7-Eleven points the finger at franchisees as chain is rocked by exploitation cover-up claims

The owners of the convenience store chain 7-Eleven have blamed franchisees for underpaying workers as the company faces accusations of a systematic cover-up of the practice.

Meanwhile, some franchising experts say that underpaying workers is likely to be widespread across different brands in the convenience store sector.

The 7-Eleven franchise has been rocked by allegations that international students are being underpaid and forced to work excessive hours.

Head office has engaged in a “massive” cover-up of employee exploitation over the years, according to a joint investigation by Fairfax and the ABC.

In addition, almost 70% of 7-Eleven stores in Australia were found to have payroll compliance issues when an internal review was conducted in July this year.

The Fairfax and ABC investigation follows a recent case reported by SmartCompany where a former 7-Eleven franchisee was caught underpaying an employee more than $20,000 and fined $7000 for refusing to co-operate with the Fair Work Ombudsman.

The employer watchdog has had its eye on 7-Eleven for some time, conducting audits of Victorian stores as far back as 2009.

However, franchising experts say the popular convenience store is not alone in underpaying employees and the issue demands more attention from policymakers.

Jason Gehrke, director of the Franchise Advisory Centre, told SmartCompany issues around franchisees underpaying their employees is “not brand-specific”.

“We’ve got business owners coming from places in the world where employee wages are not government-mandated and effectively decided through staff negotiation,” Gehrke says.

“When they start businesses in Australia that will be a perspective they may bring to the operation of their business locally. It is an issue that is significantly a cultural issue and one that, quite frankly, any franchisor could potentially face or be required to deal with.”

Elizabeth Gore-Jones, principal of The Franchise & Business Lawyers, told SmartCompany that while the onus is on franchisees to comply with the law when it comes to running their business, 7-Eleven is clearly in a position where action needs to be taken.

“Sometimes common sense needs to prevail over the legal rights and obligations outlined in the franchise agreement and in this instance the franchisor has been given a pretty clear indication that something is awry in the franchise system and action is required,” Gore-Jones says.

“If the franchise model is not working and, the franchisees find themselves in a position where they feel they have no choice but to break the law to survive, that should be a red flag to the franchisor that the franchise model may need to be adjusted to help to ensure the survival, and preferably prosperity, of both the franchisees and the franchisor.”

7-Eleven released a statement on the weekend saying it does not condone the actions of any franchisee who does not meet his or her obligations as an employer.

“7-Eleven is extremely disappointed that a number of franchisees have chosen not to meet their obligations as employers,” the company said.

“We are deeply concerned about the personal impact on affected employees or former employees, and the damage such actions cause to franchisees who are trusted, reliable and responsible small business owners meeting their obligations as employers.

“We do not and will not hesitate to take any appropriate action, under law and within the franchise agreement, where a franchisee is found to be in contravention of the law.”

7-Eleven was contacted for further comment about what action the company is taking in the wake of the joint Fairfax and ABC investigation, but SmartCompany did not receive a response prior to publication.