Behind the Headlines

Jason Gehrke | Franchise Advisory Centre

Migrant franchisee discriminates against migrant workers

The migrant Indian operators of a Crust Gourmet Pizza franchise in Tasmania have been penalised $104,000 for discriminating against employees based on their nationality and other breaches of workplace laws, according to a Fair Work Ombudsman (FWO) statement.

The alleged discrimination relates to three Bangladeshi and one Indian worker who were underpaid a total of $9,926 and not provided with payslips between January and July 2016. Australian employees who had been paid ordinary rates and provided with payslips were also found to have been underpaid a total of $6,252 after the incorrect application of some Award provisions.

The operators further breached workplace laws by providing FWO inspectors with records that had been altered by the deletion of hours worked by the overseas workers. The Federal Court judge who presided over the case emphasized that the four foreign workers, who were international students at the time, were vulnerable due to their limited understanding of Australian workplace laws and that the conduct towards them was deliberate. 

Finance franchise to pay $42.5m to settle class action

Listed retail pawnbroker and non-bank lender Cash Converters will pay $42.5 million to settle a class-action lawsuit representing 68,000 claimants related to charging vulnerable consumers excessive fees on personal loans, according to a media report.

Cash Converters allegedly engaged in “unconscionable conduct” between 2009 and 2013 when they charged borrowers more than 175 per cent interest on loans. One part of the lawsuit was settled in October 2018 when Cash Converters agreed to pay $16.4 million, bringing the 12-month total to $58.9 million. Cash Converters has stressed that the deal does not involve an admission of guilt. 

McDonald's fires global CEO

The global CEO of McDonald's has been fired by the company's board after it was revealed he had a consensual relationship with an employee against company policy, according to a media report.

Former CEO Steve Easterbrook was fired over the weekend, and was immediately replaced by the head of the company's US operations. 

Float of Boost Juice parent cancelled

The proposed share market float of Boost Juice parent, Retail Zoo, has been suspended indefinitely amid market concerns after several high profile initial public offerings (IPOs), including that of Latitude Financial Group, were abandoned, according to a media report.

Brands under the Retail Zoo umbrella include Boost Juice and Betty’s Burgers, both of which had been identified as businesses with the greatest growth potential in Australia and overseas. The float was expected to finance the company’s plans for international expansion. Speaking at the National Franchise Convention earlier in the week before the announcement, Boost Juice founder Janine Allis declined to comment on the float.  

Directors turn on each other in $13m franchise fraud trial

A former director of failed whitegoods retail chain Kleenmaid who pleaded guilty to fraud for his role in the company’s collapse has appeared as a prosecution witness at the fraud trial of fellow Kleenmaid director Andrew Eric Young, according to a media report.

Former director Garry Armstrong also appeared as a prosecution witness at the 2016 trial of another former Kleenmaid director, Bradley Young (the brother of Andrew), who was sentenced to nine years jail for his role in the fraud.

Andrew Young is facing court for the fourth time following three aborted attempts to deal with charges stemming from the 2009 collapse of the whitegoods retail franchise for knowingly operating the company while it was insolvent, and for defrauding the Westpac Bank of $13 million. He is now representing himself in the eight-week trial after dropping his legal team.

Young was previously on trial with his brother Bradley in 2016 until Andrew’s legal team withdrew and he represented himself until the trial was aborted early due to “medical reasons”. Another trial for him in 2018 was similarly aborted after Young applied for Legal Aid. Kleenmaid collapsed in April 2009 with debts of more than $100 million and left more than 6,000 customers emptyhanded after they paid deposits for whitegoods that were never supplied, making it the highest-profile collapse of a franchise system in a decade. The Kleenmaid brand has since been sold to new owners. 

Domino’s defends fortressing strategy

Listed pizza chain Domino’s Australia is defending its fortressing strategy, whereby existing franchise areas are backfilled with new franchises to increase market penetration and shorten delivery times, according to a media report.

The strategy includes opening 1,200 new stores in the next five to eight years which the company claims will boost sales, and improve brand recognition, delivery times, and labour costs. Domino’s has stressed that franchisees must relinquish some delivery territory to new stores, but notes that existing stores return to their original volumes within three years after a fortress store has opened, and that advertising royalties for affected stores are waived. 

Govt-backed small business investment fund set for launch

A special fund created by the federal government which gives small and medium sized businesses financial assistance is set to launch with each of the big four banks contributing $100 million to match the government’s commitment, according to a media report.

The Australian Business Growth Fund will provide “patient” capital of between $5 million and $15 million to small and mid-sized firms via equity stakes of between 10 and 40 per cent in the businesses. The fund is modelled on similar programs in the UK and Canada and will be managed by a board and independent management team. 

Franchise parent offloads non-furniture brands

Homewares retail group Greenlit Brands has sold its general merchandise division which includes 322 stores to private equity firm Allegro Funds as part of its strategy to simplify its portfolio, according to a media report.

Greenlit Brands, formerly trading as Steinhoff Asia Pacific, rebranded in 2018 in a bid to distance itself from beleaguered parent company Steinhoff International. The company will now be able to focus on its remaining brands, which includes Snooze, Freedom and Fantastic Furniture, among others. 

Australian household debt hits record levels

Research by the National Australia Bank indicates that household debt in Australia is now more than double annual income for the first time, according to a media report.

The record level of household debt is attributed to low wage growth failing to keep pace with a resurgent property market. Household debt has increased from 120% of income in 2000, to 202 per cent in 2019. The most indebted households are in Victoria where the debt-to-income ratio is 212 per cent. 

Franchisee terminated for racist rant on personal Facebook account

The franchisee of casual dining restaurant chain Walk On’s in Louisiana has had his franchise agreement terminated after posting a racist rant on his personal Facebook account, according to a media report.

The racially-charge rant related to a video which he also posted on Facebook showing Halloween trick-or-treaters helping themselves to handfuls of candy which the franchisee had left on his front porch beside a sign instructing children to “take just one piece of candy.”

Walk On’s president and COO issued a public statement stressing that the company built its foundation on “core values of inclusion and equality”, while the former franchisee has removed the post and publicly apologised for the “offense and pain it has caused.” 

Coffee chain to accept Bitcoin

Global coffee chain Starbucks will accept digital currency Bitcoin as payment in 2020 as the first launch partner of financial market company Interncontinental Exchange (ICE) to test a consumer app and merchant portal for digital assets which they are developing, according to a media report. 

2020 franchise education calendar released

The Franchise Advisory Centre has released its 2020 franchise education calendar with additional dates for Australia and the United States.

The Franchise Advisory Centre offers a range of educational workshops, seminars and forums for the professional development of franchisor management and leadership teams. All events receive points toward the internationally-recognised Certified Franchise Executive (CFE) qualification.

Australian dates for 2020 will include Brisbane, Sydney and Melbourne, plus other capitals. US locations include Los Angeles and Chicago in May, and Dallas in October, while workshops in New Zealand will be held in February. 

Visit www.franchiseadvice.com.au for more information