As a franchise consultant, I’ve noticed a trend among the candidates I work with: they’re really, really nervous about HR. Most are experienced executives with plenty of people management experience, but they’ve usually worked in sales, operations, or marketing. Now that they’re looking at owning a business, they have no idea what to do about the HR side of things.
I get it. In fact, I felt the same way when I became a business owner. Thankfully, I found a solution that made everything easier: I signed on with a PEO. This is the path I now recommend for all my franchise candidates.
What is a PEO?
PEO stands for Professional Employer Organization. A PEO is an administrative service provider that manages payroll, HR, and similar functions for a company. Companies of all sizes use PEOs, but they can be especially helpful for small businesses. When you don’t have the resources to build out your own HR, payroll, or legal departments, they can fill that role for you.
Like many service providers, PEOs come in all shapes and sizes. They range from giants like ADP and Workday to smaller boutique firms that serve certain industries.
What’s the difference between a PEO and other options?
If you’ve already been researching this question, you’ve probably noticed a lot of acronyms. PEO. PSP. ACH. HCM. What does it all mean?
Some of these acronyms refer to types of service providers, and some refer to related processes or products. Here’s a quick primer to help you keep them all straight.
These are the most common types of administrative service providers:
- PEOs offer a comprehensive solution for managing the administrative aspects of a business. These include payroll, accounting, HR, and legal/compliance.
- ASOs (administrative services organizations), like PEOs, offer outsourcing for administrative tasks across a range of functions. However, unlike PEOs, they do not assume HR or compliance liability for a company.
- PSPs (payroll service providers) are the most specialized type of provider. Their services are usually limited to payroll management and related financial or accounting services, such as tax filing.
Here are other common terms you might encounter as you’re researching your options:
- ACH (automated clearing house): the electronic network used by service providers to process direct deposits, whether for payroll or other purposes
- BPO (business process outsourcing): the general term for outsourcing some kind of administrative function (such as payroll processing) to a service provider
- EFTPS (electronic federal tax payment system): the electronic filing system used by service providers to pay taxes on their clients’ behalf
- ESS (employee self-service): the portal where employees can view their pay stubs, tax forms, and any other relevant documents or information from an administrative service provider
- HCM (human capital management): a comprehensive software package that a company can use to manage payroll and all HR functions in one place
- PERM (per employee/per month): the most common pricing method used by administrative service providers, where fees are calculated based on the number of active employees at the client company
Why you need a PEO for your franchise
As you can see from the information above, a PEO is the most comprehensive option when it comes to administrative service providers. But why do you need one for your franchise? Why not just go with a simpler (and likely cheaper) solution like a PSP?
There are several reasons I encourage my candidates to use a PEO – and why I use one for my own business.
Time & energy
Launching a franchise is hard work. No matter what kind of franchise you buy, you’ll need to invest significant time and energy in learning your franchisor’s business system, attending training, and setting up any proprietary software they require.
You may also have setup responsibilities for your business. Brick-and-mortar franchises require, well, the brick and mortar. You have to find a building, supervise the buildout, and more. If you buy a home-based service franchise, you may still need vehicles, storage space, special equipment, or other assets that you have to acquire and learn how to use.
When you first open for business, you’ll need to focus your time and energy on winning and serving customers. Then as the business grows, you’ll need to focus on doing the things only you can do. Delegation is the superpower of every successful executive, and it’s the same for franchisees. Your business will be much more successful if you stay out of the weeds and instead focus on strategy, growth, big-picture financials, and culture.
Knowledge
Even if you find yourself with time to manage HR, it’s a complex and high-stakes field. Here are just a few of the HR-related responsibilities required for running a successful franchise:
- Managing hiring, performance, and firing in compliance with anti-discrimination laws
- Ensuring that workers complete all legally required training or paperwork for their job responsibilities (e.g., preparing food or driving company vehicles)
- Completing background checks and ensuring that onboarding processes comply with immigration laws
- Ensuring that employee time-off accruals are correct and that they receive access to vested benefits at the right time
- Creating benefits packages that appeal to employees, are affordable to the company, and comply with all applicable laws
As you can see, effective and safe HR management requires a large amount of specialized knowledge. Unless you’ve been working in the HR field, you probably aren’t familiar with all the necessary laws, systems and principles – and that exposes you to risk. It’s a culture and retention issue, as well: a professionalized HR function helps employees to feel confident that they’ll be paid on time, get the right benefits, and be safe from negligence and discrimination.
Compliance & liability
The question of risk brings me to the final reason you need a PEO for your franchise: compliance and liability. The U.S. has several federal agencies dedicated to worker issues, and businesses have to follow regulations from each them. Plus, federal regulations only set the minimum standard. Many states have their own payroll and employment laws, adding an additional layer to the compliance picture.
If your franchise doesn’t comply with all applicable laws, you put yourself and your investment at risk. One big court judgement could be enough to bankrupt your business. Franchisors typically don’t take on any liability for franchisees, so you have to provide your own protection.
That’s where PEOs can help. A good PEO doesn’t just educate you on the laws and provide regulation-compliant services. They also assume liability with regard to those services.
How I Can Help
I’ve always said that my franchise consulting business isn’t just about matching candidates to franchises. It’s also about helping candidates launch their businesses successfully. This year, I decided that meant I needed to expand my offerings.
When it comes to business operations, HR is the biggest concern that my candidates have. So I went to my own PEO and asked, “Would you be willing to help my candidates?” To my delight, they said yes, and EmpoweredZeeHR (EZeeHR for short) was born.
EZeeHR is just that: an easy HR solution, designed specifically for franchisees. Whether you’re a single-unit owner with a handful of employees, or you’re building a franchise empire, it will work for you. It’s scalable, affordable, and has the full backing of a PEO known for the same kind of personalized service Lauri and I bring to our consulting business.
EZeeHR is available to all franchisees, regardless of whether you use our consulting services. Check it out today and find out how easy HR can be!
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