7-Eleven terminating franchises

by John Maguire12 Oct 2015
7-Eleven has begun the process of terminating franchises that were involved in the now notorious payroll breaches across its 620 outlets.

On Friday, franchisees met in Brisbane to hear details on a “new deal” being offered by 7-Eleven’s head office. This involved a plan to increase profit shares.

According to Fairfax Media, franchisees have nominated a head franchisee, who will act as a “national leader” and speak on behalf of all franchisees at meetings with head office.

During a recent Senate hearing, head office representatives said that terminating franchises was near impossible under the Franchising Code of Conduct.

“We do not have the ability to terminate under the franchising code if a breach is rectified,” said 7-Eleven’s former general manager of operations at a Senate hearing in September.

This has caused the termination of franchises to come as a shock to franchisees and the wider business community.

It was reported that a Perth-based franchisee was pushed out of 7-Eleven’s  system after being found to have underpaid staff.

It is reportedly believed that this is just one example in a string of similar cases.

Last week, a spokesman for 7-Eleven confirmed that the agreement with the franchisee in question had been terminated.

“Action has been taken in relation to non-payment of staff in circumstances that warranted termination,” he told Fairfax.

“We're now moving to resolve issues around arrears of payment with those staff.”

The termination of agreements has reportedly angered franchisees; on Thursday evening, franchisees were reported to have been attempting to rally support for a movement against the terminations.

“Could you [sic] all franchisees please stand up and protest against this unfair termination of franchisee,” a message between franchisees read.

“You should have everyone protest to get the franchisee his store back.”

In response to the recent exploitation scandal, 7-Eleven has offered to overhaul its business model in an attempt to improve its franchisees’ financial standing.

Proposed changes could see company shareholders lose over $30 million annually, delivering an average 4.5% increase to the incomes of 7-Eleven store operators.

The current system sees head office receive 57% of profits, while franchisees are paid 43%.

Under the proposed new system, stores’ incomes will determine how much profit they see.

For stores that have annual revenues of up to $300,000, franchisees will be allowed to keep 50% of their profits. This will account for 138 franchisees.

Those that produce gross incomes of between $300,000 and $500,000 a year will keep 48% of profits, while head office reaps the remaining funds.

Hundreds of stores have also been offered a deal that will see their gross profit share lowered by 1% for every additional $100,000 their franchise earns.
 
 
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