Victorian cleaners forced into franchise arrangement: confidential report

Updated: Paraserve managing director says the company’s franchising model is legitimate and lawful.


A confidential report prepared by cleaning union United Voice has revealed details surrounding a Victorian school cleaning operator on-selling public school cleaning contracts to “vulnerable” franchise holders.

According to the United Voice report obtained by INCLEAN, Paraserve, one of the larger school cleaning operators in Victoria, operates as the cleaning services provider for at least 28 Victorian schools, sells contracts it wins to “vulnerable franchise holders”. In the report, 13 cleaners engaged by Paraserve provided information about the company’s on-selling system.

The basics of the system appear to be that Paraserve entered into purported franchise contracts with various cleaners. While it is likely some of the cleaners voluntarily moved from an employment relationship to the franchise model, several reported having been forced into the franchise arrangement.

One school cleaner who wished to remain anonymous said dozens of school cleaners have been caught up in Paraserve’s franchising scam.

[quote]“I’ve been a cleaner at a school in Melbourne’s east worked for almost five years. I’d been working for Paraserve for one year when one day I was told I had to pay Paraserve $42,000 and become a ‘franchisee’ or I’d lose my job,” he said. “My job is my livelihood; it’s how I support my kids, so I had no choice. I am trapped under mountain of debt and I now work nine hours a day, for less than the minimum wage.” [/quote]

[quote]“Thousands more school cleaners are being ripped off by other backyard operators, using similar scams and other dodgy practices. School cleaners do a very important job. We deserve respect, fair pay and a job we can count on.” [/quote]

The terms of Paraserve’s franchise arrangement require the cleaners to pay Paraserve a purchase price, apparently calculated at about 35 per cent of the annual turnover of the school contract which the cleaner will be engaged to clean.

The purchase price paid by the cleaner was usually between $40,000 and $60,000. The cleaner was also required to pay Paraserve a franchise fee of $15,000. Some cleaners reported that in order to pay these fees, they entered into a loan arrangement with Paraserve whereby they make re-payments each month. Other cleaners entered into personal loans to fund these start-up costs.

Paraserve managed the contractual relations with the relevant schools. They managed the tenders, negotiate the terms and invoice for payment for the cleaning work. Paraserve then remits a monthly fee to the cleaner, minus deductions.

The cleaner is responsible for all of their own costs: employee wages; cleaning chemicals; equipment maintenance. The cleaner presents as if they are an employee of Paraserve – they wear a Paraserve uniform and most school principals involved are unaware that their cleaner has been engaged through the on-selling system.

Jess Walsh, United Voice Victoria branch secretary, told INCLEAN the franchising scam is trapping school cleaners under a mountain of debt and despair.

[quote]”These cleaners are having to find up to $75,000 to get their job and then work for less than the minimum wage to keep it,” she said. “It is really beyond belief that this is happening in our State Government schools.[/quote]

[quote]”Victoria’s school cleaning system is a disaster. We are the only state that lets hundreds of backyard operators compete for schools on the basis of who can get away with exploiting the cleaners the most. School cleaners deserve better from the Andrews government and they need change right now.”[/quote]

Paraserve Cleaning Services has rejected the claims made by United Voice.

Paraserve managing director Galvin Bartlett told INCLEAN its franchise business and franchisees are fully compliant with Australian Victorian laws and the Franchise Council of Australia’s code of conduct.

“It is Paraserve’s position that our franchise model is an entirely legitimate, lawful and a commonly used business model.”


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