Franchisees and Cost Efficient HR

Franchises are well known for being - a little - easier to start and maintain profit margins to potential business owners. They come with a known client base, built in marketing and a clear-cut business model designed to help the franchisee succeed. In today’s regulatory environment, the franchise model has become more challenging, specifically with regard to employee management and HR compliance issues. Most franchisees focus on their day to day operations, but struggle with staying current with legal, compliance and workplace best practices. According to a Wall Street Journal study, one common mistake that franchisees make is that very little attention is given to the human resource function. The common thought is that these things will take care of themselves, and that is rarely the case. So, let’s review some of the top challenges for franchisees in their HR function.

Top Franchisee Challenges

With the daily grind of running a new business, most franchisees are not equipped with either the knowledge or the time to comply with the overwhelming amount of regulations set forth by federal and state governments as they pertain to employees. With little knowledge of HR administration and the complexities of the compliance issues that surround them, many potentially costly tasks may fall through the cracks. Employee leave requests, paid sick leave compliance, employee classification, overtime requirements, on-boarding, training, performance management, workplace safety requirements and the list goes on and on.

According to a NAPEO study, businesses are spending more and more time on regulatory paperwork than ever before, with Franchisees being adversely effected because of the lack of time and man power. While larger companies might commit several employees to meeting these challenges, this would constitute a heavy percentage of a franchises workforce making it an inefficient and costly way of addressing the HR function.

What are your options?

So, now that we know there are problems, what do we do? The market is filled with options, including DIY packages and SAS providers to full service HR outsourcing, the options are plentiful.

First things first, identifying what you need is important. Do you need transactional HR duties filled (i.e. payroll, paperwork filing) or higher level needs like recruiting, employee engagement improvements, or safety and risk management training? Once those needs have been identified, you must look at what will be the best strategy for your franchisee to take.

  1. Do It Yourself. A significant percentage of small and medium business owners handle the "HR" function themselves to one degree or another. But in today's highly competitive, and highly regulated, market, should they? According to the SBA, businesses with fewer than 500 employees spend between 5% and 7% of their gross payroll on administration of employees, and many don't even know how to measure it. That's a significant, and generally unnecessary, expense for any business when there are more efficient methods available.

  2. Software-as-a-Solution is a very common method of getting help at a lower price point. Many HRIS systems can perform basic HR functions including processing payroll, set up payroll deductions and manage e

mployee files (still largely DIY). These are crucial to any business and especially for franchise owners even if just for record-keeping purposes. There is a wide cost range when it comes to SaS, all depending on how involved a system you are implementing, but this option is still generally too expensive for most small businesses. More often, small businesses are finding that they can essentially build their own suite of programs to meet their needs. The drawback in the "suite of solutions" model is that they generally don't integrate very will with one another... yet.

  1. HR Outsourcing is also an incredibly popular solution. HRO has been a long time solution for large organizations, but with improvements in cloud based solutions and overall HR strategy, a large, and growing, number of businesses in the 20-500 employee range are finding the HRO option to be a reasonable and highly effective option to address the HR function in their operation. HRO providers typically focus on one or all of the following components - HR Strategy and Compliance, Benefits and Benefits Administration, Workers' Compensation Insurance, Safety and Risk Management, Payroll Administration, Record-keeping and general support. These systems do not come without their challenges - no high level look at legal aspects of compliance with minimal support can be challenging, while not fully addressing the full scope of HR needs.

Our Suggestion

Owning your own business is an important aspect of the American dream for many people, and a franchise opportunity makes that dream easier to obtain and maintain.

However, when it comes to the HR function, you're usually better off delegating that time consuming work to the pros and keeping your focus on what drives the bottom line. Let them maintain the HR function (at your direction) and serve as your team, while you focus on the other aspects of your business that drive growth and profitability.

Successful franchisees have long viewed the employee function as paramount to long term success. Franchisees should ensure thorough understanding of federal, state and municipal employment law, anticipate changes and proactively manage their workforce in an effort to reduce the potential for employer liability while increasing productivity, limiting time spent on the noon-revenue generating aspects of the HR function, and reducing overall labor cost.

If you would like assistance in ensuring that your company is putting an efficient and effective HR Strategy in place that will assist in driving up your company metrics, contact Windsor HR Services at 800-297-4962 or at

Seth Nell is a Business Performance Adviser for Windsor HR. With nearly 15 years business development and management experience, Seth brings a holistic view to our client service strategy. A former small business owner himself, Seth has a unique perspective into the HR function and the benefits it brings to small and medium sized business. Seth works daily with C-Level business leaders to position their organization for success. Seth is a member of the National Society for Human Resource Management and Dallas HR, as well as an active member McKinney Chamber of Commerce. He is active in the community, coaching and mentoring young men through athletics. Seth is married to his wife Angelica, together they have two sons, Edwin and Preston. You can reach Seth at

#Franchise #HR #HRO

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