Franchise sector needs stronger Federal role

Jeff Board | CEO | JAX Tyres

The elevation of Prime Minister Malcolm Turnbull and the overhaul of Federal Cabinet has delivered two things that have been sorely lacking and given the retail sector hope that economic reform is back on the agenda.

The first is the return of a visionary dimension to federal politics. Turnbull’s language has been effusive and brimming with optimism; our new PM is saying all the right things about the economy, including an open discussion about tax reform – something that is long overdue.

Secondly, Mr Turnbull has assembled a solid and seemingly stable team. Whether this bears out in the longer term remains to be seen, but all in all, it appears to be a cracking cabinet.

Mr Turnbull and his new front bench have given people – and the retail sector – reason for optimism. The latest weekly survey by ANZ-Roy Morgan showed consumer sentiment rose 8.7 per cent in the wake of Turnbull’s putsch, but it’s still a good 10 per cent down since the Coalition’s election 18 months ago.

As a canary in the discretionary spending coal mine, the tyre retail sector is keenly waiting to see if this upshot in sentiment is reflected at the shop front. Generally speaking, tyres are not a cheap purchase; people will procrastinate from buying tyres until their financial situation is  secure – or if bald tyres leave them with no other option.

To make it easier for our JAX Tyres customers to make considered and informed purchase decisions, we have re-invented our digital and online presence with some worldleading industry technology that enables the Australian motoring public to choose, buy and book online 24-7. This has reduced our overheads, streamlined our operations and increased efficiency. Even so, and with three record months in a row since the launch of the new website, we were expecting a tough first quarter in F16.

But a revitalised Government under new leadership could provide a fillip to the retail and franchise sector.

Penalty rates

The case for penalty rate reform – which stalled under the previous Federal Government – has received renewed focus, with Mr Turnbull declaring last week that Sunday penalty rates were up for consideration, backed this week by the Minister for Resources, Energy and Northern Australia Josh Frydenberg.

While the debate over penalty rates evokes strong reactions from both sides of the argument, the fact remains the $169 billion franchise sector is being crippled by an outdated system.

In the tyre and retail sector, most purchases are done by mums and dads on weekends – yet we are penalised for offering a service at a time most convenient to our customers. JAX Tyres employees are covered under the Vehicle Manufacturing, Repair, Service & Retail Award, which covers everyone from tyre retailers to Holden dealerships. Under this award, employees are paid time and half for the first three hours worked over 38 hours per week – then double time for any additional hours worked.

On Saturdays we pay time and a half, and on Sunday’s we pay double time. Incredibly, the award rate is higher than some of the other retail outlets – meaning our labor costs are higher than employers like David Jones and Myer.

Our franchisees work to the schedule of our customers, who typically drop off their car before work, after work and on weekends – all times affected by penalty rates. We estimate we pay nine hours of overtime per employee every week, the bulk of which takes place on Saturday mornings.

Tyre and underbody repair is a labor intensive business; on average, labor costs account for 35 per cent of a JAX Tyres franchise’s total costs.

Talent recruitment is always a battle. Tyre retail is at a disadvantage in attracting young talent for the simple reason our highly skilled staff require far more training before they can enter the shop front than other employers in the retail sector.

Times have changed and penalty rates must change with it. Many of our franchises simply can’t open on a Sunday when our customers would like to do business. Penalty rates are therefore reducing customer choice and preventing us from growing faster than we would like. For many franchises, penalty rates create a delicate balancing act between wanting to keep head count at the right level and not wanting to overwork staff. Instead of the current system, we would prefer to see a flat rate across the board, or that failing, the equalisation of penalty rates across the weekend.

Payroll tax

For any national company dealing with Australia’s fragmented tax system, payroll tax is a doozy.

Exemptions, exclusions and state-by-state differences make no sense in the context of a global economy.

As a built-in disincentive to hiring – why should we be taxed for hiring staff? – we believe payroll tax should be scrapped altogether. At the very least, Turnbull should propose a national approach to payroll tax, creating a simple and uniform system across state borders.

Waste Tyre management

There also needs to be a federally directed approach to the issue of waste tyre management. While Tyre Stewardship Australia (TSA) was formed in January to improve waste tyre disposal, and although Federal Environment Minister Greg Hunt has become involved, it lacks any legislative
bite due to the fact that is a voluntary, not legislated, system.

Such a toothless tiger needs to be upgraded with real powers in line with the NSW’s Government’s WasteLocate approach. For those unfamiliar, WasteLocate is a NSW Government-mandated system for monitoring the disposal of waste tyres across the state that was officially launched by the NSW Environmental Protection Authority (EPA) on October 1.

This means for the first time anywhere in Australia, contractors must provide the NSWEPA with specific date regarding the movement of waste – including scrap tyres, of which only 5 per cent of some 51 million tyres are recycled in Australia every year. While the proper disposal of waste will remove millions of tyres from the natural environment every year, it is not strictly an environmental issue. There are substantial economic gains to be made by implementing a cohesive approach to waste tyre management and a federal solution, not state by-state is what’s needed.

As CEO of the JAX Quickfit Group, Jeff is responsible for the strategic direction, business performance and sustainable growth of the company. Since joining 24 years ago, he’s transformed a traditional tyre retail and servicing operation into a fully integrated digital and bricks and mortar business.

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