Can 7-Eleven revive itself with a new franchise model?

Posted by AFN Staff Writers on 12th October 2015

7-Eleven is offering a new franchising model as part of revival attempts following the investigation into alleged widespread employee underpayments.


The new model was communicated to franchise owners in a Sydney meeting last week and will reportedly see head office and franchisees split profits based off how much money stores are making.


It is also believed franchises are being are being made to follow new terms and conditions under the new arrangement.


New 7-Eleven chairman Michael Smith stated that the model reflects a changing retail environment and will help in fixing the problems faced by the chain.


Fair Work Ombudsman orders 7-Eleven operators to face court


The former owner-operators of a Melbourne 7-Eleven store have been informed by the Fair Work Ombudsman that they will have to face court for allegedly underpaying 12 employees.


It is claimed that the employees included international students and some were paid as little as AUD$11 per hour. Allegedly one employee is owed more than AUD$16, 500 in unpaid wages.


The store in question is one of 20 investigated by Fair Work in late 2014.


Across the last six years, the Fair Work Ombudsman says it has retrieved more than $600 000 of unpaid wages and entitlements for 182 workers at 7-Eleven stores.


Allegations of systemic underpayments and false record-keeping continue to be investigated by the Fair Work Ombudsman.  


The franchise model change and Fair Work Ombudsman announcement are the latest developments since 7-Eleven announced at the end of September 2015 that its chairman Russ Withers and Chief Executive Office Warren Wlmot had stepped down from their positions.


The men were replaced with Michael Smith as Chairman and Bob Baily would take up the role of interim CEO until someone else was permanently appointed to the position.


It has been confirmed that  Michael Smith, formerly the Chairman of iiNet, will be replacing Withers. Bob Baily, currently a non-executive director at The Muir Electrical Company (The Good Guys), will take up the role of interim CEO until someone can be permanently appointed to the position.


Withers said at the time of his resignation that  he had originally planned to hand-over the role to Smith in 18 months however it made sense to step down with Wilmot.


“Over the longer term Michael will need to forge a very close working relationship with our new CEO so it makes sense for that process to commence from the outset,” said Withers at the time of his resignation. “Michael will lead the appointment of Warren’s replacement and take an active lead role in navigating 7- Eleven through the current issues we are facing relating to the underpayment of staff. We’re very fortunate to have someone with Michael’s credentials and track record on the board and able to step into this role. Michael’s detailed knowledge of the 7-Eleven business together with his breadth of experience across a range of boards is exactly what we need at present. Naturally this is a major decision for me to stand aside as Chairman, however I will continue to be a shareholder and I am determined to make sure the Company is in the right hands to move forward,” said Withers.


Mr Withers will however remain Chairman of the group holding company which has 7-Eleven and Starbucks, along with real estate and shares within its investment portfolio.


7-Eleven first responded to claims franchisees have been underpaying workers saying an independent panel would be set up for investigation.