It is a story told and heard often – a small business starts with a single, great idea or product and experiences great success in a very short amount of time. However, problems arise when the business, wishing to grow its success, decides to create more products, open more offices or stores and hire more staff – without having all of the appropriate systems and processes in place to deal with the additional responsibilities and liabilities that are attached to expansion.
The recent (and well-documented) collapse of popular dessert chain, Doughnut Time, is a cautionary tale for employers about the risks associated with a rapidly expanding business.
Starting out in 2015 as a single storefront in Queensland, Doughnut Time found immediate success and over the course of the next two years, opened over 30 more stores across Australia. By the end of 2017, the company had expanded into overseas markets including England and was rumoured to be launching in the USA.
However, in March 2018, Doughnut Time here in Australia announced it was going into liquidation in the face of claims alleging unpaid rent on storefronts and employee wages. In fact, disgruntled employees took to social media in an effort to recover unpaid wages from the company.
It is estimated that there is over $70,000 in unpaid wages owing to employees, and many of those are international workers on visas who are not eligible for the government-funded Fair Entitlements Guarantee scheme. Therefore, those employees may never recover their entitlements.
As the saga continues for Doughnut Time, there are a number of lessons to be taken from its collapse in Australia – particularly for start-ups and small businesses:
In short, take a proactive approach to setting up your small business with the right foundations to avoid bigger, and possibly fatal, problems that are associated with growth and expansion.
Shane Koelmeyer is a leading workplace relations lawyer and Director at Workplace Law. Workplace Law is a specialist law firm providing employers with legal advice, training and representation in all aspects of workplace relations, employment-related matters and WH&S.
02 9256 7500 | firstname.lastname@example.org
Information provided in this blog is not legal advice and should not be relied upon as such. Workplace Law does not accept liability for any loss or damage arising from reliance on the content of this blog.
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