7-Eleven and the inconvenient penalty of 24-hour convenience

You can disguise it in anything you want but 7-Eleven is effectively a milk bar and I’m not convinced in this day and age people in Australia need or even want a milk bar that is open all hours.

Nor do you need one on every other street corner. Combine these two factors with an unsustainable wage system and you have a model that is fundamentally flawed.

But whether they have a new model or an old model, it’s the whole wage system of convenience and hospitality workers in Australia that fails.

If you understand basic labour rates and extrapolate that out, by remaining open 24 hours, 365 days a year, and then adding the on-costs (i.e. penalty rates, superannuation, payroll tax, workers comp, holiday pay, personal leave entitlements, and loadings if you’ve got casual staff), it equates to such a large number, it would be near impossible to pay the correct wages in these type of businesses. 

Doing a simple exercise, if you have to employ one person on the correct wages with all penalty rates and all of the other constraints that are placed onto an employer, the bottom line is approximately $300,000 a year, which in today’s market, is pretty hard to justify.

Add to that occupancy and more staff – you need more than one person on at a time – and the cost of goods and the model just does not work.

For this reason, we see a situation where franchisees have been caught paying staff below the minimum wage. It appears people were happy to work for that, because it’s better to have half of something than 100% of nothing.

Now, I absolutely believe people should get paid a penalty rate in certain conditions; if you exceed the ‘full-time working week’, in theory, 38-40 hours, and if you work more than that, you absolutely should get paid overtime.

But it just doesn’t make business sense to pay a kid for working on a Sunday, who wants to work on this day because he goes to school the rest of the week, a double rate. That’s ludicrous.

They say “crime never sleeps” which places the Victoria Police in a 24-hour industry, but, rightly or wrongly, they do not currently get paid penalty rates on weekends. They do an amazing job and provide a valuable service, so why should someone working weekends around a university schedule, get more entitlements for making their pocket money?

Indeed, I question the need for penalty rates on a Saturday or Sunday. Our society now trades seven days a week. If you choose to take these days, or others, for religious observance – and I think that’s your right and your choice to do so – that’s a personal choice and the rest of society shouldn’t have to be penalised for it.

The reason people buy into franchises is for a proven track record of success:  somebody has taken an idea and invested a lot of time, effort and financial resources to make sure that the system actually works.

For this, they are paid an ongoing royalty for using this existing system, so they don’t have to make mistakes. Not everybody is an entrepreneur or a visionary who can go and start a business. There is a much higher probability of it all working. But penalty wages (and silly rents – but that’s another whole story) does not bode for success.

I can certainly tell you within our sector, penalty rates are the biggest problem.  If we didn’t have those, I think franchisees, who in fact are small business owners, would be much happier; I think there would be more employment and opportunities overall. Indeed, franchising would boom.   

I think 7-Eleven’s getting a bad rap, and I don’t think that they should. Yes, they can come out with as many franchise models as they like, but ultimately they have to ask if their system can actually work in Australia in the 21st century with the wage constraints.

In my opinion, the only way a 24-hour service model can be sustained in a way that is fair and beneficial to everyone – the franchisee, the staff and the parent business – is to change the penalty rates on wages.

And those who disagree certainly have never worked in or understand what makes up the bulk of the Australian economy – small business.

Stan Gordon is the chief executive of Franchised Food Company.