace issues
- consult with employees about any proposed changes that will significantly impact them
- aim to resolve disputes promptly, either directly with the other party or through mediation
- recognise they have a shared brand and benefit from each other’s success
- follow this code of conduct.
Your code of conduct should outline how you expect your franchisees to treat their employees. You could include the example statement below.
The following apply to all employees engaged by the franchise.
- Employees will receive lawful payment appropriate for their work, skills and experience for all the hours they work, including training and meetings.
- The franchisee will give employees their minimum employment rights under the law and ensure their franchise is free from unlawful practices including discrimination, harassment and corruption.
- Management systems will support good work practices and clear accountability.
- The franchisee and its employees will handle all business dealings with the highest standards of integrity and honesty.
- Any business improvements in the franchise will fairly balance the needs of the franchisees, franchisor, customers and employees.
You could also include or reference the Ethical Trading Initiative’s (ETI) Base Code in your code of conduct. The ETI’s Base Code is an internationally recognised code of labour practice.
Ethical Trading Initiative Base Code – Ethical Trading Initiative(external link)
Basic policy
If your franchise is just starting out and is not ready to implement a detailed code of conduct yet, you can develop a basic employment policy instead. This shows you and your franchisees are committed to complying with employment legislation.
You can use this example basic employment policy.
Example of a basic employment policy [PDF, 105 KB]
Make sure franchisees’ employees are aware of the policy while you work on creating your code of conduct. You should also involve existing franchisees when developing your policy. If the policy includes expectations around employee behaviour, franchisees may need to consult with their employees before they implement it.
Pre-contract preparation (including due diligence)
Before taking on a new franchisee, take these steps to help ensure they’ll comply with employment law:
- carry out due diligence to check they’ve followed employment law in the past
- make sure they understand their obligations as an employer
- make sure they agree to your code of conduct.
Check if potential franchisee has followed employment law in the past
As part of your due diligence, ask the potential franchisee if they’ve ever been involved in any of the following (either personally or through an organisation):
- a Labour Inspectorate investigation or audit
- a case with the Employment Relations Authority or Employment Court
- if relevant, any decisions by the District Licensing Committee (DLC) or Alcohol Regulatory and Licensing Authority (ARLA) about following employment law. This could be relevant if the franchisee (or a person with authority within the franchisee organisation) has previously applied for an alcohol licence.
If they answer ‘yes’, ask them for more information about what happened and, if applicable, how any breaches were resolved.
To verify their response, even if it’s ‘no’, check the:
- employment stand-down list and immigration stand-down list to see if they (either personally or through an organisation) have been stood down from being able to support visa applications because they breached employment or immigration law
- Employment Relations Authority database and Employment Court database to see if they (either personally or through an organisation) have breached employment law, even if they are not on the employment stand down list (this could be because it was an old breach, or it did not result in them being placed on the list)
- ARLA database, if relevant (keeping in mind that not all ARLA decisions are about compliance with employment law)
- the DLC database on the local council’s website, if relevant (keeping in mind that not all DLC decisions are about compliance with employment law and the search may be limited if you don’t know where a decision was made).
Immigration stand-down list(external link)
Determination Database – Employment Relations Authority(external link)
Judgements Database – Employment Court(external link)
Alcohol Regulatory and Licensing Authority Database(external link)
Check the Companies Register and Charities Register to see which companies and charities the potential franchisee is or has been involved with. Search the lists and databases above for these other companies and charities (if any).
Ask the potential franchisee if they’ve ever been a director, chief executive, senior manager, shareholder, trustee or partner of an organisation, and whether they have ever breached employment law either personally or through an organisation.
Companies Register(external link)
Charities Services(external link)
If the outcome of your due diligence is unsatisfactory, consider if you want to continue progressing the application.
Make sure the potential franchisee understands their employer obligations
Ask the potential franchisee what they think they must do to follow employment law. They should understand what it means to be an employer and what the law requires them to do.
You can encourage — or require as a condition of joining the franchise — potential franchisees to complete our free online employer learning modules either before they sign the contract or afterwards.
ADD LINK TO EMPLOYMENT LEARNING MODULES
Provide the potential franchisee with templates of different types of legal employment agreements —permanent, fixed-term and casual — that they must use to employ their employees. You could require this as a condition of joining the franchise or provide the templates after you bring the franchisee on. Make it clear which parts of the agreement franchisees can change and which parts they have to stick with.
Check our employment agreement builder.
Employment Agreement Builder – business.govt.nz(external link)
Make sure potential franchisees agree to your code of conduct
Make sure your potential franchisee:
- understands the intent of the code and how it works in practice
- is willing to sign the code
- will display the code in their workplace.
Contract confirmation and documentation
Once you know you want someone as a franchisee, include requirements in the contract that make it a priority for them to treat their employees well.
Make sure the contract outlines what employment legislation they must comply with and where to find more information. At a minimum, this should include the:
- Employment Relations Act 2000(external link)
- Holidays Act 2003(external link)
- Wages Protection Act 1983(external link)
- Minimum Wage Act 1983(external link)
- Parental Leave and Employment Protection Act 1987(external link)
- Equal Pay Act 1972(external link)
- Health and Safety at Work Act 2015(external link)
- Human Rights Act 1993(external link)
- Privacy Act 2020(external link)
- Protected Disclosures (Protection of Whistleblowers) Act 2022(external link)
- Volunteers Employment Protection Act 1973(external link)
Include the following requirements for the franchisee:
- that they promptly inform you if they are:
- investigated for, or found to have committed, a breach of employment legislation
- scheduled to attend an Employment Relations Authority investigation meeting or Employment Court hearing
- that they commit to the franchise code of conduct by signing the document and ensuring their employees have access to it
- that they will ensure all their employees are told about their employment rights, for example, by displaying an ‘Employee rights’ poster or encouraging them to complete our free online employee learning modules.
ADD LINK TO LEARNING MODULES
Make sure the contract allows you to:
- do spot-checks and audits of workplace practices, including for compliance with employment standards
- regularly survey the franchisee’s employees.
Document how you will support the franchisee to meet their legal obligations. Consider how you can help them if they have difficulties, for example, could you negotiate reduced fees for them to get legal advice?
Monitor during the life of the contract
Throughout the life of the contract, monitor your franchisees’ compliance with:
- their contract
- the franchise code of conduct
- employment law, including employment standards.
Check-in regularly — don’t take a ‘set-and-forget’ approach. If a franchisee changes their operating model, this can, even inadvertently, mean they no longer meet employment standards and are breaching the terms of their contract.
Take the following 7 steps to reduce the risk of non-compliance across your franchise.
Include checks for compliance with employment standards as part of regular franchisee reviews.
Checks should be done annually and could be as simple as requiring the franchisee to complete a self-assessment. They can use our employer self-assessment checklist.
Employer self-assessment checklist [PDF, 654 KB]
Employer self-assessment guide [PDF, 934 KB]
Alternatively, you could provide your own checklist for the franchisee to use. If you’re providing your own, make sure it covers the key messages in the Employment New Zealand self-assessment checklist. This includes specific legal requirements and references to more information.
Franchisees should be able to back up what they say with proper evidence. You could check this yourself or get an independent auditor to check their self-assessment.
Franchisees should make sure their employees know about the franchise code of conduct. They should:
- display it where everyone in the workplace can see it
- include it in recruitment documents.
You can use an employee-voice tool to confirm that the code of conduct is being followed by collecting information about the workplace anonymously from franchisee employees. Each franchisee needs to have enough employees for the individual responses to be anonymous.
There are free survey tools available like Survey Monkey, or you could do a paper-based survey, as long as the employees can submit their responses anonymously if they want to.
As well as questions about employment standards, you can ask open-ended questions about what employees think could be better at work, and how closely their experiences reflect an ethical and sustainable workplace. You could ask:
- how valued do you feel at work?
- are you treated fairly?
- would you recommend this as a place to work?
- how long do you want to stay working here?
- how well do you understand the organisation’s values?
- how important is health and safety in your workplace?
- how much training is available to you for current and future roles?
- how much does your workplace value diversity and inclusion?
Franchisees should tell their new and existing employees about their employment rights and responsibilities and make sure they understand these.
They could provide an information sheet that explains employee rights and what to do if these are not met (and have this information translated so employees get it in their first language if possible).
They can use our 'Know your employment rights’ quick guide, which is available in a number of languages.
Minimum rights of employees translations
Employees should be able to learn about their rights and responsibilities not just when they join but also if their job or legislation changes. They should have a chance to refresh their learning throughout their employment. We offer free online courses for employees.
ADD LINK TO LEARNING MODULES
You can make employment a feature topic or a regular section of a franchise newsletter or updates. For example, you could:
- explain any employment law changes, including what they mean in practice for franchisees
- include a regular update on health and safety
- acknowledge franchisees who have managed a particular aspect of employment well
- celebrate diversity and promote inclusion by recognising things like cultural celebrations and employee achievements.
If an issue arises with one franchisee, share as much as you can (remembering confidentiality) about what happened and how it was resolved with other franchisees so everyone can learn from it. Encourage franchisees to also discuss issues with each other when they arise.
Require franchisees to tell you straightaway if they are investigated for, or are found to have committed, a breach of employment-related law — for example, employment standards, health and safety or immigration requirements.
Franchisees will need to feel there is open and trusting communication to be transparent about this.
Often employees do not raise employment issues because they are concerned about confidentiality and remaining anonymous.
You can encourage employees to raise any issues by making a confidential point of contact available for them to get in touch with if they have problems at work.
Make sure there is a proper process to effectively deal with issues if they arise. Find out more:
In some industries there are many vulnerable workers, for example, where there are higher proportions of migrant, young or mature employees. They may not be confident to speak up if they believe they are not receiving their entitlements. In industries with higher proportions of vulnerable workers, it is particularly important that employees have tools that empower them to raise any concerns.
Consider providing a less formal and anonymous reporting system for vulnerable employees to report issues at work. You could do this by:
- appointing 1 person, who the employees choose, as their representative to raise issues with you confidentially (if the industry is not unionised)
- having a system where employees can raise potential issues with you, which you then anonymously pass on to the relevant franchisee and give them the opportunity to fix any problems.
This will reduce legal risk for the franchisee as well as the risk of bad publicity for the whole franchise.
A Guide for Franchisors [PDF, 1.9 MB]
If your franchise also has a procurement function or a supply chain, read our guidance for procurers.
Procurer’s approach to ethical and sustainable work practices