Essential Elements of a Successful Franchise Network
Franchising refers to a business relationship between a franchisor, who is said to create the method of doing the business with a specific brand and the franchisees are the independent entities or people, who are granted license to operate the facsimile version of the system created by the franchisor. The elements that are indispensable to make the franchise network successful are the compliance with the policies and procedures of the franchisor. The franchisor must be capable of exercising considerable control over the system and must ensure that the franchisee is acting in compliance with the policies and procedures of the organization (Bowie, 2017). The franchisor must further ensure effective management of franchisee that fails to perform accordingly with a view to implement an effective franchise model and safeguard the brand. The franchisors must be able to state stringent guidelines with respect to the required structure and operation of all the franchised business. Such guidelines must include choice of signage, location, local marketing, services offered and products sold and hours of business operations. This need for uniformity can be achieved if the franchisors constantly police the actions of the franchisees within the system to ensure safety of their brands.
The paper also provides an argument against the statement that franchisers should be expected to police compliance with laws by their franchisees. Referring to the English proverb “too many cooks spoil the broth” it can be evidently stated that too much of supervision may also hamper the framework in which franchises operate. Not all humans in the society possess similar character and in the same way not all organizations do not treat their employees in an ill manner. There are various organizations whose culture influences them to ensure employee satisfaction. In the same way there are various franchises who provide fair remuneration to all employees and treat them in a just and equitable manner. The paper presents an argument in favor of these franchisers that if the compliance of law is strengthened then the franchises who are trustful and loyal to their employee would have to come under the axe unnecessarily. These organizations who pay fair wages to their employees would by looked with an eye of suspicion. The statement would be further analyzed and provided through the application of the three theories of Kant, Utilitarianism and virtue ethics.
In the case of 7-Eleven, an investigation was conducted and the investigation revealed widespread evidence of the staff of the company being underpaid and that they were compelled to work for extra long hours. Majority of the staffs were international students whose visas only permitted them to work only for 20 hours per work. Apparently, the students were being blackmailed by their Franchisee that of they complained to the Fair Work Australia about being underpaid, they would be taken to the authorities for breaching their visa conditions and would likely be deported. The case clearly demonstrates the coercion and exploitation of workers who were mostly foreign students. This case brought the franchising model into limelight and the head office have scrutinized its compliance of payroll under the business model of wage fraud and franchising (Sivaraman & Turner, 2016).
Argument Against Policing Compliance with Laws by Franchisors
In the context of ethical theory of utilitarianism, the leadership culture of 7-Eleven can be perceived to be established on the basis of selfish behavior. Under the theory of utilitarianism which focuses on the consequence of an act to determine its goodness. This theory emphasizes on the determining the actions based on the fact whether such actions create happiness or causes harm. For instance, poor treatment with workers can often be justified if the consequence is beneficial for large number for people. This theory is a normative ethical theory that focuses solely on the consequence of selecting one policy or action over the policy/action. Such action or policies must be beneficial and in the interest of others beyond the scope of the interest of oneself.
Under this theory, the purpose of mortality is to ensure a better place to strive and live. One must lay more emphasis on delivering the greatest good by comprehending the rights and wrong actions based on the particular circumstances. In the case of 7-Eleven, the behavior exhibited by the company cannot be said to be ethical in the context of the utilitarianism theory (Tham, Campbell, & Boese, 2016). The unethical behavior of the company can be further established from the fact that the pay records used by the organization to record the pay rates provided to its employees were manipulated to show that for every hours the students were provided with double rates as compared to the actual flat rate.
The company failed considerably in maintaining the pay records of the employees as they deliberately manipulated the records by removing the data. There are evidences that reveal that both the directors of the company were equally involved in the contravention and in the business fraud. According to the utilitarianism theory, the extent of pain that may arise from an action must also be taken into consideration while assessing happiness. The franchisor and the franchisee in the 7-Eleven case failed to consider the outcome and the negative impact it would have on the employees of the organization (IKONOMI, 2014).
In businesses, the main objective of the company is to maximize profit to ensure the benefit of shareholder. The organizations adopt various strategies to enhance the wealth of the shareholders and in the 7-eleven organization, pay low wages to the workers was a strategy to maximize the profit or the organization and the franchisee (Trevino & Nelson, 2016). According to the deontology ethical theory of Kant, morality is a matter of duty which implies that every person has certain moral duties to do things that are the right things to do and a moral duty not to do certain things that are wrong to do. Unlike the utilitarianism theory, the Kantian or the deontology ethical duty does not assess any action/policy to be right or wrong based on the outcomes of such actions or polices.
According to Albee (2014) morality according to utilitarianism does not include the cultural norms of a person, the command provided by God, the order of the universe provided by God, self-interest of individuals and moral rules which are inflexible such as never lying. According to Bentham the principle of utility means the concept which disapproves or approves all actions whatsoever as per the inclination which it depicts to have to diminish or augment happiness. Thus as per the theory the best possible action includes an act or omission through which the best possible degree of happiness can be obtained and the best possible way through which the degree of pain is diminished. The theory emphasizes on aggregate happiness and not the distribution of happiness. Therefore any act which promotes overall happiness is a morally correct action. The fundamental idea of utilitarianism may seem obvious and not significantly revolutionary, however the practitioners of utilitarianism are significant social reformers in the area of society well fare. Therefore in relation to the circumstances of the case the overall happiness of all franchises have to be considered along with the employees and however where the problem is related to only one franchiser the others should not be made to suffer the consequences.
Application of Three Ethical Theories to the Issue
There are two branches in relation to the unilateralism theory of justice. The first branch is in relation to impartial and equal administration of law whereas the second branch is in relation to forbidding legislative measure which were discriminatory unless such measures hand been taken with respect to the intention of the legislation. Thus equality in this contention is not limited to formalities. According to the theory the law has to be impartial both in relation to its application and administration. However if the concept is read in accordance to the classic theory it can be provided that the law should be applied equally as far as it promotes overall happiness and case minimum pain. In the given situation hype had been created that the seven eleven has indulged in an action which is discriminatory and not in accordance to law. The situation when had been analyzed by the fair work ombudsman also provided a positive result in relation to the violation of law. However through the enquiry and hype around the business all employers who employee international students and the students as well will have a degrading effect on their relationship leading to unhappiness. In addition if additional compliance of policies are imposed on such business they may prefer not to hire international students at all in order to ensure that they are not targeted in relation to strict compliance of law. The situation would cause further grievances for the franchisers and the employee student as one the franchisers would not get enough manpower and the students would not be able to earn part time. Therefore the situation which would be created through imposing strict compliance and increased provisions would not be consistent with the Utilitarianism analysis.
According to Playford and Roberts (2015) justice is used as the prescribed name which is appropriate for certain social needs which are of major significance and thus justice has to ensured in the society. On the other hand approach of utilitarianism provides that happiness and utility are the most significant things which the society demands through an act or omission. In the situation there are two option one is to select justice with respect to the student based on the act of only one organization and the other is to ensure the smooth functioning of businesses along as well as happiness of the franchisers and franchisee. There is no doubt that what has been done by seven eleven is not morally correct with respect to any theory or provisions. Taking away the rights of other in order to make personal gain although is the present scenario of the society but it cannot be in any circumstances considered orally correct. However according to Utilitarianism it would be wrong to punish everyone because of the actions of a particular franchiser as it would overall increase pain and decrease happiness.
The Kantian ethical theory refers to the ethical duty instead of ethics of consequences. An ethical person is considered as ethical if such person acts with the right intentions. The deontology theory states that there are certain actions that are right or wrong and the distinction of action as right or wrong can be made from the intention with which the actions was done (Ji & Weil, 2015)For instance, a person may murder another person but all ‘killings’ does not signify same action. In other words, if the person intends to murder someone is different from the murder that was accidental and not intentional. Actions are the outcomes of choices; hence, actions should be comprehended in terms of choices only. Therefore, in order to judge whether the action was right or wrong, one must determine the intention with which the action was done instead of determining the action based on outcomes of the action.
Utilitarianism Theory
Power is good but it depends on what the power is used for, that is, if the power is used with a good intention, the action shall be considered as the right thing to do. The franchisers must ensure that the franchisees must comply with the policies of the organization with a view to assure effective implementation of the business model of the organization. The franchisees of the 7-Eleven case, have failed to comply with the policies and both the franchisers and the franchisees have been involved in the contravention committed by the organization (DesJardins & McCall, 2014). As discussed earlier that various organizations adopt several strategies to maximize its profits and wealth, hence the 7-Eleven organization paid low wages to the workers which can be considered as their business strategy to enhance profits of the organization. As per the inquiry conducted against the organization, it was revealed that the business model of the organization receives percentage of gross profit of each store; hence, the franchisor obtains a financial benefit if the franchisee underpays the employees and thus, saves cost.
According to the Kantian theory, the actions result from choices and any action shall be determined as right or wrong based on the intention of the person doing such action. The franchiser has the duty to ensure that the franchisee should comply with the procedures and policies(Scholten, 2016). It is essential for the franchisors to exercise considerable control over the business and that the business is operated in a manner that does not cause any damage or is in contravention with the policies and procedures of the organization. However, in this case, the franchisor was entitled to financial gains when the franchisee was underpaying the workers. This implies that the franchisor’s main objective was to maximize the profits and increase the wealth of the organization, and he should have exercised his control over the business model of the organization to ensure compliance of the franchisee with the policies and procedures of the organization(Shafer-Landau, 2014).
This clearly demonstrates that the franchiser intended to earn more profits and his failure to take reasonable steps regarding the underpayment of the workers which is in contravention of the Fair Work Act cannot be determined as an ethical act. The actions of the franchisee regarding underpayment of the workers who were not only forced to work for extra hours but also threatened not to complain about the same, cannot be held as ethical as well as he had a duty not to do certain actions that were wrong(Crane & Matten, 2016). As the theory suggests, the consequence of the actions cannot determine whether actions were right or wrong but the intention with which the act is done determines the same. Therefore, it is clear that the franchisee had been deliberately paying low wages to the workers especially the international students who were permitted to work only for 20 hours, forcing them to work for extra hours, thus exhibiting unethical behavior. Organizations consist of persons and as per the varying nature of the persons, the organizational policies and procedures must created in a manner that it treats every persons with dignity and respect.
Kantian or Deontology Ethical Theory
Deontology theory or the Kantian analysis has a totally different view to Bentham’s utilitarianism theory. Both the theories have a different idea of what is actually meant by morality and what the correct action in relation to a specific situation should be. According to the plain and textual meaning of the theory it is the duty of every individual to abide by any duty imposed on the individual. The individual as per the provisions of this theory are not supposed to consider the consequences of their actions as long as they have complied with the duties imposed on them. According to the theory duty is the core determinant of morality.
According to Cline (2014) there is a duty imposed on every individual to do things which are right to do and not to do the things which are not right to do. The duty gives no relevance to the circumstances and thus what is right and what is wrong does not get influenced by its consequence. Even if duty has dire consequences doing it would be right as per the theory if it is morally correct to do as per the duty. Mostly two classes of duties are recognized by the theories of deontology Firstly, an overall common duty which is related to the society as a whole and Secondly, the duties which arise out of social and personal relationships of a person. The first duty is mostly related to prohibitions such as not lying or not causing any breach of law and the second duty is related to not breaching promises made at a personal level. Every person has a duty in relation to one’s own action. According to the principle each person has the duty to keep personal promises but they do not have the duty to ensure that all promises which are made are kept. According to the principles of deontology there must be an attempt by a person to ensure compliance with duties of their own rather than attempting to make others comply with their duties and promote common good. All deontologists in addition provide that the goods should not be maximized if it is related to the violation of a personal duty. Thus various deontologists conclude that there are limited duties imposed on an individual according to which they should not to specific actions but are allowed to indulge in all other actions freely. It is provided by deontology that specific kinds of actions are right or wrong.
There is certain criterion for differentiating between such types of actions. For instance a person my kill another person. The action is controversially described as killing but all killings are not same type of action like intentional killing would be very different form accidental killing in relation to self-defense. Actions have to be understood and considered with respect to choices as they are the effect of choices. Thus in this situation the action which has been chosen by on franchiser would not be same with respect to the action of another franchiser. In addition what one person considers morally correct would not be morally correct for another person. In the present situation through the application of deontology theory it can be provided that it only has to be ensured that seven eleven complied with their duties and not everyone are made to suffer because of them. Thus the application of strict compliance with law would also not be supported by Deontology theory in the same way it has not been supported by utilitarianism even when both the theories are contrary to each other.
Unilateralism Theory of Justice
The major application of virtue ethics in relation to law enforcement as provides by — states that if a person is good, he is going to do good thing and in order to be a good person a person must do actions which are good. Thus actions are should not be based on consequences according through the application of virtue ethics. Rather good and rights things result out of good character demonstrated throughout life. When a person faces complex ethical situation the person would demonstrate good character through intellect and temperance if he is of a good character. The virtue theory is an ethical approach that lays more emphasis on the character of an individual, which is considered as an indispensible element of ethical thinking instead of emphasizing on duties or rules (deontology) and on the consequences of actions. This form of ethics emphasizes on the development of sound moral character and not on the moral rules and that, a person having virtuous character shall be capable of making virtuous decisions. It is a person rather than action based concept and considers the moral character of a person while carrying out an action instead of what rules a person should adopt while carrying on the actions.
Virtue ethics can be used to determine the wrongness or rightness of an action by associating the choice with desired characteristics(Broad, 2014). An act or choice is considered as morally right if while performing such act, the person exhibits or develops a morally virtuous character. It provides guidance regarding the behaviors and the characteristics that any good person will seek to achieve. The theory believes that the only way to create a good society is by assisting the members of the society to become good people instead of using laws and punishments for preventing exhibition of bad actions. An action is considered as a right action, if such action is such that nay prudent person would have carried out such action under the same circumstances(Weiss, 2014). A virtuous person treats all human beings impartially and equally. They ensure that people who are closer should be treated with special care.
In the context of the corporate world, every organization must have a defined ethical policy that would act as guidance in the event of any business related dilemma. The corporate giants usually focus on maximization of company profits instead of having concerns about the adverse impact the unethical actions would have on the employees and the community altogether. In the 7-Eleven case, the franchisers have adopted underpayment of the employees as a business strategy to save costs and enable the franchisors to obtain financial gains(Westermarck, 2017). The franchisor instead of ensuring compliance of the policies and procedures, has been involved in the contravention and fraud committed by the organization. Their actions did not treat the employees especially those who were students with respect and dignity instead blackmailed them to work for excess hours at low wage rate otherwise the same shall be reported to the Department and they would be deported from the country(Follesdal & Maliks, 2013). As the theory suggests, any prudent person would have acted in the way the franchisee had acted in contravention of the Fair Work Act and exhibited a behavior that a virtuous person would never exhibit in the same circumstance.
The assumptions made under the theory of normative ethical theory that assessment of actions whether it is right or wrong is based on the consequence of the action. The ethical theory states that happiness of the greatest number of people in the community shall be considered as the greatest good(Pojman, Pojman, & McShane, 2015). Since, the connection between the actions and the happy or unhappy consequence is based on the circumstances; hence, no moral principle is an absolute necessity(Hoffman, Frederick, & Schwartz, 2014). The organizations must develop policies and procedures that are in compliance with the law of the state and such policy aims to achieve happiness for greatest number of people/employees, shall be considered as a good and ethical organizational policy/procedures. The actions or policies of any organizations have a positive or a negative impact on its employees and the community, apart from the organization itself. From the franchisor’s perspective, the franchisor must ensure that the business model is not operated in contravention of the policies and procedures of the franchisor. The incorporation of the policies and procedures of franchisors are essential in assuring the ability to enforce franchisee compliance with such policies and procedures.
As per the inquiry report, a number of employees have reported that the head office was least concerned about the grievances and issues of the workers and have made no effort in redressing such issues. The 7-Eleven gets a percentage of the gross profit earned by each store and becomes entitled to financial gains. In order to achieve the goals of the company, to maximize profit, the franchisees resorts to under payment of the workers and fireces the international workers to work for additional hours at low wage rate. This is the strategy adopted by the franchisee to save the costs of the company. In addition, the international students were threatened that if they complain about the low wage rate before the Fair work Ombudsman, they shall inform the Department of Immigration and Border that they have breached their visa condition that prohibits them to work for more than 20 hours.
According to Bentham’s theory of utilitarianism, one must concentrate on delivering the greatest good by comprehending the wrong and right actions on the basis of specific circumstances. In case of 7-Eleven, the conduct exhibited by the franchisee signifies scope of self-interest, which is contrary to the concept of utilitarianism, as the conduct does not reflect the action of greater good hence it is unethical as per the utilitarianism theory. The organization had been engaged in manipulating the employment payment record of the company and threatened the international students, which have a negative impact on the student. The international students work hard to make a living and such a conduct is completely unethical and inhuman. According to Bentham, the underlying concept of utilitarianism is to achieve greatest good for greatest number, but the conduct of the organization although was capable of maximizing its financial profits, but such conduct did not achieve good for greatest number.
Conclusion
Upon the analysis of the three theories can be provided that each theory differs from one another. Utilitarianism does not include the cultural norms of a person, the command provided by God, the order of the universe provided by God, self-interest of individuals and moral rules which are inflexible such as never lying. According to Bentham the principle of utility means the concept which disapproves or approves all actions whatsoever as per the inclination which it depicts to have to diminish or augment happiness. Thus as per the theory the best possible action includes an act or omission through which the best possible degree of happiness can be obtained and the best possible way through which the degree of pain is diminished. According to the Kantian theory, the actions result from choices and any action shall be determined as right or wrong based on the intention of the person doing such action. The franchiser has the duty to ensure that the franchisee should comply with the procedures and policies. The virtue theory is an ethical approach that lays more emphasis on the character of an individual, which is considered as an indispensable element of ethical thinking instead of emphasizing on duties or rules (deontology) and on the consequences of actions. This form of ethics emphasizes on the development of sound moral character and not on the moral rules and that, a person having virtuous character shall be capable of making virtuous decisions. The application of all the theories provided contrary results in relation to the scenario. The issue raised in the case is therefore still unclear so as to what would be the correct approach.
- If strict compliance is imposed it should only be imposed after a franchiser has violated any provisions at least more than one times.
- Students must report any low or unfair wages and an appropriate platform should be provided to them for such report
- All franchisers should not be viewed as wrong as a there are also franchisers who are loyal and just
- The strict compliance of la may hamper the functioning of franchisers and should thus be imposed appropriately
Reference list
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