Today’s news that 14 7-Eleven franchises have been seized and 9 managers arrested, with prosecutors seeking $30 million in forfeitures from the franchise and its corporate parent, should send alarm bells ringing across the franchised business industry.
Prosecutors charge that these 7-Eleven’s relied on an unauthorized workforce and tried to hide their activities by paying the unauthorized workers with social security numbers belonging to children and deceased individuals. This case sends a clear message: corporate entities cannot franchise away immigration compliance. Not only can corporate leaders be found liable for the failures of individual franchise owners, but a well-respected brand can be irreparably tarnished because of the misdeeds of a few wayward franchise owners.
Franchised companies are aggressive when it comes to vetting potential new franchise owners and are adamant about the process by which individual franchises will market its goods. But when it comes to certain legal requirements, many franchised businesses are more than willing to distance themselves and look to their individual franchise owners to “figure it out.”
This strategy is especially unfortunate given that many franchises are in high-risk industries for immigration violations. 7-Eleven is number four on Entrepreneur’s Top 50 Franchises for 2013, and other top franchises included franchises in the hospitality industry (Hampton Inn), restaurant industry (Subway, McDonald’s), and cleaning industry (ServPro).
As we learned today, actions on the part of a single franchise owner can jeopardize the integrity of a hard-fought pristine reputation and also cost the corporate entity cold, hard cash. Six years ago, we saw the same thing when a rogue McDonalds franchise owner in Nevada violated basic immigration compliance procedures at 11 stores. Turning a blind eye in the franchise industry can have significant consequences.
Just as franchisors expect a key recipe or cleaning method to be the same in West Virginia and California, corporations need to implement basic top-down immigration compliance plans for franchise owners.
First, corporations should set the tone at the top for a culture of compliance. As indicated in the U.S. Sentencing Guidelines, the government expects this for every compliance and ethics program, and immigration is no different. Ensure that your franchisees know that immigration compliance matters, and include compliance metrics on the franchisee scorecards or annual rating.
Second, the franchisee contract should document specific expectations of the franchisee in terms of immigration compliance, including giving the corporation the right to audit immigration compliance and requiring the franchisee to provide notice of any visit from government agencies.
Third, include basic immigration compliance training as part of franchisee development. Many franchisees are new business owners, and they may not understand that an I-9 is required for every employee or the penalties that can occur when hiring unauthorized workers.
Finally, consider requiring E-Verify, the government’s voluntary system for verifying employment, for franchisees. While participation in E-Verify doesn’t guarantee that franchise owners avoid unauthorized workers or the problem of identity theft, it is a solid base for any compliance program or structure.
While the general public might be forgiving of some brands that fail to comply with basic immigration compliance, other brands may not be so lucky. Failing to include a company-wide compliance plan is tantamount to corporate mismanagement. Corporations should take the 7-Eleven news as a warning sign and begin identifying vulnerabilities in their franchise management today.
