In The News

The initiatives include thumbprint scanning of workers to clock on and clock off at the start and end of their shifts, backed-up by a network-wide CCTV system monitored by 7-Eleven head office; continued rectification by 7-Eleven of unpaid staff wages; the introduction of a mandatory centralised payroll system that all franchisees will be required to use; the establishment of an employee consultation group that specifically excludes franchisees; and a raft of other measures.

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Veritas is required under the revised ANZ facility to deliver to ANZ by 15 January 2017 either an unconditional contract for the sale of Nosh, or a proposal to close and wind down Nosh. Veritas is also required to close and wind down Nosh by 31 March 2017, if it cannot be sold by that date.

Given the time available before 15 January 2017, the Board cannot be certain that a sale of Nosh can be agreed by that date. The Board therefore proposes to investigate the proposal to close and wind down Nosh by 31 March 2017, as part of its strategic plan for the group.

Jim Delligatti told The Associated Press in 2006 that McDonald's resisted the idea at first because its simple lineup of hamburgers, cheeseburgers, fries and shakes was selling well.

'They figured, why go to something else if (the original menu) was working so well?' Delligatti said then.

McDonald's has sold billions of Big Macs since then, in more than 100 countries. When the burger turned 40, McDonald's estimated it was selling 550 million Big Macs a year, or roughly 17 every second.

The job description attached to his employment agreement specified Mr Corten would work 40 hours a week at $18 per hour.

But for the duration of his employment Mr Corten worked six days a week, from 8.30am until 10pm. He took no holidays while employed and was paid $720 a week, either in cash or cheque, which works out to about $8.90 an hour.

He resigned in September 2013 following disagreements with Mr Efendi.

An internal Caltex document presented to franchisees in August on workplace obligations outlines "common mistakes".

The list includes not paying an employee for trial/training shifts, not recording and rostering the hours worked by the franchisee and not having these records available and not checking if visa requirements are up to date.

One of the more egregious "common mistakes" was "not paying wages … on a regular basis/on time and not having required records of wage payments (especially when cash wages are paid)".

In a statement Caltex described the "common mistakes" as examples "provided by way of illustration and do not reflect Caltex's behaviour".

It says the company had always made it clear to franchisees that they are required to operate their businesses in full compliance with all laws, including the Fair Work Act.

But it will not commit to a compensation scheme where it finds exploited workers who have been systematically ripped off, similar to the scheme set up by 7-Eleven, which has so far paid A$50 million in back pay to workers.

Instead, it points the finger at franchisees, saying "franchisees are responsible for ensuring their employees are correctly paid. Caltex is providing practical support to those employees such as helping them secure ongoing employment if possible as well as assisting them to pursue a claim against their former employer".

But it isn't as simple as that. If a franchisee is terminated and loses the value of the goodwill, it is hard to chase them down to repay workers as some of them will have nothing left except a big bank loan to repay for a business loan they took and no income to repay workers.

In addition, many workers are too afraid to come forward for fear of retribution.

Veritas chairman Tim Cook, however, on Tuesday detailed what he called the facts of the Mangere liquidation and his frustration with Jollands.

He said he could not comment on Jollands' claim the Mangere store had begun losing money in the years prior to its sale, other than that Leitch had a "very successful business" there.

But he ran through a series of phone calls, meetings and other dealings with Jollands, where the franchisor wanted to find a workable solution for the store's owner rather than put it in liquidation.

Other stores, such as one in Rotorua, had become one of its big successes after a "motivated" operator took it over using exactly the same business model.

Cook said they offered "an enormous amount of free help" to turn around the Mangere store, including bringing in a proven operator and free advertising.

The franchisee had admitted in those meetings the failure was his fault, and was a minority shareholder and manager before buying the store outright, Cook said.

But the next thing Cook knew, the store had gone into liquidation

Business Insider's Hollis Johnson tested the programme at a New York City McDonald's and paid US$10 for a burger with bacon, tomato, onions, cheddar cheese, guacamole, and two sauces, along with sides of fries and a drink. That's about twice the cost of a Big Mac meal. His meal took eight minutes to prepare.

Some franchisees also complained about the cost of the programme, and said it slowed down kitchen operations and targeted an upscale customer that McDonald's shouldn't be going after.

McDonald's decision to get rid of the full Create Your Taste menu and replace it with Signature Crafted Recipes should help solve some of these issues.

Signature Crafted Recipes has fewer options for customisation than Create Your Taste with bundled toppings that should make it easier for kitchens to handle. The company started testing it earlier this year.

Restaurant Brands, New Zealand's largest fast-food operator with 173 stores, is expanding into new markets to drive future earnings growth, opening new burger chain Carl's Jr in New Zealand and expanding into KFC in Australia where it has 42 stores. To improve profitability in its legacy businesses, the company has been refurbishing and adding to its local KFC outlets, exiting low-performing Pizza Hut stores and closing its worst performing Starbucks Coffee outlets.

"A while ago we looked at the growth potential for Restaurant Brands in New Zealand and it was in our view limited to a steady 'business as usual' growth of one or two KFCs per year, maybe one or two Pizza Huts per year, that sort of pace. The ability to grow rapidly with new brands as we have seen with Carl's Jr is a very slow path, and there's not many other brands that we could purchase or would be interested in purchasing to add step change," chief executive Russel Creedy told NBR's BusinessDesk. 

World Bank chief economist Paul Romer said simple rules for doing business were a sign that a government treated its people with respect.

'They yield direct economic benefits: more entrepreneurship, more market opportunities for women, more adherence to the rule of law.'

However, in a separate article a Wellington academic has warned that 'ease of doing business does not always equate to more business.'

Immigration Minister Michael Woodhouse today announced that there would be fewer residence approvals planned for the next two years to 85,000-95,000, down from 90,000-100,000.

'Increasing the points required to gain residence from 140 to 160 will moderate the growth in applications in the Skilled Migrant Category and enable us to lower the overall number of migrants gaining residence,' Woodhouse said.

'Changes to the Family Category, including temporarily closing the Parent Category to new applications, will also reduce the total number of migrants being granted residence.'

Around half of those approved under the residence programme came through the skilled migrant category.

As of April 1, employers have been required to state any agreed hours of work in an employer's contract.  They do not have to specify any set hours if both parties agree not to.

The current Restaurant Brands collective had a formula that hours were guaranteed at 80 per cent of the previous three months staff had worked. 

Employees will also be offered additional shifts when they become available up to a maximum of 40 hours a week, allowing the opportunity to build up stable, secure full-time employment.

While year-over-year sales dropped at several leading brands, the picture brightened further down the list as franchised brands reached new heights with record-breaking sales, significant gains in unit counts and an ongoing push into new corners of the globe.

Outside the eye-popping declines posted by the largest brands, our Top 200+ ranking confirms that, unequivocally, franchised brands continue to grab an ever-growing share of the American economy. This year’s top 200 companies produced a combined $596.1 billion in systemwide sales during 2015.

Based on total worldwide system sales, our ranking rewards systems for how much they sell in a given year, rather than how many units they build. With Hertz dropping out of the Top 200+ and replaced by RE/MAX, the five remaining brands in the top 10 all saw healthy increases during 2015. Burger King added $287 million in new sales, Ace Hardware was up $557 million, RE/MAX added $1.18 billion, Wendy’s gained $405 million and Marriott Hotels and Resorts added $400 million to its top line.

Veritas' share price has been severely impacted by the disappointing performance of the four acquisitions. It closed the 2014 year at $1.25, the 2015 year at $0.48 and hit a low of $0.15 on Thursday.

It has subsequently recovered to $0.23 but has a sharemarket value of only $10.0m compared with the purchase price of just over $74m for the four purchases.

Ironically, the original Salvus shareholders invested $20.1m in the company and received over 80 per cent of their capital back, while Veritas shareholders have invested $25m but these shares are worth less than 20 per cent of their issued price.

One of the results of rising house prices is that many people are using the increased equity in their homes to realise a dream and fund them into their own business. Franchises are particularly attractive to first-time business owners as they can be in business ‘for themselves, but not by themselves’. Having an established brand, proven business systems and specific training and support are all compelling reasons to choose a franchise.

Buying any business is a big decision that often requires a significant capital investment secured over the family home. It therefore demands careful scrutiny of the financial risks involved, as well as other factors such as family support, time commitment, relevant experience, your aptitude for business and your people skills.

The first step for any potential franchisee is to work out your personal equity or net worth so you can determine what franchise systems are realistically within your financial reach.

You can determine your personal equity by compiling a personal statement of financial position. This involves noting what you own – your large personal assets, such as your house or investment property – and deducting what debt you owe. The balance left over represents your personal equity. We suggest you only include assets valued at over $5,000.

In the example in figure 1, Arthur, our potential franchisee, has a house which has a current market value of $600,000, a car which has a current market value of $20,000, a redeemable life insurance policy with a current value of $10,000, and ... Read more

Pizza Hut slashed the prices of its pizzas in 2014 to compete with rival Dominos, with its cheapest pizzas selling for A$4.95 (now A$5 - NZ$5.15). The cheapest pizzas currently sell for NZ$5 throughout New Zealand.

After a group of franchisees failed to get an injunction to stop the price cuts going ahead, more than 280 franchisees from across Australia began a class action against Pizza Hut's then-owner Yum Restaurants in 2015, claiming its aggressive pricing policies were forcing mum-and-dad operators to the wall.

Gordon said once wages, rent, franchise costs, royalties, marketing and delivery costs were taken into account, it cost him A$5.50 (NZ $5.67) to make a A$4.95 (NZ $5.10) pizza.

An estimated 90 percent of franchisees claimed losses and business collapses as a direct consequence of orders they slash the price of pizzas by up to 50 per cent, to take market share from rivals.

The class action, initially led by Sydney franchisee Danny Diab​, alleged unconscionable conduct under the [Australian] franchising code.

While Diab walked away from the class action, concerned for the impact it was having on his family (he declined to speak about the case to Fairfax, citing a confidentiality agreement signed as part of the settlement), the rest stayed – and lost.

Yum defended the action and in March the Federal Court threw out the class action.

He said once the new ownership and management took control they began to implement significant multiple changes to all aspects of the business along with the core marketing strategies of Eagle Boys, and in his opinion, these changes were ultimately 'genocide' to the business’s franchisees.

This included increasing prices and an attempt to re-position the company as a gourmet pizza brand, which only resulted in alienating long term loyal customers.

According to Tom, Eagle Boys’ key family target market who was interested in its $20 value meal became alienated and sales started to decline rapidly.

He explained that gourmet food is only a small percentage of the overall take-away food market at 5%, while fast food accounts for 60%, budget food 25% and QSR (Quick Service Restaurants) 10%.

In Tom’s eyes, another major mistake that the new Eagle Boys management made was replacing its ‘2 minute guarantee or it’s free’ commitment by watering it down to ‘2 minute express when it’s available’, and discontinuing the marketing altogether, which resulted in stores falling behind the expected standard and customers waiting longer.

The Groove Train is described as an "urban dining experience" (think gastro bar), while Coffee Hit is an upmarket roasted coffee café (think Mojo).

[Master franchisees Brad Jacobs and Andy Lucas] have got an agreement in principle from the franchisor but are still assessing local franchisee demand for the more expensive The Groove Train which would have an upfront cost of about $1 million. They're also looking for suitable locations within shopping centres to get it started.

They've just signed another 10-year franchise with Minor DKL for The Coffee Club and plan to expand the chain to around 93 stores within the next seven to 10 years, mainly in regions outside of Auckland where most of their stores are based.

Veritas chairman Tim Cook said the company had been advised of the IRD action by the franchisee in Siverdale.

No outcome had been determined and wouldn't be until the hearing on Friday.

''Tax is a personal matter between the franchisee and IRD and as such neither Veritas nor Mad Butcher have any comment to make,'' Cook said.

''Once any outcome is known Veritas/Mad Butcher will determine what is required going forward.''

Configure Express managing director Greg Peters said gym requirements were changing and his business was following global trends.

People wanted shorter contracts and better availability, he said.

"The gym market has changed since we first set up and we were going in a different direction than other gyms."

Overseas the trend was for smaller gyms to feed into bigger gyms and he planned to open Configure 24 hours gyms to work alongside the Configure Express franchise.

There was still a market for female only gyms but his business had to make changes to be successful.

In some areas it was not possible for the gyms to follow the new direction, which led to closure and splits, he said.

The four former gyms on Willis St, Lambton Quay, Lower Hutt and Upper Hutt, have now rebranded as Revive Fitness.

Lambton Quay Revive Fitness general manager Sheree Cooper would not say why the company had left the franchise, citing a confidentiality agreement.

It would be business as usual for the gyms and members, she said.

Members were under contract with the owners of the gym and not the franchise, so their contacts would not change, she said. If they wanted to remain with the Configure franchise, she said members should speak to her on an individual basis.