There were two major developments in retail this week which show just how volatile our sector can be, and how challenging the environment remains for retail business owners. The first was the seemingly inevitable announcement that the Masters hardware chain would close its doors before the end of the year. Although it can be argued that the Australian market simply was too crowded for this additional large-format player, it also points to ongoing softness in consumer and household spending.
It’s disappointing to see the jobs of 7,700 Masters employees on the line, but on the positive side, there may be some space for small and independent stores to claw back some of their previous market share.
This week also saw the 7-Eleven chain announce it will roll out of number of high-tech initiatives across franchised stores to help ensure compliance with Modern Award and student visa requirements. These include finger print scanners that will be used when staff clock on and off, to ensure accurate record keeping. It will be interesting to see how the Australian market embraces this technology.
The 7-Eleven Chairman also made a case in The Financial Review for more power for franchisors to expel rogue operators, and even to take over management of their franchisees’ payrolls – in order to protect the franchise brand and reputation from problems such as those faced by 7-Eleven.
The NRA would be happy to have a look at a detailed proposal, but we would be very concerned about a significant diminution of franchisee rights, particularly to the point where small businesses could effectively see their business taken from them by franchisors, with no recourse.
In the first instance, we believe that the overwhelming majority of business owners do meet all their obligations. Secondly, we also know that the system is complex and it is easy to make a mistake. We wouldn’t want to see heavy-handed punishment of franchisees for unintentional errors.
And finally, we need to bear in mind that the 7-Eleven case was the result of a range of factors, not all of which were the responsibility of the individual operators. So we feel it would be unfair for all franchise owners across Australia to pay the penalty for the actions of a small number of people.
7-Eleven has also proposed relaxing employment limits for student visas, saying the current visa rules create the conditions for foreign students to be exploited. There is some logic to this argument, but we are experiencing very high youth unemployment across Australia right now, and it would be hard to argue that there is a need for overseas workers to fill a market vacancy.
In both cases, there is sufficient power for the Fair Work Commission and Ombudsman to check and enforce the correct wages and entitlements for student workers. Perhaps what is needed more is a culture within the industry of businesses being committed to doing the right thing by their workers. To its credit, this is what 7-Eleven seems to be striving for.
But arguably this could be better achieved through the leadership of a large corporate player such as 7-Eleven, rather than by changing the rules of the game for franchise owners and the entire sector. When there are large businesses such as Masters and Dick Smith falling over, more regulation and red tape is rarely the answer.
Have a great week.
Dominique Lamb, CEO