7-Eleven – The other lesson learnt for Franchisors

Over the past few weeks the 7-Eleven Franchise Group has received some very poor publicity – particularly when in comes to underpayment of wages.

The story itself is not pretty – claims that Franchisees of the Group have been underpaying staff, many from minority groups, and falsifying employment records.  It is also not a new story – media releases on the Fair Work Ombudsman’s website go back many months.

The overwhelming reporting, and the many blog articles on the internet, concentrate on underpayment of wages.  I cannot disagree with any of these articles – the underpayment of wages and the possible exploitation of staff is unacceptable.

But there is another lesson here for Franchisors – Your brand is your Franchise’s Life.  Damage to the brand effects every aspect of your business – your ability to market to end-users, your ability to attract new franchisees and your ability to attract good staff.

The 7-Eleven Brand today is significantly damaged.  Daily articles are being written by journalists with new claims coming out daily.  If you do not read the newspaper, watch the news or listen to the radio – you may be one of the few unaware of the situation they are in.

The response from 7-Eleven has been to blame the Franchisees – they are the one’s who employ the staff and therefore the one’s to blame.

I am afraid, I can not agree.  People who become Franchisees come from a myriad of backgrounds, some are experienced business people, others are not.  Some have experience in the industry they are buying into, some do not.  Some have managed people before, some have not.  I could go on….

But let’s look at this from the point of the risk to Franchises brand.  Most Franchises have strong systems to manage stock, finances and on-site branding.  They market aggressively using their brand and apply campaigns across their network.  But many do not place controls or systems in place regarding the management of people or to ensure there is no underpayment of wages.

And 7-Eleven are learning the folly of this approach.  Their brand is damaged and they have a good deal of work to do to regain the trust of the public, potential employees and potential new franchisees.  A statement on their website acknowledges that they may lose current franchisees.

But they are not alone, I can provide many examples of Franchise Groups receiving poor publicity as a result of people related compliance issues in both Australia and New Zealand.  Underpayment of wages is probably the most common, but there are other examples.  I must say however, it can happen to any brand – Lorna Jane only yesterday received poor publicity regarding an harassment claim and a couple of months ago was in the press for their recruiting requirements.

7-Eleven’s response to this is a recognition of their own responsibilities in regards to employee management as Franchisor.  They have recognised that they must place systems in place to manage compliance, particularly underpayment of wages.

Many of the commitments they have made are consistent with steps we at People Smartz have taken with other franchise groups.  They include:

  • Ensuring that the Franchisees, and their Managers, are educated and aware of their employment obligations.
  • Putting in place Enterprise Agreements, where it is applicable, that provide for consistent conditions across their network.
  • Putting in place systems, such as network wide payroll and HR Information Systems to ensure consistency and allow the monitoring of payroll.
  • Having systems and processes in place to manage rostering and timesheeting processes.
  • Ensuring that Human Resource, Workplace Health and Safety and Risk Related policies are applied consistently across the network.
  • Ensuring that a monitoring and auditing process is in place and implemented in order to correct any issues as soon as identified.
  • Having specialised legal and professional support in place at both Franchisor and Franchisee level to assist with issues as they arise and address everyday queries.
Many of the above steps not only have a compliance effect, they can also have a significant business outcome.  Improved rostering practices, greater consistency in outcomes, reduced wage costs and improvement in employee retention are just some of these.
Aside from the 7-Eleven employees receiving their entitlements, my one hope is that this situation highlights to Franchisors, the need to apply just as much attention to people management as to their sales and financial systems.
If you would like some assistance improving your compliance systems – contact us today
Read more about the 7-Eleven situation at https://www.smh.com.au/interactive/2015/7-eleven-revealed/

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