Franchised Food Company would close down if Greens MP Adam Bandt’s franchising bill becomes law, according to the company’s chief executive, meaning the end of popular brands such as Cold Rock Ice Creameries and the loss of thousands of jobs.
Bandt has introduced a bill into parliament that would allow workers to recover lost wages from franchisors if negotiations break down with their franchisee employer.
The proposed legislation is in response to the 7-Eleven underpayments scandal, which has sent shockwaves through the franchising community and prompted the 24-7 convenience chain’s chair and chief executive to resign.
7-Eleven is scrambling to repair its relationship with franchisees, with a meeting between Victorian franchisees and head office held at Melbourne’s Convention Centre on Monday.
Bandt says his bill would help avoid widespread worker exploitation and stop head offices from turning a “blind eye” to what happens under their brand name.
However, franchising experts have said the bill would be a “kiss of death” for smaller franchises if it becomes law.
Franchised Food Company chief executive Stan Gordon told SmartCompany the bill would cause untold damage to small franchises if it receives the support of the government.
“If it goes up, Mr Bandt can take responsibility for the loss of about 5000 jobs because I’ll close down,” Gordon says.
“It’s as simple as that. I couldn’t take the responsibility for my franchisee’s wages and my insurance companies wouldn’t do that. Even if we were to put in a central payroll system, if we don’t get the right information we don’t know how it would work.”
The Franchised Food Company operates the Cold Rock brand, as well as other brands such as Mr Whippy, Nutshack, Pretzel World, Trampoline and Europa Coffee.
Gordon says Bandt’s bill won’t actually solve the problem of worker underpayment and will instead defer a franchisee’s responsibility to correctly pay their workers to head office.
“It’s a mess,” Gordon says.
“If a franchisor has to take responsibility for an incorrect payment, it won’t work. The whole franchising model falls apart. I’m sure my views would be shared by larger organisations.”
Bandt told SmartCompany Gordon has “fundamentally misunderstood” his bill.
“Under my bill, the franchisee remains primarily liable for any underpayments to its employees,” Bandt says.
“What the bill does is allow any underpaid employee who can’t get satisfaction from their employer to then go to head office. Head office meets the underpayment and then can pursue the franchisee for that amount.”
Bandt says if the bill becomes law, franchisors could still protect themselves through their franchise agreements through a provision that indemnifies head office of any underpayments.
“Head office will still have many ways of ensuring franchisees don’t leave them exposed, but fewer incentives to turn a blind eye to what’s happening in stores that carry their name,” Bandt says.
*This story was updated at 12.10pm to include comments from Adam Bandt
Broede Carmody is a former senior SmartCompany reporter. Before this, he was a co-editor of RMIT University’s student magazine Catalyst.
