7-Eleven deed sets new standards for franchise compliance

Embattled Australian convenience retailer 7-Eleven has entered into a proactive compliance deed with the Fair Work Ombudsman to reform its internal systems and procedures to stamp out the wage fraud which has scandalised the brand for more than a year, according to a media report.

Jason Gehrke of the Franchise Advisory Centre advises that the proactive compliance deed – a binding legal agreement – requires 7-Eleven to undertake and implement a number of initiatives that will reduce and potentially eliminate the capacity for wage fraud to re-occur in its network.

Jason notes that that 7-Eleven is unique in the franchise sector in its application of a gross profit-share royalty model (rather than a fixed fee or percentage of turnover royalty model), which has been criticised by some observers as a contributing factor for franchisees in the underpayment of employees. The Fair Work Ombudsman does note that 7-Eleven has since changed its financial model to provide greater financial assistance to franchisees, and is now also required to provide detailed wage information to potential franchisees.