Who sets employee’s salaries in a franchise?

The important point to remember, in relation to franchising, is that the franchisee’s business is his – it is not the franchisor’s.  Franchisees generally make all business decisions subject to any restrictions that may be found in the franchise agreement or in their manual.

Franchisors provide franchisees with the system that they need to follow because franchisors will have (or should have) developed a system that they can prove will lead to a successful business. Having said that, not all elements of operating a business will form part of the system and be set out in either the franchise agreement or the manual. If it is neither in the manual nor the franchise agreement, franchisees have to make their own decisions and that would almost certainly be the case in relation to their own employees’ salaries.

Having said all of that, franchisors may provide guidance and assistance to franchisees as to the correct level of salaries in order to ensure that franchisees do not either under or over pay. Where franchisors provide assistance it is not necessary for franchisees to comply with that assistance although they may be foolish if they fail to do so.