Our client, an ASX50 company, approached LegalVision to assist with auditing franchisees within their network. As part of its ongoing monitoring of its franchise network, our client wanted to ensure that franchise owners were:
- paying their employees properly; and
- following Australian workplace laws.
In conducting these audits, it was important for our client to be able to quickly and efficiently identify breaches of employment laws, while minimising disruption to the day-to-day business operations of each franchisee.
The audit process – and the legal assistance – therefore needed to balance the dual priorities of efficiency and accuracy. The overarching objective was to be able to detect serious cases of non-compliance and take action against those franchisees. In doing so, our client was ensuring the rights of employees throughout the network were adequately protected.
The Limitations of a Traditional Approach
1. Accounting for Legal and Reputational Risks
Ensuring franchisees are complying with workplace laws is a key concern for many Australian franchisors, particularly in light of changes to the Fair Work Act which can make franchisors liable for their franchisee’s breaches in some circumstances.
Given that franchisees’ non-compliance can sometimes have serious consequences for franchisors, it was important for our client to demonstrate that it was taking reasonable steps to maintain workplace compliance and to be confident that breaches were:
- being identified; and
- being appropriately addressed.
In terms of the reputational impact, our client needed to ensure that their brand and goodwill remained intact to maintain value in the business and protect the interests of stakeholders. Part of doing this was making sure franchisees were operating their businesses in accordance with Australian laws.
Given the legal and reputational issues at stake, it was important not to take shortcuts with the workplace audits. Our client needed to carefully:
- consider all evidence relating to the operation of each franchised business;
- assess the application of workplace legislation;
- weigh up how serious these breaches were; and
- make a decision as to whether a breach notice could be issued, or, in the most serious of cases, a termination notice.
A traditional approach means that comprehensive legal reviews and advice are typically time-consuming and costly. The scope of traditional engagement with a law firm is also more limited and would not cover custom technology or legal design (particularly around mapping out decision-making as to different thresholds that apply to franchisee’s behaviour and what issues will warrant the most serious responses by the franchisor).
2. Pricing for the Unexpected
The traditional law firm model is based on hourly rate billing. Billing in six-minute blocks every time a lawyer touches a matter can quickly add up and result in very long bills – especially if the precise nature of the work is unpredictable.
Unpredictability is a common characteristic of workplace audits, where external factors drive the progress of the matter. You can have oversight over how many franchisees are being audited, but that doesn’t necessarily give you a clear picture of exactly what work will be involved for each franchisee. Until the auditor engages with the franchisees and starts receiving documents and records relating to the franchise business, it’s impossible to pre-empt exactly the issues that may be raised and the possible breaches that may be revealed.
You also don’t know how franchisees will react to the audit process. Some may be aware of their obligations under their respective franchise agreements and immediately cooperate with the auditor’s requests. Others may challenge the process and therefore draw it out significantly (which means, under a traditional billing model, unexpectedly increased costs).
We designed and implemented a tailored managed legal services solution which combined legal process design, legal expertise in franchising and employment law and technology.
- legal process assistance to design an efficient approach for managing the legal tasks associated with the franchise audits. We deconstructed our client’s overall objectives into a series of business and legal steps and applied design thinking to create effective structures to guide legal work. This included developing a ‘playbook’ to guide decision-making, which set out different scenarios and appropriate responses (which were pre-approved by senior business and legal stakeholders within our client’s company);
- IT development services to build a custom project management portal for critical tracking and reporting on the progress of the franchise audits;
- a fixed monthly retainer for our ongoing assistance with legal work, legal process design and technology; and
- a carefully curated multi-disciplinary team, led by a dedicated project manager, of:
- lawyers (who are subject matter experts in the relevant areas of franchising and employment law);
- specialist IT engineers; and
- a legal process designer.
The Solution’s Impact
Legal Process Assistance
Our legal process assistance elevated the efficiency, efficacy, usability and simplicity of the audit process. We streamlined the way in which LegalVision delivered legal assistance, allowing us to draft documents and advise our client at scale and velocity.
IT Development Services
Our IT development services provided our client with a portal that offered a live snapshot of the audits. The portal increased transparency and allowed our client to manage the flow of information across hundreds of franchise sites. It was also a key way of managing internal stakeholders.
Fixed Monthly Retainer
Our fixed monthly retainer offered cost certainty and allowed our client to maintain control over the allocation of their audit budget to legal fees. We provided our client with an average cost per site, taking into account efficiencies gained through providing legal assistance at scale and across a large franchise network.
Our fixed retainer averaged out the assistance involved across straightforward sites as well as more complex sites. In this way, we could respond to the unpredictability of dealing with complex legal issues throughout the audit process. And, most importantly, we could do so without passing on higher fees where the work was more complicated than expected.
Finally, our multi-disciplinary team meant we could allocate resources corresponding to the work involved. We leveraged legal, tech and process design strengths of different team members. This allowed us to minimise double-handling or repetition and provide quality work effectively.
By tying all of these elements into one managed legal services package, we provided our client with an efficient and cost-effective way of delivering legal support and successfully auditing a franchise network.
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