Is becoming a franchisee really a win-win for employee?

Question:

I just had the oddest conversation with my boss. He asked if I’d like to own my own business.

When I realized he was serious, I asked, “What’s the catch?” He said there wasn’t one and that if I became a franchisee, and we created a business to business relationship, it would be a win for him and for me. He said since it would lower his payroll costs, he would guarantee my new small business work from his business and become a subsidy client for me. He acted like we should break out the champagne and celebrate.

I asked if I was being fired. He said of course not, but then he gave the franchise paperwork to sign and a list of Internet websites that I could use to set up my business. He expects my answer today. Could this get me into trouble?

Answer:

Your boss wants to lower his payroll costs. While he presents this strategy to you as a win-win, and it may be if you’ve always longed to run your own business, think long and hard before you accept. Once you become a franchise owner, you lose standard employee protections, such as overtime and safety protections.

Further, unless you and your former boss truly change how you work together and how you independently build your own business, this paper façade can burn up in a heartbeat. Recently, the U.S. Department of Labor investigated franchises in the construction industry. They learned that more than 1,000 construction workers built houses one day as employees, and then became LLC owners the next day, without wage or safety protection. The DOL went after their former employers and penalized the employers nearly $1 million in damages and penalties, and the franchise owners learned they’d been employees all along.

Could you get into trouble? That depends — if your new business has safety or other problems, you’ll be on your own. If those calamities don’t result, and you want your own business, your boss’s offer gives you a head start. Your boss, however, takes a risk.

© Dr. Lynne Curry is author of ”Beating the Workplace Bully” and ”Solutions” as well as owner of the management/HR consulting/training firm The Growth Company Inc. Follow her on Twitter @lynnecury10 or at www.bullywhisperer.com.

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