Adele Ferguson and Sarah Danckert, 26 September 2015

The competition watchdog has set its sights on 7-Eleven head office for potential breaches of the Franchising Code of Conduct and Australian Consumer Law.

The Australian Competition & Consumer Commission’s review of the convenience store giant’s franchising activities could result in the ACCC taking legal action against the company or levelling hefty fines if it finds it has breached the law.

The ACCC declined to comment publicly on the review, but it is understood to be closely monitoring the convenience store chain.

ACCC’s review of 7-Eleven’s franchising activities comes as the Senate Committee on Education and Employment is set to call the ACCC to give evidence on 7-Eleven. The next hearing date has been set for November.

“This visa inquiry has demonstrated there are some serious and systemic problems across the labour market. It appears there are business models which set out to exploit  457/417 visa holders and international students,” Senate committee chairwoman Senator Sue Lines said.

Senator Lines said the scale of underpayments, non-payment of superannuation and underpayment of tax has been “shocking”.

“It is clear that we need to better understand the labour market, the precarious nature of visa worker employment and employment law. To that end I’m interested to hear from a broader range of witnesses such as the ACCC, Department of Immigration and Border Protection and specialist academics,” she said.

“I will be asking for these groups to appear before the committee.”

A spokeswoman for the ACCC declined to comment on being called before the Senate committee.

7-Eleven has been in damage control since a joint media investigation by Four Corners and Fairfax Media that exposed widespread wage fraud across the 7-Eleven franchise network with some staff working for as little as $5 an hour.

The investigation also revealed the financial plight of 7-Eleven’s franchisees. The company has had to almost treble the level of financial support it provides to franchisees after the media investigation revealed 138 of the 620 stores made $300,000 or less in income in 2015, which is not enough to pay full freight, wages and other costs.

Since the revelations of systemic wage fraud in the 7-Eleven network came to light late last month, 7-Eleven has set up a company-funded panel chaired by former ACCC head Allan Fels to assess any back-pay claims by current and former employees.

It has also tried to pacify disgruntled franchisees by offering to almost triple income support to any stores that earn $310,000 or less annually in gross income.

At a board meeting scheduled on Friday, a discussion about various options for changing the profit share between head office and franchisees was also discussed.

Several current and former 7-Eleven franchisees have made contact with Fairfax Media to complain about what they believe are unfair elements of the franchising agreement, including increasing the share of profit head office pays to franchisees from the present 43 per cent, out of which franchisees pay wages and other costs including cleaning and telephone charges.

7-Eleven has also confirmed it intends to make “substantial changes” to it business model.

Professor Fels has strongly criticised the 7-Eleven business model, saying it “will only work for the franchisee if they underpay or overwork employees”.

In an interview with Four Corners, he said the Franchising Code of Conduct should be changed to include clauses about worker exploitation.

“We do have a Franchising Code of Conduct, that’s going to have to be looked at again in the light of all this evidence.  It should be tightened up and possibly more said in there about illegal behaviour,” Professor Fels said.

The Franchising Code of Conduct is a mandatory code administered by the ACCC and includes clauses for termination of franchise agreements and the requirement that a franchisor act in good faith.

At a Senate hearing on Thursday, Fair Work Ombudsman Natalie James and others were asked to look at the 7-Eleven franchise agreement after comments by 7-Eleven chief executive Warren Wilmot that it is difficult to terminate franchisees due to the terms of the code of conduct.

Extracted in full from the Sydney Morning Herald.