Simmering tensions between Caltex management and their store owners spilled onto the streets of Sydney as franchisees marched on the company’s offices demanding better treatment and a larger slice of profits.

Around 70 Caltex store owners, workers and their family members marched through Sydney’s business district chanting and brandishing placards denouncing management, and accusing the company of running a franchise model that is unprofitable.

“They have squeezed the franchisees, and we have been squeezed to the limit that we have nowhere to go now,” said Granville store owner Sanjeev Sharma.

“The model is structured in such a way that we have to work long hours, and despite that we don’t make money. In most of the cases, wives, husbands, parents, brothers, sisters … whenever we can’t pay the staff we make the family work.”

A Fairfax investigation last year found large store networks were engaging in wage fraud, with former store owners pointing the finger at the franchise model they said was unprofitable.

In November Caltex promised to crack down on wage fraud, pledging to audit its entire store network while simultaneously conducting an independent review of its franchise model.

Last week Caltex chief executive Julian Segal revealed the outcome of that review, using an opinion piece in Fairfax newspapers to say the Caltex model “allows franchisees to draw a wage, make a profit and pay employees in accordance with lawful wage rates”.

But that comment drew the ire of franchisees on Wednesday who questioned the results of the review and called on Caltex to release the report and the data it was based on.

“Who did they gain their input from? Did they speak to any franchisees? Where is the data from? They think this model is fine, well, prove it?,” Mr Sharma said. “Stores are struggling and I can prove it from my store and from 150 other stores we have data on.”

Mr Segal stood by his comments and said stores were profitable.

“There is no excuse for wage fraud or the mistreatment of employees,” he said

Caltex has pledged to stamp out wage fraud, and promised to terminate any store owner found to have engaged in the practice. It has hired big-four accounting firm Ernst & Young to conduct audits for every store in its network.

The crackdown has spooked franchisees, who are scared they might lose their stores and angry at having to pay for the audits, which cost thousands of dollars, out of their own pocket.

Mr Segal told Fairfax Media on Wednesday that Caltex incurs the costs of audits but added that the company “may seek to recover costs if franchisees are found to be in breach of their agreements”.

Franchisees say they are fighting back against the wage audits, with two separate legal actions being prepared against the company. Lawyer Tean Kerr from Lander & Rogers said he represented about 40 franchisees from across Australia.

“The grievances they primarily have are with the harsh and heavy-handed treatment by Caltex. They are currently undergoing an oppressive audit scheme where they are required to give up numerous documents and asked to pay for that privilege,” he said.

“Caltex’s attitude to any negotiations have been completely stark. There has been no willingness to engage in meaningful debate with us.

Mr Segal said the company was following a rigorous process to afford franchisees procedural fairness, including the opportunity to remedy breaches of their agreements.

“Caltex Australia will take appropriate action to address breaches, including termination of franchise agreements where wage or other fraud is involved,” he said

If a store owner is found to have engaged in wage fraud Caltex can seize their store for a fraction of its market price.

In one case revealed by Fairfax Media last year, a franchisee was terminated from seven stores, which he estimates were worth $5 million on the secondary market if sold to another franchisee.

Last week the company said it was not profiting by terminating franchisees, arguing the cost of refranchising was costly and took considerable time and corporate resources.

Caltex reported a fall in full-year net profit last week, down around 17 per cent to $524 million, dragged down by a falling revenue from its refining operations along with side concerns about wage fraud and the profitability of franchisees.

Extracted from SMH.