Behind the Headlines

Jason Gehrke, Director, Franchise Advisory Centre

This article appears in the March/April 2014 issue of Business Franchise Australia & New Zealand


Australia Post to raise stamp price amid bank license and reduced delivery claims

Following recent media speculation about any possible privatisation of Australia Post, the government-owned entity has again come under the spotlight amid claims that it could be issued with a banking license to compete with the existing ‘big four’ Australian banks.

While the banking suggestion has been made by the Communication Workers Union, the business is also staving-off suggestions that it will wind back mail deliveries to three times a week following a survey of customers.

Meanwhile, Australia Post is also seeking federal government approval to increase the cost of postage for a standard letter from 60c to 70c in what would be a 17 per cent price hike, but which still is lower than the comparitive cost of postage in most  other developed nations.

A Senate inquiry conducted late last year into the operations of Australia Post is yet to present its findings.

Gloria Jean’s sold to Singaporean directory business

Gloria Jean’s Coffees and its global supply chain, as well as master franchises, and Gloria Jean’s and It’s a Grind intellectual property has been sold in a $35.6 million deal to listed Singaporean database and directories company, Global Yellow Pages Ltd.

The announcement of the sale of the 17-year old Australian-owned business will transfer control of the brand’s 800 oulets in 39 countries to a business that traditionally publishes directories and compiles databases, but which has recently  commenced a strategy of diversifying into food businesses.

The sale includes a combination of cash and Global Yellow Pages shares, and is being partially funded by a rights issue. Gloria Jean’s executive chairman Nabi Salleh will continue to be involved with the business.

Franchisor sues US government for damage to reputation

A franchisor is suing the the United States Department of Labour for damaging the reputation of the franchise’s brand and for arbitrarily classifying volunteers who work in the franchise as employees.

The chain, Rhea Lana, has 63 franchisees throughout the US and conducts giant consignment sale events for children’s clothes and toys, similar to events conducted by charities in Australia. Volunteers are given early entry to the event and first pick of the items for sale, in return for helping out, however the US Department of Labour has classified the volunteers as employees, and stated that they are all entitled to back pay at the minimum wage rate.

McDonald’s trials home delivery in Sydney

McDonald’s is trialling home delivery in Australia, with the North Parramatta outlet in Sydney offering a McDelivery service of family value meal packs between 5pm and 9pm, seven days a week.

However the service has been criticised as an incentive to eat food high in saturated fat and salt, and the choice of North Parramatta has also come under fire for its high proportion of obese adults, according to a media report.

The family value packs do not offer McDonalds’ healthier range of menu items, and requires a minimum order value of $25. The fast food chain currently offers home delivery in several Asian countries.

Harvey Norman franchisees fined $30,000 each for consumer breaches

The Federal Court has issued fines of approximately $30,000 each to five Harvey Norman franchisees where were found to have misled customers about their rights to refunds, or to have defective products repaired or replaced.

The stores in Tasmania, Victoria and New South Wales were handed fines ranging from $28,000 to $32,000 each, and were also ordered to display in-store corrective notices and undertake a consumer law compliance program.

A further five Harvey Norman franchisees are alleged by the ACCC to have engaged in misleading consumers about their rights, with judgements pending in those cases. The ACCC alleged that the franchisees engaged in misleading or deceptive conduct by making false or misleading statements to consumers about their rights under the consumer guarantee provisions of the Australian Consumer Law (ACL).

Proceedings against all the franchisees were originally launched in the Federal Court in New South Wales in November last year, were disallowed as a group action, and susbequently relodged against each respondent in their respective home state. The ACCC did not allege that the franchisor of Harvey Norman was involved in making the representations.

Salsa’s gives away a free Melbourne franchise in radio competition

A couple from the Melbourne suburb of Bacchus Marsh have won their own Salsa’s Mexican-food franchise in a competition held by Salsa’s parent company Retail Zoo and Melbourne radio station Mix 101.1 FM.

The couple won the franchise during a live broadcast from the Bridge Road, Richmond store on November 29 after completing a Salsa’s weekend boot camp along with two other finalists.

To enter the competition, Mix 101.1 FM listeners were required to register on the station website, then call when their name was broadcast to register for the boot camp. Finalists were then selected at the camp. The winner is granted a license to  operate the store for six months, after which they will be required to sign a franchise agreement and continue to operate the store as their own, or vacate the premises and accept a $50,000 cash prize.

Super Retail Group buys fitness franchise assets

Listed Australian company Super Retail Group, owner of Supercheap Auto, Rebel Sports and several other retail brands, has bought the brand name, intellectual property, inventory and store assets of former fitness franchise Workout World.

Super Retail Group is also taking over 21 of Workout World’s 26 company-owned stores, as well as a number of employees and employee entitlements. However it is is not taking over Workout World’s franchised operations, but is in discussions with  those franchisees about their next steps.

Competitive Foods divests KFC outlets

Competive Foods, the parent company of Hungry Jacks, has sold its 44 KFC outlets in Western Australia and the Northern Territory to listed Queensland-based KFC operator Collins Foods for $55.6 million.

The deal brings to an end the involvement with KFC of Hungry Jack’s founder and franchise pioneer Jack Cowin, who made his start in Australian franchising by securing the rights to KFC for WA and the NT in 1969.

The deal also ends a long-running dispute between Competitive Foods and KFC parent Yum! Brands.

Collins Foods operates 125 KFC outlets mainly in Queensland, and listed two years ago, however its share price halved within months of listing, and is currently trading at around $1.78, down from its list price of $2.50. The company also owns 27  Sizzler restaurants and plans to open another 25 to 30 KFC stores in WA over the next 10 years.