How to Root Out Fraud in Your Franchise and Foster a Culture to Safeguard Against It


A company culture that is predicated upon solution management will continue to thrive and generate unity by adapting and preparing for change.

By Jessica Martin
The increasing risks from IT breaches and legislation are overreaching; the franchise business model and culture is under pressure. These areas were once seemingly miles apart, but are now interwoven. The National Labor Relations Board’s joint employment ruling inhibits communications and operations between the franchisor and franchisee significantly. This looming limitation is hindering the franchise industry’s culture while simultaneously creating opportunities for cyber-criminals. 
During 2016, heavy cyber breaches and a variety of fraudulent activities were experienced by companies such as ADP, Seagate, Wells Fargo and Yahoo, which delayed its acknowledgement. Even the Internal Revenue Service has suffered an attack by cyber-thieves.
Still, enterprise and small businesses are neglecting the threat and increasing risks for information leaks. As stated in the Ponemon Institute’s 2016 Cost of Data Breach Study: United States, the average cost for each stolen record is $221 and the total average cost that organizations paid increased to $7.01 million – a 1.07 percent increase. 
Now that the franchisor cannot direct or advise on security measures for fear of violating legislative boundaries, vetting your software and technology vendors will be more crucial as the joint employment law evolves and hackers’ uses for different types of information progress. 
Protecting against fraudulent attacks is necessary and requires an acute attention to detail. Heavily regulated industries have the costliest data breaches due to fines and an above average rate of lost business. Creating a plan and maintaining compliance are critical. There are many ways to protect your company, but here are several starting pointers you can take to create a safe, secure technology environment.
  • Make your technology security a priority. Audit your environment bi-annually or annually to understand what your risks are and how your company and its customers will be affected if information is stolen. No company is too big or too small and these attacks are becoming more frequent and intrusive.
  • Be adaptive. What worked yesterday may not work today. Information security experiences efficacy dilemmas just like other moving facets of your business. As a company or industry culture you are connected, adaptive and collaborative; ensure your technology is too.
  • Create Access Controls. Everyone should never have full access to your full environment. By setting controlled access for all users, you can limit access to the systems they need for their tasks to control data exposure.
  • Maintain Security Patches. Ensure your hardware and software security is up-to-date with anti-malware signatures, patches, etc. Criminals are continually optimizing their approach to find your vulnerabilities. While installing new or updated security patches, have a plan in place should a breach happen during this prime time.
  • Educate and Train. Users should be able to recognize phishing emails, understand the implications of surfing the internet and streaming videos/music, and understand how to utilize passwords; make them strong and use a variety of different ones. 

Build the Culture

Despite the cyber and legislative impediments, the franchising industry is facing, it is possible to continue to fashion a healthy, thriving, and collaborative franchise culture. Obstacles birth inspiration and critical invention.

As an example, over the past year Payroll Vault Franchising has focused on adapting its tools, technology and communications so that the culture remains open, collaborative, and educational. To maintain and cultivate their environment, the team has set up a forum within the FranConnect platform in which the franchisees can be in contact with each other and corporate. FranConnect is a cloud-based franchise management software that was designed specifically to encapsulate best practices and the franchise lifecycle. 

By employing this platform, the franchisees have fostered the freedom to engage with each other to better understand day-to-day challenges, learn and teach best practices, and build onto each other’s strengths. As a result, a community has been fashioned that is close knit and experiences continued success with creative solution management. By acclimatizing, an atmosphere of intelligent networking has been created. This community forum is now an active medium for small-business owners to explore and implement strategies for their businesses while working within the brand’s guidelines.

Adapt and Prepare for Change 

Franchisees rely heavily on the communication forum, but also receive valuable education and guidance from the franchisor through other indirect means. For example, an annual conference is an ideal setting where franchisees convene to interact with industry related vendors, national speakers, small-business consultants and other thought leaders that openly lend their years of expertise in all areas of business. 
Added value is also provided through an annual event called an Owners Exchange that is hosted by the franchisor, as well as a regular monthly owners’ conference call. By connecting regularly, the natural fostering of a healthy culture occurs. 
Lastly, employing external accounting audits on a regular basis is an excellent opportunity to uncover abnormal activity. A reputable third party provides a franchise unit access to a CFO/Controller who has experience in detecting fraudulent activity and offers another layer of accountability and protection. 
A company culture that is predicated upon solution management will continue to thrive and generate unity by adapting and preparing for change. Whether these changes are instigated by the government, invisible invaders in virtual spaces, or just change itself, the company’s leaders should be aware of industry changes and trends and systems that will offer added layers of security. 
Jessica Martin is Director of Marketing and Executive Project Manager for Payroll Vault.