Am I correct in saying that as a franchisor, I am not legally responsible for the compliance of franchisees in terms of health and safety, only at my own offices?
Hi Pieter. There are as many answers to this question as there are facets to a diamond. If we look at the OHS Act only, your assumption is correct. The OHS Act defines an employer and places duties on employers and users of machinery or plant. Generally speaking, the franchisor is not the employer, but the franchisee. The latter is normally a separate legal entity trading under the brand name of the franchisor under the terms and conditions set out by the franchisor. Where a franchisee fails to comply with the OHS Act, the franchisor cannot be prosecuted under the OHS Act. This also depends on numerous other factors, including the extent of the franchisor’s control over the franchisee and the “true” relationship between the parties.
If there is any form of control, which under section 37(2) could be construed as a principal-mandatory relationship, then the answer will be Yes, you can be held liable. Where the franchisee is allowed total autonomy in the running of the business, then it would be the opposite.
You must also look at the CPA, the Companies Act and the Common Law duty of care, which will change the compliance scene. It is common practice that the franchisor will take due steps to prevent legal non-compliance purely from a reputational risk point of view.
We have seen the KFC debacle on disposing of chicken and the damage it caused to their image. Any prudent franchisor will ensure this does not happen as far as reasonably foreseeable and ensure compliance by the franchisee to all applicable laws.
Thank you for the quick reply Rudy. Any advice on who I can ask to have a look at our franchise agreements to asses our liability? We do have control of aspects such as premises, suppliers and equipment used.
You are welcome to forward the agreement to me and I will have a look at it. It seems that you could have some liabilities there, given the aspects you mentioned.