tag:theconversation.com,2011:/ca/topics/franchisees-24489/articlesFranchisees – The Conversation2023-11-16T03:49:51Ztag:theconversation.com,2011:article/2177772023-11-16T03:49:51Z2023-11-16T03:49:51ZIs Jim’s Beauty set to flop like Harley-Davidson perfume – or could it be branding genius?<figure><img src="https://images.theconversation.com/files/559824/original/file-20231116-21-h90pdi.png?ixlib=rb-1.1.0&rect=745%2C166%2C1774%2C942&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://jimpenman.com.au/">Jim Penman</a>, <span class="license">Author provided</span></span></figcaption></figure><p>Jim’s Group – best known for <a href="https://www.jimsmowing.com.au/">Jim’s Mowing</a> and <a href="https://jimsplumbing.com.au/">Jim’s Plumbing</a> – this week announced a surprising brand extension. </p>
<p>It’s <a href="https://jimsbeauty.net.au/">Jim’s Beauty</a>, offering “professional beauty treatments in the comfort of your chosen space”.</p>
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<p>It’s surprising because Jim’s Group got its start mowing lawns, then extended into <a href="https://jims.net/services/">related businesses</a>, including dog washing, pest control and roofing.</p>
<p>These services are usually offered in the client’s home, and are provided by franchisees, as will the beauty services – which will include facial, lash and brow and nail treatments, as well as waxing and teeth whitening.</p>
<p>It isn’t a joke, although it has been greeted on social media as one, and was once the plot of a TV <a href="https://youtu.be/BtkS0TGaMBc?si=xfUr6kCTC2OcoRhm">comedy sketch</a>. </p>
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<h2>Brand extensions are nothing new</h2>
<p>Brands often try to extend their “<a href="https://www.investopedia.com/terms/h/halo-effect.asp">halo</a>” to cover other fields, hoping to capitalise on goodwill and stay relevant in a changing world.</p>
<p>Fast food giant McDonald’s is a leader, introducing <a href="https://franchiseexecutives.com.au/mcdonalds-celebrates-30-years-of-mccafe/">McCafes</a> in 1993, salads and wraps in the 2000s, and more recently adding plant-based and vegan meals.</p>
<p>Coles and Woolworths have diversified into just about every product there is by selling their own generic home brands. </p>
<p>This has allowed them to undercut other brands and get more margin – a strategy that is paying off as consumers become more stretched, allowing Coles to increase home brand sales <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02730324-3A629171?access_token=83ff96335c2d45a094df02a206a39ff4">9.4%</a> and Woolworths <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02729605-2A1482720?access_token=83ff96335c2d45a094df02a206a39ff4">7.8%</a> over the past year.</p>
<p>Even their <a href="https://pitchgrade.com/companies/coles-group">delivery services</a> can be thought of as brand extensions. Away from their physical stores, they are offering <a href="https://www.healthylife.com.au/">telehealth</a>, <a href="https://www.woolworths.com.au/shop/discover/insurance">insurance</a>, <a href="https://mobile.everyday.com.au/">mobile phone plans</a>, <a href="https://giftcards.woolworths.com.au/">gift cards</a>, and <a href="https://atwork.woolworths.com.au/">deliveries at work</a>.</p>
<h2>It works where there’s brand alignment</h2>
<p>Brand extensions work where there is <a href="https://www.forbes.com/sites/paultalbot/2018/07/31/a-brave-new-world-of-brand-alignment/?sh=6afb95654dbc">brand alignment</a> – where the extension is true to the image of the brand and doesn’t devalue it. </p>
<p>Among some of the most <a href="https://www.linkedin.com/advice/3/what-some-examples-brand-innovation-extension-failures">infamous failures</a> are
<a href="https://www.rideapart.com/news/253742/the-rise-and-fall-of-harley-davidson-perfume/">Harley-Davidson perfume</a>, <a href="https://bradburybrandexperts.com/brand-over-extension-bics-disposable-pantyhose-and-why-it-never-caught-on/">Bic underwear</a> and <a href="https://patriciagsoto.medium.com/yogurt-is-not-the-answer-cosmos-most-confusing-product-failure-2d863e459389">Cosmopolitan yogurt</a>.</p>
<p>Sometimes the extreme strangeness of an extension can create a buzz around a faded company, even if its sales bomb.</p>
<p>Cadbury briefly introduced <a href="https://twitter.com/CadburyAU/status/596155604361613314">Vegemite chocolate</a> in 2015, but then said it hadn’t been serious. What it had wanted to do was to “<a href="https://www.adnews.com.au/news/mondelez-marketing-boss-comes-clean-on-cadbury-vegemite">generate talk</a>” about rediscovering favourite flavours.</p>
<h2>Jim’s could fill a gap in the beauty market</h2>
<p>Industry researcher <a href="https://my.ibisworld.com/au/en/industry/f3722/performance">IBISWorld</a> says Australia’s beauty industry is characterised by “market saturation and the wholehearted acceptance of its products by consumers”, which isn’t a good sign for Jim’s.</p>
<p>But IBISWorld says sales of beauty products are overwhelmingly through physical stores with “new channels” (mainly online) accounting for only 13.8% – which suggests there is room for growth in face-to-face sales aligned with services.</p>
<p>Jim Penman started Jim’s Mowing as a side business in <a href="https://jimsmowingmelbourne.com.au/history-of-jims-mowing/">1982</a> while studying for a PhD in history. He turned it into a franchise in 1989 and then extended the idea to franchises including Jim’s Cleaning, Jim’s Building Inspections, Jim’s Fencing, Jim’s Antennas, Jim’s Pest Control and Jim’s Dog Wash. </p>
<p>A blog on a Jim’s Group website describes it as a “<a href="https://jimsmowingmelbourne.com.au/history-of-jims-mowing/">go-to for a plethora of services</a>”. But they are all associated with the guy who used to have the beard – the tradie.</p>
<p>His success, or failure, in moving into beauty will help answer one of the enduring questions in business strategy: just because you can, does that mean you should?</p><img src="https://counter.theconversation.com/content/217777/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Many thought Jim’s Beauty – branded with a bearded tradie – was a social media joke. But don’t bank on it failing: sales data shows there may be a gap in the market for at-home beauty services.Edwina Luck, Senior Lecturer QUT Business School, Advertising, Marketing and Public Relations, Queensland University of TechnologyNicholas Grech, Sessional Academic and PhD Candidate, Queensland University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2067902023-06-01T10:25:47Z2023-06-01T10:25:47ZFast X review: proof that there’s method in the madness of the Fast & Furious franchise<p>There’s a scene in the latest Fast & Furious film, <a href="https://www.youtube.com/watch?v=eoOaKN4qCKw">Fast X</a>, where Aimes (<a href="https://fastandfurious.fandom.com/wiki/Alan_Ritchson">Alan Ritchson</a>) – the government agent tasked with apprehending Dom (Vin Diesel) and his crew – gives a rundown of the heroes’ backstory:</p>
<blockquote>
<p>Let’s start back at the beginning … Los Angeles, 2001 … Humble roots, local kids … Street racers who became hijackers … Graduated to high-speed smuggling, mobile jailbreaks, train robberies … If it could be done in a car, they did it … If it violates the laws of God and gravity, they did it twice.</p>
</blockquote>
<p>On one level, the scene is a recap reel. Monitors inside Aimes’ hi-tech HQ play clips from the <a href="https://www.fastxfamily.com/">Fast family’s</a> biggest stunts. These clips are designed to initiate casual viewers into the Furious-verse, helping them to make sense of what’s to come.</p>
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<figcaption><span class="caption">The trailer for Fast X.</span></figcaption>
</figure>
<p>On another level, it’s a knowing wink to “ride or die” fans. The scene addresses audiences who’ve followed the franchise throughout its 22-year history, a period in which Fast & Furious has undergone so many <a href="https://deadline.com/2011/04/fast-five-will-transition-franchise-from-street-racing-to-heist-action-125552/">transformations</a> that the latest entries can feel unrecognisable from the first film.</p>
<p>When Aimes talks about “humble roots” in Fast X, therefore, he’s also referring to the franchise as a whole. It began with 2001’s <a href="https://www.youtube.com/watch?v=2TAOizOnNPo">The Fast and the Furious</a>, a mid-budget crime film about street racing which featured a cast of relative unknowns.</p>
<p>In the ten sequels that followed before this latest edition, the franchise grew exponentially, rebranding as <a href="https://screenrant.com/fast-furious-saga-movies-franchise-name-meaning-change-explained/">the Fast Saga</a> and evolving to become a series of star-studded global adventures in the Mission: Impossible mould. </p>
<p>This evolution brought greater commercial risks and rewards. The Fast Saga is one of the <a href="https://www.cbr.com/most-profitable-movie-franchises-ever/">top-ten highest grossing film franchises of all time</a>, and Fast X cost an estimated <a href="https://www.slashfilm.com/1106938/the-fast-x-budget-rises-to-340-million-making-it-potentially-the-fourth-most-expensive-movie-of-all-time/">US$340 million</a> (£275 million) to produce.</p>
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<figcaption><span class="caption">Han fights Shaw in a clip from Fast X.</span></figcaption>
</figure>
<p>By now, the franchise’s unlikely trajectory is so well known that recent films have incorporated meta commentary on their own ridiculousness. This is best illustrated in F9’s (2021) running gag where Roman (Tyrese Gibson) wonders whether the heroes may be invincible.</p>
<p>Fast X is the latest pitstop on this journey. It’s a logical extension of the Fast Saga’s illogical, gravity-defying melodrama, where every set-piece and plot twist furthers the extravagant myth of Dom and his family.</p>
<h2>Retcons and resurrections</h2>
<p>The latest film (the first of <a href="https://ew.com/movies/vin-diesel-announces-fast-x-will-be-2-movies/">two volumes</a> that will draw the Fast Saga to a close) continues the tradition of <a href="https://www.looper.com/1292152/every-major-fast-character-returned-from-dead-so-far/">bringing back fan favourites</a>. This is something the Fast films do with an alarming disregard for narrative coherence. In this sense, Fast X feels like an attempt to rationalise the messy timeline that emerged out of the unusual choices of earlier films.</p>
<p>That timeline began in <a href="https://www.youtube.com/watch?v=k98tBkRsGl4">Fast & Furious</a> (2009) – the confusingly titled fourth film – where the opening sequence revealed the surprise return of Han (Sung Kang), a character who died in the previous instalment, <a href="https://www.youtube.com/watch?v=p8HQ2JLlc4E">Tokyo Drift</a> (2006).</p>
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<figcaption><span class="caption">Han returns in F9.</span></figcaption>
</figure>
<p>Han appeared again in <a href="https://www.youtube.com/watch?v=vcn2GOuZCKI">Fast Five</a> (2011) and <a href="https://www.youtube.com/watch?v=dKi5XoeTN0k">Fast & Furious 6</a> (2013). A <a href="https://www.youtube.com/watch?v=ZIO_9mjHR8A">mid-credits scene</a> in the sixth film seemed to confirm Han’s exit by replaying his death and revealing that it was at the hands of new villain, Deckard Shaw (Jason Statham).</p>
<p>The decision to <a href="https://en.wikipedia.org/wiki/Retroactive_continuity">retcon</a> Han’s demise and then fold it into the events of <a href="https://www.youtube.com/watch?v=Skpu5HaVkOc">Furious 7 </a>(2015) established a strange chronology where the fourth, fifth and sixth films take place (in story terms) before Tokyo Drift.</p>
<p>The screenwriters <a href="https://uproxx.com/movies/the-fast-and-the-furious-tokyo-drift/">have acknowledged</a> this <a href="https://post45.org/2022/11/refusing-narrative-time-as-grief-practice/">disregard for linear time</a>, joking: “Look, the timeline is … you know … it’s one-two-four-five-six-three-seven, right?”</p>
<p>Since then, Han has been resurrected once more in <a href="https://www.youtube.com/watch?v=aSiDu3Ywi8E">F9</a>, where it’s revealed that his death in Tokyo was an elaborate hoax. In Fast X, he finally reunites with Shaw, giving Han a chance to get revenge against the man who appeared to kill him four films ago.</p>
<h2>An outlaw franchise</h2>
<p>With the number of once-dead characters that populate the Fast Saga, viewers could be forgiven for thinking that many of its major plot points are introduced on a whim, <a href="https://ew.com/movies/vin-diesel-says-fast-x-might-be-a-3-part-trilogy-now/">dreamed up by co-producer Vin Diesel during interviews</a>. But there’s method in the madness, a consistent inconsistency which has allowed the saga to carve out its own niche.</p>
<p>The seemingly chaotic nature of the Fast Saga’s development is central to its appeal. Reflecting on its unlikely trajectory, <a href="https://www.bbc.com/culture/article/20210624-f9-and-how-the-fast-furious-films-define-the-21st-century">critics</a> often observe that the franchise has an off-the-cuff feel. This distinguishes it from more <a href="https://muse.jhu.edu/pub/34/article/805897/summary?casa_token=0warJlKXALUAAAAA:u1OzUxxpJ2M6_PIK_pzZF_SHckYZ0eI7bYfRl1_W-KaBV-3zQ3W5aPKdnp8F-j4tFHstxT09Nw">meticulously planned franchises</a>, such as the Marvel Cinematic Universe, where every sequel and spin-off is mapped out years in advance to try to maximise the brand.</p>
<p>This long-term planning can sometimes be a weakness, leaving such franchises less able to adapt to fan responses. In contrast, the Fast Saga has often shown a fleet-footedness in its engagement with audience demands. </p>
<p>After all, Han was only included in the fourth film after test screenings for Tokyo Drift showed he was a hit with fans, while his resurrection in F9 was a direct response to the <a href="https://news.yahoo.com/fast-9-director-justin-lin-020914357.html?guccounter=1">#Justice4Han campaign</a> that emerged on social media.</p>
<p>With its elaborate plot twists, surprise cameos and callbacks to previous films, Fast X is enjoyed best as a road trip through <a href="https://www.bloomsbury.com/uk/fullthrottle-franchise-9781501378904/">the franchise’s messy history</a>. It’s a reminder that the franchise’s route to the blockbuster A-list has been unconventional. Like Dom’s family of street racing <a href="https://post45.org/2022/11/wheel-men-the-blue-collar-masculinities-of-the-fast-saga/">outlaws</a>, the Fast Saga continues to play by its own rules.</p><img src="https://counter.theconversation.com/content/206790/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Joshua Gulam is co-editor (with Fraser Elliott and Sarah Feinstein) of Full-Throttle Franchise (Bloomsbury 2023), a book which brings together a range of scholars to explore not only the style and themes of Fast & Furious, but also its broader cultural impact and industry legacy.</span></em></p><p class="fine-print"><em><span>Dr Sarah Feinstein is a co-editor (with Joshua Gulam and Fraser Elliott) of Full-Throttle Franchise (Bloomsbury 2023), a book which brings together a range of scholars to explore not only the style and themes of Fast & Furious, but also its broader cultural impact and industry legacy.</span></em></p><p class="fine-print"><em><span>Fraser Elliott does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The seemingly chaotic nature of the Fast Saga’s development is central to the Furious-verse’s appeal.Joshua Gulam, Senior Lecturer in Film, Liverpool Hope UniversityFraser Elliott, Lecturer in Film, Exhibition and Curation, The University of EdinburghSarah Feinstein, Lecturer in Heritage Studies and Cultural Industries, University of LeedsLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1795052022-03-18T10:12:46Z2022-03-18T10:12:46ZLasso-ing Chelsea FC? Why super-rich US sports owners are looking to buy a London soccer team<figure><img src="https://images.theconversation.com/files/452894/original/file-20220317-23-1ulw0kg.jpg?ixlib=rb-1.1.0&rect=0%2C208%2C2102%2C1168&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Putting the Blues in the red, white and blue.</span> <span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/chelsea-fan-in-a-stars-and-stripes-hat-cheers-on-his-team-news-photo/681569006?adppopup=true">Bradley C Bower/EMPICS via Getty Images</a></span></figcaption></figure><p>Ted Lasso, the story of an American football coach bringing his unique management skills to a fictional soccer club in West London, has <a href="https://www.imdb.com/title/tt10986410/">entertained TV viewers since 2020</a>. It now appears that some investors stateside are looking to experience this close up by buying a real English Premier League club in West London: Chelsea FC.</p>
<p>For the fictional Lasso, swap in the very real Ricketts family. The Chicago Cubs owners have joined up with hedge fund billionaire Ken Griffin to bid for the club and have <a href="https://www.skysports.com/football/news/11668/12572802/chelsea-sale-ricketts-family-fly-to-london-as-race-to-buy-the-blues-hots-up">flown to London</a> to meet with Chelsea stakeholders.</p>
<p>Meanwhile, Woody Johnson, owner of the New York Jets and a former Ambassador to the U.K., also <a href="https://www.si.com/soccer/chelsea/news/report-woody-johnson-makes-big-solo-offer-for-chelsea-as-raine-review-takeover-offers">reportedly threw his hat into the ring</a>.</p>
<p>The fire sale of the club is part of the fallout from the unprovoked Russian invasion of Ukraine. The current owner is the <a href="https://www.nytimes.com/2022/03/11/world/europe/roman-abramovich-russian-oligarch-sanctions.html">Russian oligarch Roman Abramovich</a>. Facing pressure over his links to Vladimir Putin, he promised <a href="https://www.forbes.com/sites/annakaplan/2022/03/02/russian-billionaire-roman-abramovich-to-sell-chelsea-fcdonate-proceeds-to-help-victims-in-ukraine/?sh=7a7129ca44a0">to sell the club and donate the proceeds for Ukraine relief</a>. Then the U.K. government froze his assets and imposed conditions on the sale process to <a href="https://bleacherreport.com/articles/10029291-roman-abramovichs-assets-frozen-needs-uk-governments-permission-to-sell-chelsea">make sure there was no impropriety</a>. The expected price tag for the club is <a href="https://www.nbcsports.com/chicago/cubs/cubs-ricketts-family-ken-griffin-make-joint-bid-chelsea-fc">in excess of US$3 billion</a>.</p>
<p>But why are Americans so interested in the fire sale of this club? </p>
<p>Chelsea is one of the best known soccer clubs in the world and current holder of Europe’s prestigious <a href="https://www.theguardian.com/football/2021/may/29/manchester-city-chelsea-champions-league-final-match-report-kai-havertz">Champions League trophy</a>, which the team also won in 2012. Chelsea is a five-time champion of the English Premier League (EPL). </p>
<p>But the interest is driven not so much by what Chelsea has been, as what it might become. The EPL is already the <a href="https://bleacherreport.com/articles/1948434-why-the-premier-league-is-the-most-powerful-league-in-the-world">dominant soccer league on the planet</a>, and it might plausibly go on to become the dominant league across all sports – a kind of NFL Global if you will. And that makes Chelsea, one of the league’s biggest clubs, a very attractive prospect. Its location in one of London’s most fashionable districts also helps, even if the <a href="https://www.football.london/chelsea-fc/news/chelsea-new-stadium-stamford-bridge-19601375">stadium itself could do with an upgrade</a>.</p>
<h2>An open goal …</h2>
<p>This interest of American investors in English professional soccer is not new. In fact, it can be dated to 1998 when, temporarily, Manchester United became <a href="http://news.bbc.co.uk/2/hi/sport/football/543805.stm#:%7E:text=Nine%20British%20clubs%20in%20total,did%20not%20win%20any%20trophies.">the world’s most valuable sports team</a>.</p>
<p>The flood of TV money that started to <a href="https://www.statista.com/statistics/385002/premier-league-tv-rights-revenue/">swell the coffers of England’s top teams from the early 1990s</a> piqued interest in the U.S. and led to a series of acquisitions.</p>
<p>By 2005, the Glazer family, owners of the Tampa Bay Buccaneers, had <a href="https://www.goal.com/en-us/news/who-owns-manchester-united-who-are-the-glazer-family/18j8f1yu1tliv1hrp93zeffh7n">acquired Manchester United</a>. A couple of years later, St. Louis Rams owner Stan Kroenke <a href="https://www.football.london/arsenal-fc/news/how-much-money-stan-kroenke-17273593">started buying shares in</a> London club Arsenal, eventually taking overall control. In 2010, Boston Red Sox owner John Henry <a href="https://bleacherreport.com/articles/483802-liverpool-sold-after-years-of-uncertainty-to-boston-red-sox-owner-john-henry">purchased Liverpool</a>. </p>
<p>For those already super-rich individuals, the move into soccer has paid off. Between 2004 and 2021, the value of these three clubs plus Chelsea increased from <a href="https://www.forbes.com/forbes/2004/0412/126tab.html?sh=761f8fa23425">$2.5 billion</a> to <a href="https://www.forbes.com/sites/mikeozanian/2021/04/12/the-worlds-most-valuable-soccer-teams-barcelona-on-top-at-48-billion/?sh=7618731916ac">$14.3 billion</a>, a healthy 11% compound average growth rate.</p>
<p>While Europe’s Champions League gives these clubs international exposure – the final of that competition in 2020 <a href="https://www.goal.com/en-us/news/super-bowl-vs-world-cup-champions-league-viewing-figures/blte47db8809dbd0a6d">pulled in 328 million viewers worldwide</a> – it’s the global reach of the English Premier League that makes its clubs attractive in the long term. The EPL now generates over 50% of its broadcast revenues from <a href="https://www.premierleague.com/news/970151">overseas contracts</a>. It recently signed a <a href="https://theathletic.com/news/premier-league-agrees-new-six-year-us-tv-deal-worth-more-than-two-billion/GJhr8eHhi3ke/">$2.7 billion contract</a> for the U.S., even though most games air on weekend mornings, meaning people living on the West Coast having to wake up at 4 a.m. to catch some games.</p>
<p>There is almost no country in the world where you cannot get access to EPL games. While Spain’s La Liga and Germany’s Bundesliga are popular, they lag far behind in <a href="https://www2.deloitte.com/uk/en/pages/sports-business-group/articles/annual-review-of-football-finance.html">revenues and reach</a>, and no other league generates even half the revenues of the EPL. </p>
<h2>… or an own goal?</h2>
<p>But acquiring an English soccer club is not without risk. The <a href="https://theconversation.com/the-ups-and-downs-of-european-soccer-are-part-of-its-culture-moving-to-a-us-style-closed-super-league-would-destroy-that-159316">promotion and relegation system</a>, in which the bottom three teams in the EPL annually go down a division to the less glamorous second-tier Championship, means that teams that fail to win on the pitch are threatened with commercial as well as sporting failure, as several American owners learned the hard way.</p>
<figure class="align-center ">
<img alt="A supporter holds aloft a corner flag while another holds a sign saying 'Glazer out.'" src="https://images.theconversation.com/files/452899/original/file-20220317-12943-1bgknar.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/452899/original/file-20220317-12943-1bgknar.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/452899/original/file-20220317-12943-1bgknar.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/452899/original/file-20220317-12943-1bgknar.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/452899/original/file-20220317-12943-1bgknar.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/452899/original/file-20220317-12943-1bgknar.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/452899/original/file-20220317-12943-1bgknar.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Supporters protest against Manchester United’s owners, the Glazer family.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/supporters-protest-against-manchester-uniteds-owners-inside-news-photo/1232648557?adppopup=true">Oli Scarff/AFP via Getty Images</a></span>
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<p>Before John Henry and the Fenway Sports Group bought Liverpool, the club was <a href="https://www.liverpoolecho.co.uk/sport/football/football-news/liverpool-george-gillett-tom-hicks-19947788">briefly owned by two other Americans</a>, Tom Hicks and George Gillett, who nearly drove the club into ruin before selling it.</p>
<p>Randy Lerner, the billionaire who once owned the Cleveland Browns, bought Aston Villa FC in 2006 with hopes of bringing success back to a storied team situated in the U.K’s second-largest city, Birmingham. But he decided to <a href="https://www.forbes.com/sites/mikeozanian/2016/05/18/randy-lerner-suffers-400-million-loss-with-sale-of-aston-villa/">sell a decade later</a> after the club was relegated from the EPL, losing a large chunk of TV revenue in the process.</p>
<p>Similarly, American businessman Ellis Short bought Sunderland AFC in 2008 and <a href="https://www.theguardian.com/football/2018/apr/29/chris-coleman-sackedd-manager-sunderland">sold it in 2018</a> following relegation in that year.</p>
<p>Chelsea’s neighbor Fulham FC – the two teams’ stadiums are only a mile apart – was purchased by Jacksonville Jaguars owner Shahid Khan in 2013, but the club <a href="https://apnews.com/article/jacksonville-jaguars-premier-league-europe-soccer-nfl-a00ffa7a55925ff226842a9dfb75f222">was immediately relegated</a>. And in 2017, former Disney CEO Michael Eisner <a href="https://www.bbc.com/sport/football/40789323">bought Portsmouth FC</a> – a famous team languishing in the third tier of English football, where it remains today.</p>
<h2>Moving the goal posts?</h2>
<p>Because of the financial and sporting risks of relegation from the English Premier League, successful clubs must continually invest in talent, making it hard to generate profit.</p>
<p>In the past five years, based on the club’s <a href="https://find-and-update.company-information.service.gov.uk/company/04784127/filing-history">audited financial statements</a>, Chelsea has reported a cumulative net loss of £227 million ($299 million) on revenues of £2.166 billion ($2.85 billion). The accounts also show that this can be attributed to player wage costs, which have averaged 65% of revenues over the past five seasons, and reached 77% of revenues in the 2020/21 season, when COVID-19 kept fans out of the stadium.</p>
<p>The obvious solution for big clubs like Chelsea is to limit risk by abolishing the promotion and relegation system and then instituting salary caps and other restrictive measures employed in U.S. leagues. </p>
<p>However, when the big clubs proposed something along these lines in 2021 – the ill-fated European Super League – the <a href="https://www.espn.com/soccer/blog-espn-fc-united/story/4366927/super-league-collapses-how-fan-reactionrevolt-helped-end-english-clubs-breakaway">opposition from fans was so intense</a> that the clubs were forced to back down.</p>
<p>American owners frequently mention a steep learning curve when describing the acquisition of an English soccer club. The attractions are easy to see, the pitfalls are perhaps a little less obvious to the untrained eye.</p>
<p>[<em>More than 150,000 readers get one of The Conversation’s informative newsletters.</em> <a href="https://memberservices.theconversation.com/newsletters/?source=inline-140K">Join the list today</a>.]</p><img src="https://counter.theconversation.com/content/179505/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stefan Szymanski does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The deadline for formal bids to buy Chelsea FC is March 18. Expect some very rich US businessmen to be in the running.Stefan Szymanski, Professor of Sport Management, University of MichiganLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1210382019-07-30T20:03:17Z2019-07-30T20:03:17ZShocking yet not surprising: wage theft has become a culturally accepted part of business<figure><img src="https://images.theconversation.com/files/285962/original/file-20190729-43140-af6jqk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Australia's Fairwork Ombudsman found wage theft in 45% of its audits In food services. </span> <span class="attribution"><span class="source">www.shutterstock.com</span></span></figcaption></figure><p>Many Australians are shocked by celebrity chef George Calombaris being caught for underpaying employees A$7.8 million. It didn’t help, of course, that the television personality was also reported to be <a href="https://www.abc.net.au/news/2019-07-24/masterchef-george-calombaris-matt-preston-gary-mehigan/11341090">seeking a huge pay rise</a> for appearing in the television program MasterChef Australia.</p>
<p>But what should not be a surprise is the prevalence in Australia of wage theft – typically underpaying award rates and entitlements such as overtime, superannuation and penalty rates. </p>
<p>Calombaris is not alone. In recent years there have equally large cases of wage theft involving household brand names such as <a href="https://www.smh.com.au/business/companies/76-percent-of-audited-caltex-franchises-found-to-be-underpaying-workers-20180305-p4z2u9.html">Caltex</a>, <a href="https://www.smh.com.au/business/workplace/7eleven-compensation-bill-climbs-over-110-million-20170612-gwpdfx.html">7-Eleven</a>, <a href="https://www.smh.com.au/business/companies/wage-fraud-pizza-hut-hit-with-fines-20170127-gtzrbx.html">Pizza Hut</a> and <a href="https://www.smh.com.au/business/companies/investors-savage-dominos-pizza-as-union-call-for-wage-theft-royal-commission-into-wage-fraud-20170215-gudnm5.html">Domino’s Pizza</a>. </p>
<p>The Australian Taxation Office estimated that in 2014-2015 Australian workers had been short-changed A$2.5 billion on superannuation payments alone . </p>
<p>Workplace audits by the federal Fair Work Ombudsman over the past decade suggest <a href="https://mckellinstitute.org.au/app/uploads/McKell-Ending-Wage-Theft.pdf">wage theft</a> is rising. Most vulnerable are the young, the low-skilled and <a href="https://www.mwji.org/highlights/2017/11/14/report-released-wage-theft-in-australia-findings-of-the-national-temporary-migrant-work-survey">temporary migrants</a>. </p>
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Read more:
<a href="https://theconversation.com/weve-let-wage-exploitation-become-the-default-experience-of-migrant-workers-113644">We've let wage exploitation become the default experience of migrant workers</a>
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<p>And the sector where wage theft appears most common: food services (evident in more than 45% of audits). </p>
<h2>Structure, culture, enforcement</h2>
<p>The evidence points to wage theft being more associated with certain types of business structures. In particular, <a href="https://www.afr.com/news/policy/industrial-relations/caltex-pays-57m-to-workers-for-underpayments-20180914-h15dvo">franchise operations</a>, <a href="https://www.abc.net.au/news/2018-02-14/woolworths-cleaners-underpaid-tasmanian-inquiry-finds/9444916">outsourcing</a>, <a href="https://engage.vic.gov.au/inquiry-labour-hire-industry-and-insecure-work">insecure work</a> and the <a href="https://theconversation.com/redefining-workers-in-the-platform-economy-lessons-from-the-foodora-bunfight-107369">gig economy</a>. </p>
<p>Calombaris has had a hard time denying he knew what happened in his companies. Bigger brands have gotten away with minimising costs through supply-chain arrangements where there’s exploitation somewhere along the line. It’s the very same problem that enables modern slavery to flourish around the world. These companies can deny responsibility because they have no direct legal obligations. </p>
<p>The problem isn’t just structural. It is also cultural. </p>
<p>Wage theft seems to have become accepted as a fact of life, maybe even a necessity, in certain sectors and workplaces. As a result, employers have developed a sense of impunity, while workers have become resigned to underpayment as unavoidable. </p>
<p>More than three-quarters of international students and backpackers, for example, know they’re being <a href="https://www.mwji.org/highlights/2017/11/14/report-released-wage-theft-in-australia-findings-of-the-national-temporary-migrant-work-survey">underpaid but accept it</a> because they believe it’s standard treatment for anyone on their type of visa. </p>
<p>Cultural acceptance translates into weak enforcement rules. Wage theft is not considered a criminal offence, in the same way as stealing money from a company. Those caught face low penalties. Calombaris, for example, has to pay his employees what they are owed, but his penalty is limited to a $200,000 “contrition payment”). </p>
<h2>Finally, a reform agenda</h2>
<p>In this context – practices and attitudes making wage theft rampant – the only positive thing about Calombaris’ case is that, combined with other high profile cases, it has triggered enough outrage to make politicians get serious about reform.</p>
<p>The federal government has indicated it will propose new laws to make wage theft <a href="https://www.hcamag.com/au/specialisation/employment-law/employers-could-face-jail-time-under-new-laws/173789?utm_source=hs&utm_medium=20190726&utm_campaign=WHCA-Newsletter&utm_content=BC916A1A-A48B-418D-B07F-20CE2BCCB6D2&tu=BC916A1A-A48B-418D-B07F-20CE2BCCB6D2&_hsenc=p2ANqtz-_mMsE6xajfDkvMf36-1gUYkihUwgrylR6DTHCDf_CB_ln2dzGxQxKlqGfAeASc83mFFZ6A8fgCLSD0BmY1oBMPc2Ev6Q&_hsmi=75064392">a criminal offence</a>, punishable with prison time.</p>
<p>Along with tougher laws, more resources for enforcement are also needed. </p>
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Read more:
<a href="https://theconversation.com/five-myths-about-the-informal-economy-that-need-debunking-117612">Five myths about the informal economy that need debunking</a>
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<p>Other reforms could help too. Supply chain certification, similar to the schemes used to guarantee fairtrade coffee or sustainably caught fish, are an example. The Fairwork Ombudsman has partnered with business and unions to create a pilot certification scheme for the cleaning industry. </p>
<p>Modern slavery legislation now requires large companies to report on their efforts to keep their supply chains slave-free. Acceptance of such reporting obligations could pave the way for the expectation that companies more attention to stamping out all forms of worker exploitation. </p>
<h2>Community responsibility</h2>
<p>There is one other notable point to make about the Calombaris case. It is about our own responsibility.</p>
<p>As a community we have collectively accepted wage theft for too long. </p>
<p>Collectively we seem to have higher tolerance for the mistreatment of workers at the fringes of the labour market – such as migrants, young workers and the low-skilled. </p>
<p>It is time to take stock. Work will change drastically in coming decades. More of us face the prospect of being among the vulnerable, with the jobs we do now being taken over by AI and automation. </p>
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Read more:
<a href="https://theconversation.com/artificial-intelligence-enhanced-journalism-offers-a-glimpse-of-the-future-of-the-knowledge-economy-117728">Artificial intelligence-enhanced journalism offers a glimpse of the future of the knowledge economy</a>
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<p>Technology has also facilitated “uberisation” and the growth of the gig economy, in which companies minimise their obligations by denying workers are employees. </p>
<p>Considering the breadth of change to come, we need more than ever to reflect on what we accept and enable.</p><img src="https://counter.theconversation.com/content/121038/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sarah Kaine receives funding from the Australian Research Council and is a Director of the McKell Institute.</span></em></p><p class="fine-print"><em><span>Emmanuel Josserand does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Underpaying workers has become rampant in Australia.Sarah Kaine, Associate Professor UTS Centre for Business and Social Innovation, University of Technology SydneyEmmanuel Josserand, Professor of management, Director of the Centre for Business and Social Innovation, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1022982018-09-05T10:37:23Z2018-09-05T10:37:23ZAsking customers to donate when they buy stuff may be good for business<figure><img src="https://images.theconversation.com/files/234910/original/file-20180904-45163-18gtl6e.jpg?ixlib=rb-1.1.0&rect=78%2C52%2C8688%2C4252&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Do you want to make a donation with that?</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/customer-paying-their-order-credit-card-343157249">Shutterstock.com/Jacob Lund</a></span></figcaption></figure><p><em><a href="https://theconversation.com/desea-donar-el-cambio-de-la-compra-pedir-donaciones-beneficas-en-el-supermercado-es-un-buen-negocio-102813">Leer en español</a></em>.</p>
<p>Cashiers asking customers to donate small sums to charity while they’re at cash registers, known as <a href="https://engageforgood.com/2017checkout/">checkout charity</a>, is becoming a big business.</p>
<p>All that spare change, taken together with donations solicited through e-commerce, collectively raised at least US$440 billion in 2016 from retailers like <a href="https://www.petcofoundation.org">Petco</a>, <a href="https://wm.childrensmiraclenetworkhospitals.org/">Walmart</a> and <a href="https://givingworks.ebay.com/about/">eBay</a>. According to <a href="https://engageforgood.com/">Engage for Good</a>, a cause-related commerce group, roughly 3 out of 4 Americans have been asked to donate to charities ranging from <a href="https://www.riteaid.com/shop/info/about-us/rite-aid-in-the-community">Children’s Miracle Network Hospitals</a> to <a href="https://www.wegmans.com/about-us/making-a-difference/feeding-the-hungry.html">local foodbanks</a> while buying stuff.</p>
<p>Franchisees often say they are <a href="https://www.alignable.com/forum/small-business-philanthropy-on-the-rise">reluctant to participate</a> in this practice based on an assumption that consumers dislike donating at checkout and that these campaigns will negatively impact sales. Because I do <a href="https://scholar.google.com/citations?user=KK3MyMcAAAAJ&hl=en&oi=ao">research about franchising</a>, I wanted to see if those concerns are valid.</p>
<h2>Is reluctance warranted?</h2>
<p>To get a clearer picture of how customers feel about checkout charity appeals and if it makes them less likely to return to its restaurants, I was on a research team that looked into how checkout charity may affect sales at retailers, restaurants and supermarkets – plus the public’s perception of those brands. </p>
<p>We partnered with a national fast-food restaurant chain that provided data in exchange for an analysis of their checkout charity campaign and declined to be identified.</p>
<p>Marketing professors and experts in consumer behavior and marketing strategy <a href="http://www.clemson.edu/business/about/profiles/mgiebel">Michael Gibelhausen</a>, <a href="https://scholar.google.com/citations?user=jyJDoVgAAAAJ&hl=en">Helen Chun</a>, <a href="https://scholar.google.com/citations?user=ap-UVxMAAAAJ&hl=en">Liwu Hsu</a> and I conducted multiple studies including a restaurant field study where we intercepted customers in the restaurant to get their feedback immediately after they were asked to donate.</p>
<p>Three controlled online experiments investigated the underlying psychological processes at play. We also reviewed sales and checkout charity data provided by the fast-food chain, which has approximately 1,000 U.S. locations. </p>
<h2>A warm glow</h2>
<p>As we explained in the <a href="https://scholarship.sha.cornell.edu/articles/1038/">Cornell Hospitality Quarterly</a>, an academic journal, we found that such campaigns can benefit a franchise’s bottom line. This occurs because checkout charity can make consumers feel what economist <a href="https://scholar.google.com/citations?user=FvzjvLoAAAAJ&hl=en&oi=ao">James Andreoni</a> calls a “<a href="http://www.econport.org/econport/request?page=man_pg_experimentalresearch_impurealtruism">warm glow</a>” from their giving. These positive feelings, we believe, can lead customers to spend more money in the future at the same restaurant chain.</p>
<p>We found that asking customers who refuse to donate had no effect on their emotional response to the brand or their willingness to return for another meal. </p>
<p>However, the customers who donated felt good about it. Based on our analysis of sales data, we believe they also felt better about the chain we studied and were more likely to return. </p>
<p>In short, raising money for causes through checkout charity may increase sales without costing businesses anything in terms of customer satisfaction.</p><img src="https://counter.theconversation.com/content/102298/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Benjamin Lawrence does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Checkout charity research suggests that it can boost sales and doesn’t ward off customers who don’t contribute.Benjamin Lawrence, Aziz Hashim Professor of Franchise Entrepreneurship and Associate Professor of Hospitality, Georgia State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1001672018-08-06T19:38:54Z2018-08-06T19:38:54ZHow to improve the appeal of franchising for women<figure><img src="https://images.theconversation.com/files/230331/original/file-20180802-136664-1icqldp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The franchise sector might be missing out on opportunities to attract female entrepreneurs.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/721112086?src=SSuunVxy52n4Lb4tIbg9eA-1-30&size=huge_jpg">Shutterstock</a></span></figcaption></figure><p>The franchise model should represent a business model of choice for women. The format has a lower risk profile, as it offers a level of perceived reassurance that the concept has been tested in the marketplace. It also minimises some of the historical disadvantages women face when entering self-employment. </p>
<p>Yet contrary to the stereotype of women being risk-averse, <a href="https://www.tandfonline.com/doi/abs/10.1080/0965254X.2018.1482946">our research</a> has found many are willing to take risks in business and embrace innovation. </p>
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Read more:
<a href="https://theconversation.com/senior-female-bankers-dont-conform-to-stereotypes-and-are-just-as-ready-to-take-risks-71891">Senior female bankers don't conform to stereotypes and are just as ready to take risks</a>
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<p>We identified another factor that might limit women’s uptake of franchising opportunities. Many remained unaware of key benefits such as support from government and franchisors, which includes initial investment and working capital. </p>
<p>This matters for both the franchising sector and the broader economy. Entrepreneurs are considered a major source of economic growth, and <a href="https://www.afr.com/news/special-reports/businesses-of-tomorrow/the-rise-of-femaleled-businesses-and-entrepreneurs-20180304-h0wyzq">more and more of them are women</a>.</p>
<p>Yet a number of factors often constrain women’s choices in business. These include lack of business experience, lack of access to capital and formal and informal business networks, and the need to balance work and family commitments. In fact, <a href="https://www.startupmuster.com/reports/Startup-Muster-2017-Report.pdf">women founded only about 25% of start-ups</a> in Australia in 2017.</p>
<h2>Risk-taking propensity</h2>
<p>Our research explored the effects of different risk-taking levels among women on their likelihood of adopting a franchise business model. The chart below illustrates influences on the identified risk-taking groups – low, medium and high risk propensity. </p>
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<img alt="" src="https://images.theconversation.com/files/229570/original/file-20180727-106524-1ue8gpf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/229570/original/file-20180727-106524-1ue8gpf.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=709&fit=crop&dpr=1 600w, https://images.theconversation.com/files/229570/original/file-20180727-106524-1ue8gpf.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=709&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/229570/original/file-20180727-106524-1ue8gpf.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=709&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/229570/original/file-20180727-106524-1ue8gpf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=891&fit=crop&dpr=1 754w, https://images.theconversation.com/files/229570/original/file-20180727-106524-1ue8gpf.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=891&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/229570/original/file-20180727-106524-1ue8gpf.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=891&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="attribution"><span class="source">Based on Thaichon, P., Weaven, S., Quach, S., Bodey, K., Merrilees, B., & Frazer, L. (2018). Female franchisees; a lost opportunity for franchising sector growth?, Journal of Strategic Marketing, 1-16./The Conversation</span>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
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<p>“Push” influences are external factors stemming from an individual’s lack of control in their working environment. “Pull” influences are internal motivations based on the need to take control of one’s working life. Other factors include work-family life balance, industry sector characteristics and capital availability. </p>
<p>The impacts of these factors on decision-making vary with the three risk categories. </p>
<p><strong>Low risk-taking propensity</strong></p>
<p>“Push” factors are more dominant among women with a low risk-taking propensity. Most of these women go into franchising because of a lack of employment choice and difficulties in finding work. </p>
<p>These women favour business options that reflect minimal risk. Work-family life balance is extremely important to them.</p>
<p>In addition, low-risk female franchisees prefer known industries and those that are less financially intensive. They tend to have difficulty in obtaining finance from third-party sources. Instead, they seek equity financing from family and friends. </p>
<p><strong>Medium risk-taking propensity</strong></p>
<p>Women in the medium-risk group tend to enter franchising in response to a combination of “push” and “pull” motivations. They appear to see becoming self-employed as a way to gain greater control in their working lives and bolster individual prosperity. </p>
<p>Work-life balance, while still important, is less of a concern for this group. </p>
<p>Despite many studies suggesting women select business opportunities to achieve greater work-life balance, our study suggests this may take a back seat as the demands of the business grow. By definition, most medium-sized franchise systems require substantially greater financial, physical and mental inputs from owners than those considered low risk. This further erodes work–life balance and has impacts on desired lifestyle and family outcomes. </p>
<p>Medium-risk-taking women generally sought a combination of private equity and debt or external financial sources to start their franchise.</p>
<p><strong>High risk-taking propensity</strong></p>
<p>Typically, internal motivations most strongly influence high-risk-taking women to go into the franchise business. This is markedly different from the other two groups. </p>
<p>An intrinsic desire to leverage their knowledge and skills to provide job certainty and grow personal wealth “pulls” high-risk-taking individuals towards franchising. Though not totally neglecting work-life balance, the external benefits from working hard likely compensate for reduced family contact or flexibility among these franchisees. </p>
<p>High-risk-taking women franchise owners tend to value innovation. They are willing to enter unfamiliar industries in which they have less direct experience.</p>
<p>These women, like the medium-risk cohort, were also proficient in financing operations from a combination of equity and debt sources as well as government grants and franchisor-provided assistance.</p>
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Read more:
<a href="https://theconversation.com/whats-going-wrong-with-australias-franchises-92916">What's going wrong with Australia's franchises?</a>
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<h2>So what does this mean for the sector?</h2>
<p>Individual characteristics as well as one’s willingness to take risks appear to influence a woman’s likelihood of engaging in self-employment. But understanding the risk-taking propensities of female franchisees may help franchisors recruit this valuable business segment. </p>
<p>Although entrepreneurship research has suggested women have lower self-confidence or self-efficacy and higher risk aversion than men, we found many women have a medium to high propensity to take risks in business operations. The high-risk group also embraced innovation, in contrast to traditional views of franchisees as “reproducers” not “innovators”. This represents a solid departure from limiting gender stereotypes.</p>
<p>A majority of female franchisees appear to know about the main benefits of franchising. These relate mainly to initial and ongoing training and support, prominent branding, and opportunities to work within a proven business system. </p>
<p>However, many remained unaware of key benefits such as assistance from governments and franchisors. In fact, many hadn’t known that franchisors provided investment and working capital support. This knowledge might have changed the size of their initial investment and encouraged them to enter franchising earlier. </p>
<p>This suggests franchisors need to overcome this lack of information. Marketing campaigns explaining relevant franchise opportunities may increase participation by women.</p>
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Read more:
<a href="https://theconversation.com/it-really-pays-for-franchisees-to-do-their-due-diligence-heres-how-49297">It really pays for franchisees to do their due diligence – here's how</a>
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<img src="https://counter.theconversation.com/content/100167/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Women are more willing to take risks and innovate than the stereotype suggests, but even more would likely go into business via franchising if they knew about all the start-up support they can get.Park Thaichon, Lecturer and Cluster Leader, Relationship Marketing for Impact Research Cluster, Griffith UniversitySara Quach, Lecturer, Griffith UniversityScott Weaven, Professor and Head, Department of Marketing, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/889542017-12-13T01:50:23Z2017-12-13T01:50:23ZWhat is going rotten in the franchise businesses plagued by scandals<p>Judging by the scandals that have engulfed franchises in Australia including <a href="https://theconversation.com/au/topics/7-eleven-20033">7-Eleven</a>, <a href="http://www.smh.com.au/business/workplace-relations/caltex-warned-its-service-station-owners-of-regulator-raids-20161102-gsg8qn.html">Caltex</a>, <a href="http://www.smh.com.au/interactive/2017/the-dominos-effect/">Domino’s</a> and most recently <a href="http://www.smh.com.au/business/retail/cup-of-sorrow-the-brutal-reality-of-australias-franchise-king-20171207-h00lbl.html">Retail Food Group</a>, it seems like the very business model of franchising is flawed. But there are franchises that thrive without problems like wage theft and fraught business relationships.</p>
<p>These franchises have a committed franchisor, a proven and evolving brand, and franchisees that are well supported. When any of these components is missing franchisees can quickly become unprofitable and things can turn ugly. </p>
<p>There are some hallmark problems within franchising in Australia and internationally and not all are within the franchisor’s or franchisees’ control.</p>
<h2>No transparency in the model and problems in the supply chain</h2>
<p>The first issue is in the supply chain. A good franchisor will source quality products and services that both the franchisees and their customers want, and make them available to franchisees on terms that are more competitive than the franchisee could obtain as a sole trader. </p>
<p>They wouldn’t let something like a rebate from the supplier stop them from replacing a bad supplier. They will not do as <a href="http://www.smh.com.au/business/retail/cup-of-sorrow-the-brutal-reality-of-australias-franchise-king-20171207-h00lbl.html">Michel’s Patisserie reportedly did</a> and require franchisees to sell spoiled cakes. </p>
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Read more:
<a href="https://theconversation.com/franchisees-dont-do-their-homework-and-are-too-optimistic-about-risks-research-68333">Franchisees don't do their homework and are too optimistic about risks: research</a>
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<p>In a successful franchise, the franchisor’s own network of related entities and associates should be aligned with a franchisees’ success. But franchise operations have become attractive acquisition targets for venture capitalists. For example private equity firm <a href="http://www.afr.com/street-talk/permira-retreats-as-laser-clinics-sale-reaches-crunch-time-20170820-gy03tn">Permira</a> was considering buying the Laser Clinics Australia franchise. </p>
<p>Franchises are also commonly owned by public companies such as Godfreys, Acdent Group Limited and Yum! Brands. This gives rise to new problems for franchisees. </p>
<p>A franchisee might buy their business from one franchisor, but, following sale of the network, have to deal with a new franchisor with different motivations. Venture capitalists and public companies have shareholders <a href="http://www.smh.com.au/business/retail/retail-food-group-begs-shareholders-for-shortseller-mercy-20171130-gzwbms.html">who prioritise dividends and capital gain</a> ahead of ongoing success of franchisees’ businesses. </p>
<p>Under clause 17 of <a href="https://www.legislation.gov.au/Details/F2017C00182">Australia’s Franchising Code</a> a franchisor has to let franchisees know about any materially relevant changes, such as change of ownership. In reality, once a franchisee has signed the franchise agreement and the seven day cooling off period has passed, there is no backing out. A franchisee wanting to make a material change needs to obtain the consent of the franchisor, but the franchisor needs no such consent from franchisees.</p>
<p>The Australian franchisor may be a master franchisee, this means they are an independent operator with responsibility for developing the Australian market for a foreign based franchisor. </p>
<p>One example is of a master franchisee is 7-Eleven in Australia. In this case the franchisor is a Japanese company. It seems the same issues that arose with the brand in Australia also <a href="http://www.bluemaumau.org/sites/default/files/NCASEF%20Complaint.Final_.pdf">allegedly</a> arose in California. So the system needs overhauling globally. </p>
<h2>Lack of lobbying and professional support</h2>
<p>Another problem in franchising is the franchisor and franchisees are unlikely to seek professional advice from the same sources. Well-resourced franchisors and master franchisees have large legal and accounting firms advising them.</p>
<p>There are many big law firms whose names are on franchise agreements and who run law suits for franchisors. Franchisor’s advisers offer expert advice drawing on a deep understanding of the sector. </p>
<p>Whereas <a href="https://www.cpaaustralia.com.au/%7E/media/corporate/allfiles/document/professional-resources/education/due-diligence-full-report.pdf?la=en">research</a> shows that franchisees are more likely to seek advice, if at all, from suburban solicitors and accountants or even to decline to seek legal or financial advice before signing. They may fear the cost, or be so keen to get going they don’t want any reality checks. </p>
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Read more:
<a href="https://theconversation.com/are-some-franchises-more-likely-to-exploit-their-workers-49444">Are some franchises more likely to exploit their workers?</a>
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<p>When it comes to making policy submissions, no sector representative body can fully represent both sides of franchising. Consequently, there is limited effective lobbying by the Franchise Council of Australia on franchisee issues where these conflict with franchisor preferences. </p>
<p>In a number of submissions to <a href="https://www.parliament.sa.gov.au/Committees/Pages/Committees.aspx?CTId=5&CId=173">state</a> and <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Education_and_Employment/VulnerableWorkers/Submissions">federal</a> inquiries the Franchise Council of Australia has blamed franchisees for problems in franchises.</p>
<p>The motor trades franchisees have a committed lobbyist in the <a href="https://www.mtaa.com.au/">Motor Trades Association of Australia,</a> but other franchisees do not have a well funded franchisee member organisation to represent them in Canberra. </p>
<h2>The law and regulators are not off the hook</h2>
<p>Two laws potentially even up the imbalance of rights and power between franchisors and franchisees. There’s the <a href="http://consumerlaw.gov.au/">Australian Consumer Law</a> and the <a href="https://www.accc.gov.au/business/industry-codes/franchising-code-of-conduct">Franchising Code of Conduct 2014</a>. </p>
<p>Consumer Law gives franchisees that have been misled, deceived or treated unconscionably, or whose contract terms are unfair, the right to ask a court to sort things out. But court actions are slow and expensive and can end in business failure. </p>
<p>For example Allphones was successfully sued by a franchisee, Hoy Mobile in <a href="https://jade.io/article/78386">2008</a>, but their dispute had been brewing since 2005. In 2009 the ACCC successfully mounted a class action against Allphones on behalf of other franchisees who had <a href="https://www.accc.gov.au/media-release/3-million-in-damages-to-small-businesses">been treated unconscionably</a>. </p>
<p>Franchisors have access to system-wide evidence to use to mount their cases whereas franchisees have great difficulty accessing data like the cost of sales of other franchisees. This data would help them discover whether they had been singled out for attention or whether all franchisees in the system were in the same boat. Of course, franchise agreements may have also expired by the time judgements are handed down. </p>
<p>The Franchising Code entrenches rights into all franchise agreements, such as the right to have a mediator appointed to resolve franchise disputes. Although mediation is quick and effective, it has flaws. </p>
<p>There is no public information available about concluded mediations, whereas enforceable undertakings that franchisors reach with regulators, and court decisions are on the public record.</p>
<p>Parties to mediation parties sign confidentiality agreements. So, if a potential franchisee wants to know about the potential pitfalls of the system no one involved can talk about any disputes. </p>
<p>The Australian Consumer and Competition Commission (ACCC) and the Australian Securities and Investments Commission (ASIC) are responsible for regulating different aspects of franchises. The ACCC administers Australian Consumer Law and the Franchising Code, whereas ASIC administers the Corporations Act. </p>
<p>Most franchisors and franchisees are corporations. When a franchisor <a href="http://www.austlii.edu.au/au/journals/AdelLawRw/2013/17.pdf">fails</a> the overlap between the regulators is murky. For example the Code applies to administrators and this binds them to mediate with franchisees, but administrators’ duties under the Corporations Act trump the Code. Here, the law fails franchisees.</p>
<h2>A wish list to restore confidence in franchising</h2>
<p>Franchise disclosure documents should contain an organisation chart with the franchisor’s entire network named so franchisees could better conduct their due diligence. </p>
<p>Franchisees could also unionise to strengthen their position in collectively bargaining as a sector of potentially <a href="https://www.franchise.edu.au/home/research/franchise-australia/2016-survey-shows-franchising-on-the-rise-in-australia">79,000 members</a>. This would put them in a strong bargaining position against the 1200 or so franchisors operating in Australia.</p>
<p>The professions could lift their game to help franchisees access competent advisers. Many of Australia’s state and territory law societies have accreditation programs for specialists to become accredited in a field of law. It could help franchisees’ confidence in their advisers if there was specialist accreditation for franchise lawyers and financial advisers.</p>
<p>One of the regulators should set up a public database of franchisors to enable franchisees and their advisers to compare offerings, without having to pay a deposit and enter a selection process before they really know what alternatives are available. There are already databases in the United States in California, Minnesota and Wisconsin funded by government. Australia could follow this lead and keep a database up to date with each franchisors disclosure document and standard form of franchise agreement. </p>
<p>Franchisees should also be given a right to sell their business back to the franchisor at a fair price if the franchisor sells to a venture capitalist or lists on a stock market. Only when all these changes are working together can we expect to see a proper end to rotten behaviour in some franchises.</p><img src="https://counter.theconversation.com/content/88954/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jenny Buchan receives funding from CPA Australia and Chartered Accountants ANZ. She is a member of the Small Business and Franchising Consultative Committee of the Australian Competition and Consumer Commission, ARITA and the Law Society of NSW. </span></em></p>There are some hallmark problems within franchising in Australia and internationally and not all are within the franchisor’s or franchisees’ control to fix.Jenny Buchan, Professor, Business School, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/812612017-07-21T04:07:38Z2017-07-21T04:07:38ZBoth franchisees and franchisors benefit from company-owned stores<figure><img src="https://images.theconversation.com/files/178967/original/file-20170720-23989-cm3qbu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Do company-owned stores really compete with franchisees?</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Some franchisees of hardware chain Mitre 10 are <a href="http://www.afr.com/business/retail/metcash-resisting-pressure-from-independents-to-sell-hardware-stores-20170713-gxaha8">calling for an end to “company-owned” stores</a>. These are stores owned and run by <a href="http://www.metcash.com/our-brands/">Metcash</a>, which owns the Mitre 10 brand and is a supplier to the franchisees. </p>
<p>But <a href="http://www.sciencedirect.com/science/article/pii/S0263237308001291">research shows</a> that brands with a mixture of franchised and company-owned stores are <a href="http://www.sciencedirect.com/science/article/pii/S0278431908000601">not only</a> more profitable but also more valuable than brands that are purely franchised. Company-owned stores are a win-win for franchisees and franchisors.</p>
<p>As we have seen with the likes of <a href="https://mcdonalds.com.au/about-maccas/maccas-story">McDonald’s</a> and <a href="https://www.bobjane.com.au/info/corporation/">Bob Jane T-Marts</a>, company-owned stores have <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1540-627X.2008.00244.x/full">various functions</a>. They may be “flagship” stores in prominent locations, making them a marketing tool. They can also be places for <a href="https://www.businessinsider.com.au/mcdonalds-test-restaurant-the-corner-2014-12#others">experimentation</a> with new products, technologies, store concepts, and prices. </p>
<p>Some franchisors have also used company-owned stores as mini-warehouses to supply other stores within a trade area. Finally, company-owned stores expand the network, lowering costs for the whole franchise and acting as a barrier to entry for competitors. </p>
<p>The benefits of all these measures are not always obvious or measurable by franchisees. For example, the average franchisee won’t appreciate the research and development costs incurred by a company store for a new training program or product. Franchisees only see the final result.</p>
<h2>Tensions between franchisees and franchisors</h2>
<p>There can be a legitimate tension between franchised and company-owned stores. For instance, company-owned stores may have greater access to resources such as local area advertising and staff training, preferential pricing and access to stock, and even favourable trading terms. </p>
<p>This can be unsettling for franchisees who feel they are not only competing against other brands but also their own. This is called “<a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1744-1714.2010.01094.x/full">encroachment</a>” and can damage the brand in the long run. </p>
<p>In a case between McDonald’s and a franchisee, the Victorian Supreme Court <a href="http://www.allens.com.au/pubs/comp/ccsep00a.htm">found</a> that McDonald’s could open new stores even if they potentially impact the existing franchisee. Opening new stores creates a barrier to entry for competitors, increases sales, and thereby lowers the costs of products for both franchisees and company-owned stores. This shows that even an action that may appear harmful can have wider benefits. </p>
<p>The huge difference in business models between franchisors and franchisees can also be a source of tension.</p>
<p>Franchisees are retailers. They need to buy the products they are selling as cheaply as possible while incurring the least amount of cost. In doing so they will maximise their retail profit. On the other hand, franchisors are like a wholesaler. They rely on the profit they make from selling products to franchisees. So franchisors can afford to lose money in company-owned stores, making up the difference by selling products wholesale to franchisees. </p>
<h2>A happy medium</h2>
<p>But as the <a href="http://www.sciencedirect.com/science/article/pii/S0263237308001291">research</a> clearly shows, for franchisees the benefit from company-owned stores - from marketing, research and development, and training - outweighs the negatives. Nevertheless, some things should change to keep the peace. </p>
<p>For starters, every company-owned store should operate like a franchise. Franchisees have been found to <a href="http://www.franchiserelationships.com/gregs-blog/are-company-stores-good-idea">perform better</a> than company-owned stores. Franchisees have skin in the game and are motivated by the bottom line of their stores.</p>
<p>What this means in practice is that all stores should make the same contributions to a marketing fund, buy products at the same price, and observe the same retail pricing structure. Company stores should have the same relative local advertising budget as franchisees, have the same stock-holding requirement (quantity and range), and company store managers should face the same performance criteria as franchisees. </p>
<p>Company stores might not perform as well at the bottom line, but overall they add value to both franchisors and franchisees.</p><img src="https://counter.theconversation.com/content/81261/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lorelle Frazer receives funding from the Franchise Council of Australia for the 'Franchising Australia' biennial surveys of the Australian franchise sector.</span></em></p><p class="fine-print"><em><span>Maurice Roussety does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Mitre 10 franchisees are calling for an end to company-owned stores, but they benefit from them too.Lorelle Frazer, Professor and Director, Franchising Centre, Griffith UniversityMaurice Roussety, Lecturer- Franchising and Marketing, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/734452017-03-02T19:07:49Z2017-03-02T19:07:49ZThe government needs to better enforce the laws it creates, to protect franchise workers<p>The government’s <a href="http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r5826">recent proposal to amend the Fair Work Act</a> makes it clear franchisors will be punishable for breaches of industrial law, the like of which we’ve seen in scandals surrounding retail franchises. But there will still be problems in enforcing this law. This is because of the obstacles workers face in successfully pursuing their entitlements and the inadequacy of our current penalties to deter these sorts of practices. </p>
<p>We’ve seen various scandals surrounding retail franchises, including 7-Eleven and Caltex stores, and takeaway food businesses such as KFC, McDonald’s and Hungry Jacks. The wages theft has taken several forms, with some franchisees paying workers far less than the minimum wage or modern award entitlements, failing to pay penalty rates and superannuation, and falsifying pay records. </p>
<p>A significant proportion of Australia’s labour force works in franchise organisations. <a href="http://www.franchise.org.au/franchising--an-introduction.html">According to the Franchise Council of Australia</a>, while franchising accounts for only 4% of businesses, this includes about 1,200 franchising brands. Among these, there are approximately 79,000 operating franchisees which together employ more than 470,000 direct employees. </p>
<p>In the “commercial marriage” of franchisor and franchisee, the franchise agreement defines the rights and obligations of both parties. The franchisor is the senior partner in this relationship, and charges the franchisee an upfront fee, an ongoing fee (such as a percentage of revenue), or a combination of the two. Given this continuing financial bond, holding franchisors, as well as franchisees responsible for wage compliance, is crucial.</p>
<h2>If employees have been underpaid</h2>
<p>Under the Fair Work Act, employees of a franchise can pursue recovery of underpaid wages through the Federal Magistrates Court or Federal Court of Australia. The Fair Work Ombudsman can also investigate claims of underpayment by franchise operators. Following findings of noncompliance, the Ombudsman can issue compliance notices, infringement notices and engage employers in enforceable undertakings to remedy infringements.</p>
<p>However, in practice for individual workers, numerous obstacles exist to recovering stolen wages. Many workers simply do not know their wage entitlements or how to identify them.</p>
<p>Also, proceedings in the Fair Work Commission <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Education_and_Employment/temporary_work_visa/Report">take time, and are costly</a>, unless a worker belongs to a union or represents him or herself.</p>
<p>Self-representation is often infeasible, particularly for workers with English as a second language. Then, documentary records, such as payslips, time sheets and rosters are often missing in action or deliberately falsified. This was the case <a href="http://www.fairwork.gov.au/ArticleDocuments/.../7-eleven-inquiry-report.docx.aspx">with those 7-Eleven franchises</a> which recorded only half the hours worked, so that workers appeared to be earning the correct wage instead of only half that amount.</p>
<p>Migrant workers and international students may face the threat of deportation. As well, pursing the claim may prove fruitless if the franchisee lacks the financial resources to reimburse the wages.</p>
<p>The Ombudsman will be responsible for enforcing the proposed legal provisions, including the ones in the government’s latest proposal, but in reality this will require a substantial increase in resources.</p>
<p>While the Ombudsman has engaged vigorously in action against a number of franchise operators for significant breaches, its investigative capacity is <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Education_and_Employment/temporary_work_visa/Report">constrained by inadequate resources</a>, a limited power to compel employer cooperation and assistance, and companies liquidating after the Ombudsman files a matter in court. </p>
<h2>The penalties and sanctions for franchises</h2>
<p>The penalties and sanctions for punishing misbehaving franchises, available under industrial law, are also limited. </p>
<p>The financial <a href="http://workplaceinfo.com.au/resources/employment-topics-a-z/penalties-breach-of-fair-work-act">weight of sanctions is low</a> - the maximum fine is A$10,800 for individuals and A$54,000 for a corporation. This is unlike in other areas of law such as occupational health and safety, migration and consumer law, where criminal penalties apply, there are no criminal penalties for recalcitrant franchises.</p>
<p>The current system in Australia with these sanctions is that punishments for transgression become increasingly severe with repeated non-compliance. But the law currently steers clear of using the highest fines and other penalties, to avoid upsetting franchises that might be doing the right thing. </p>
<p>However, this relies on most employers being ethical, following the rules, and the availability of measures sufficient to encourage compliance and deter non-compliance. The existing sanctions for employer failing to pay award wages are unlikely to be sufficient to deter wage theft among either franchisees or franchisors. </p>
<p>Even under the proposed legal protections to cover franchises, including increased powers and resources for the Ombudsman, it will remain difficult to hold franchisors accountable for wage underpayments. This is because of <a href="http://www.fairwork.gov.au/about-us/news-media-releases/newsletter/august-2016/what-is-accessorial-liability">the need to prove that</a> the franchisor had actual knowledge of the franchisee’s contravention and intentionally participated. </p>
<h2>What needs to change</h2>
<p>The extensive public shaming of some franchise operators in recent months may have encouraged a return to compliance for those acting illegally. However, for the longer term, legislative changes are required both to make it easier for individuals to recover wages and to deter franchise operators more strongly from engaging in unlawful wage practices. </p>
<p>Individual workers need stronger protections to prevent retributive actions from employers towards whistleblowers. Workers must also be better informed about their wage entitlements and employers need to know that this information is easily accessible to workers. </p>
<p>Sanctions <a href="http://www.teacho.com.au/images/TEACHO_Final_Report.pdf">in recent legislation</a> on workplace health and safety (2011), and in the heavy vehicle road transport sector (2012), provide an example to follow appropriately penalising and preventing misbehaviour in franchises. These new measures have included increased financial penalties, the disqualification of company directors from managing companies and criminal sanctions for serious and repeat offenders. </p>
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<p><em>This article has been corrected since publication to acknowledge that underpaid workers can pursue underpaid wages through certain courts.</em></p><img src="https://counter.theconversation.com/content/73445/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Louise Thornthwaite does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The obstacles workers face in successfully pursuing their entitlements and the inadequacy of our current penalties to deter underpayments means problems with franchises will remain.Louise Thornthwaite, Senior Lecturer, Department of Marketing and Management, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/697202016-12-16T00:42:55Z2016-12-16T00:42:55ZFranchises shouldn’t share responsibilities for stuff-ups<p>The government’s plan to combat recent cases of franchise misbehaviour by holding franchisors responsible for wage underpayments by their franchisees, could undermine the business model of franchises. </p>
<p>Franchisors and franchisees operate as separate legal entities. Until now, franchisors have relied on this separation to avoid responsibility for franchisee non-compliance with workplace laws.</p>
<p>It’s this separation that makes franchises work and although these companies may appear as one to customers, the distinction between franchisor and franchisee in law is essential to its business model.</p>
<p>Joint responsibility under law could potentially burden the operating costs of franchise systems, thereby affecting their economic value. Knowing that franchisors are jointly responsible, franchisees could even free ride and become complacent towards compliance.</p>
<h2>How franchises work</h2>
<p>The <a href="https://deepblue.lib.umich.edu/bitstream/handle/2027.42/31457/0000379.pdf?sequence=1">sharing of obligations</a>, the operation of businesses through separate legal entities and the perception of operating and minding one’s own business are what make franchising successful. Both parties enjoy the separation of ownership and custodianship, while agreeing to share benefits. </p>
<p>Franchising is a quirky relational system that is very sensitive to the way revenues are <a href="http://www.sfu.ca/%7Ewainwrig/Econ400/mathewson-winter85.pdf">shared</a> and costs apportioned. If the franchisor is forced to share statutory responsibilities with non-complying franchisees, any costs associated in mitigating this responsibility will be passed on to all the other franchisees in the form of reduced revenues or increased costs.</p>
<p>It’s often noted by industry professionals that when a company-owned store is <a href="http://www.franchisebusiness.com.au/news/franchisees-v-company-owned-stores-which-performs">converted</a> to a franchise, the franchisee generally increases the outlet’s sales turnover and profit within a short time. This is because the franchisee, unlike the store manager, has their capital at risk and is motivated to maximise profit by operating an efficient business.</p>
<p>Admittedly, the introduction of the <a href="https://www.legislation.gov.au/Details/F2010C00457">Franchising Code of Conduct in 1998</a> - which converted some common law practices into legislation - has already signalled the preparedness of the Australian government to intervene in this freedom to contract. The mandatory Franchising Code of Conduct applies to franchisors and franchisees and it has addressed several problems relating to conduct towards each other. However, the new law proposes to create an obligation between the franchisor and the franchisee’s employees. </p>
<h2>The proposed legislation for franchises</h2>
<p>The proposed legislation seeks to make a franchisor legally responsible for wage underpayments by franchisees in their network, if the franchisor knew (or ought to have known) of the contraventions. Franchisors may escape liability if they took all reasonable steps to prevent the breaches. </p>
<p>Franchisors have a <a href="https://theconversation.com/7-eleven-fallout-what-are-the-moral-obligations-on-franchisors-47197">moral obligation</a> to ensure their franchisees comply with workplace laws. It also makes good business sense to protect the franchise brand and reputation. </p>
<p>Recent cases, such as <a href="https://theconversation.com/can-7-eleven-be-trusted-to-uclean-up-its-own-mess-59302">7-Eleven</a> and Caltex, have revealed the potential adverse impact on franchise systems in which franchisees have been caught out underpaying employees. Numerous 7-Eleven franchisees were exposed as exploiting workers in this manner last year. More recent <a href="http://www.abc.net.au/news/2016-11-21/covert-video-captures-711-workers-being-forced-to-pay-back-wage/8033808">evidence</a> showed some vulnerable employees were paid in full but forced to return some of their wages as “cash backs” to their 7-Eleven franchisee employers. </p>
<p>In very similar circumstances Caltex franchisees have also been accused of wage fraud. Unlike 7-Eleven, which has committed to compensating exploited workers, Caltex is placing this responsibility on the recalcitrant franchisees. </p>
<p>7-Eleven recently signed a Proactive Compliance Deed which the <a href="https://www.fairwork.gov.au/about-us/news-and-media-releases/2016-media-releases/december-2016/20161207-7-11-pcdmediarelease">Fair Work Ombudsman</a> has suggested will “set a new standard for franchising in Australia”. These standards include biometric shift scanning and the use of CCTV in stores to enable monitoring by head office. </p>
<p>Although 7-Eleven has been forced to rectify its poor workplace practices, such extreme measures should not be regarded as the new benchmark for franchising. Proactive Deeds will place a monitoring burden on franchisors for the franchisee employee/employer contractual relationship. </p>
<p>A franchisor may be prosecuted under section 550 of the Fair Work Act as an accessory if it aided or abetted the breach. Indeed, <a href="https://www.fairwork.gov.au/about-us/news-and-media-releases/2016-media-releases/november-2016/20161103-yogurberry-penalty-release">Yogurberry</a> was recently penalised in a precedent setting Federal Court judgement for being an accessory to the exploitation of several employees of its franchisees. So, do we really need more laws that purport to do the same thing?</p>
<p>The proposed new legislation similarly aims to hold franchisors responsible for franchisee non-compliance of workplace laws. But this proposal has potential to extend to other laws. </p>
<p>This will mean there will be a statutory precedent that such franchisor obligations should also apply to corporations, consumer and occupational health and safety laws. For example, a franchisor might become responsible for a franchisee who trades while insolvent or one who misrepresents an offer or who fails to observe proper safety practices. Such breaches are effectively dealt with under existing laws.</p>
<p>We don’t need another legal layer of prescriptive conduct and regulations for franchising. Instead, franchisees and franchisors should be encouraged to share their moral and commercial obligations. </p>
<p>Given the commercial interdependence of franchisor and franchisee, recurring unlawful conduct by either party ultimately degrades the value of the brand and any goodwill attached to it. Both parties depend on the brand’s equity for income and capital growth. Franchisors could be encouraged to include a reward model in their franchise agreement that allows franchisees to benefit from appreciations in the goodwill value of the brand and the goodwill of their respective franchise on exit.</p>
<p>While the proposed legislation is well-intended and seeks to protect vulnerable employees, a more measured approach is required to ensure that government intervention between contracting parties does not undermine the foundations of franchising. </p>
<p>The economics of franchising are carefully balanced against risk, reward and effort. Any attempt by government to impose further compliance obligations on franchisors would increase monitoring costs and affect that balance to the detriment of the sector.</p><img src="https://counter.theconversation.com/content/69720/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lorelle Frazer receives funding from the Franchise Council of Australia for the 'Franchising Australia' biennial surveys of the Australian franchise sector.</span></em></p><p class="fine-print"><em><span>Maurice Roussety does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The franchise business model could be undermined by proposed laws which make franchisors and franchisees jointly responsible for wage underpayments.Lorelle Frazer, Professor and Director, Franchising Centre, Griffith UniversityMaurice Roussety, Sessional AcademicLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/683332016-11-13T19:06:15Z2016-11-13T19:06:15ZFranchisees don’t do their homework and are too optimistic about risks: research<p>Franchisees are unrealistically optimistic about risks of setting up their business, even after those risks have been disclosed to them, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2805844">our research shows</a>. </p>
<p>We tested this unrealistic optimism by surveying 205 current US franchisees from 26 brands. We chose the US because there is publicly accessible data about the identity of franchisees there (in Australia this does not exist). It’s this information US franchisors are required to provide that should alert intending franchisees to the risks of their agreement being terminated. </p>
<p>We asked individual US franchisees to answer the degree to which they are more or less likely to experience a certain risk than the “average” person operating a franchise in the same brand. This focused on the risk of the franchisor terminating their franchise agreement in two scenarios:</p>
<ol>
<li>Solely so the franchisor could sell their business to a new franchisee for higher franchise fees.</li>
<li>So the franchisor could operate the successful unit themselves.</li>
</ol>
<p>Our data revealed that for both scenarios, more than 80% of franchisees believed they weren’t likely to be affected, which is concerning considering the serious consequences to a franchisee of either event occurring. </p>
<p>Policy makers assume that the presence of disclosure laws mean franchisees will do their homework before committing to a particular franchise. Our research shows that these assumptions are wrong.</p>
<h2>The risks of early termination of a franchise agreement</h2>
<p>A franchise is a complex, expensive, purchase that will commit the franchisor and franchisee to a business relationship with each other for several years. The franchsior has usually sold many franchises, and signed many franchise agreements but buying a franchise is something a franchisee may do only once in their life. </p>
<p>To help franchisees avoid making such a significant decision on impulse, the law requires that franchisors provide a disclosure document replete with information. Although the contents vary from country to country, the disclosure requirement is widespread. </p>
<p>Disclosure laws are based on an assumption that franchisees are rational. They will read and understand the disclosed material, take professional advice on anything they do not understand and will not commit until they understand the risks and satisfy themselves as to how they will manage them. </p>
<p>US franchisees are alerted to the possibility that their franchisor might terminate their agreement in one of four ways. The franchisor has to summarise how it could terminate the agreement in a <a href="https://www.law.cornell.edu/cfr/text/16/436.5">disclosure document</a> by law. </p>
<p>This includes stating whether the franchisor has the right to terminate “at will”; meaning that the franchisor is not required to give the franchisee any opportunity to remedy defaults. The franchisor must disclose the annual number of franchisees terminated to date without compensation and must include the names and contact details of former franchisees whose agreements have been terminated by the franchisor. </p>
<p>Surely, equipped with all of this information, a prospective franchisee would realise that they too, could find their newly minted franchise agreement opportunistically terminated by their franchisor. Our research shows that most do not. </p>
<h2>Optimism of franchisees</h2>
<p>Franchisors do sometimes terminate franchisees’ agreements “at will”. <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2777813">A statistical analysis by Emerson</a> of 342 US cases involving a franchise agreement terminated by the franchisor, shows in 49 cases the cause of termination is listed as being “at will”. Of these 49 cases, only 11 found in favour of the franchisee. </p>
<p>These results indicate that there is a real risk faced by franchisees that a franchisor will opportunistically terminate the franchise agreement. This information about US franchisees makes us wonder about Australian franchisees. </p>
<p>Franchisors in Australia <a href="https://www.legislation.gov.au/Details/F2014L01472">provide pre-contract disclosure</a> prescribed under the Competition and Consumer (Industry Codes—Franchising) Regulation of 2014. This includes information such as the identity and business experience of the franchisor. </p>
<p>It also discloses any litigation the franchisor is involved in, who the franchisor pays to introduce franchisees to the system, the number and business address details of up to 50 existing franchisees and key details of relevant master franchise agreements. It explains the status of intellectual property like registered trademarks that the franchisee will be allowed to use. </p>
<p>Under headings related to supply of goods or services to a franchisee, there is financial and logistical information that covers aspects like online sales. The franchsior’s policy and practice about sites or territories is explained. </p>
<p>Financial issues are disclosed, as are arrangements that will apply at the end of the term. The franchisor must provide a signed statement that it is solvent, although research shows that a small number of franchisors sign the disclosure statement confirming they are <a href="http://www.tandfonline.com/doi/full/10.1080/1046669X.2015.1113487">solvent</a> when they are not. </p>
<p>All this information makes franchisees think the disclosure documents tell them all they need to. But, because there is no public database of franchise disclosure in Australia, franchisees can not compare their chosen franchisor with other brands. </p>
<p>And, as our US-based research shows, even a detailed pre-contract disclosure document that clearly outlines real risks may not convince franchisees that franchising can be risky.</p><img src="https://counter.theconversation.com/content/68333/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jenny Buchan receives funding from CPA Australia. She is a member of the Australian Competition and Consumer Commission's Small Business and Franchising Consultative Committee.</span></em></p>The law assumes franchisees do their financial and legal homework when it comes to signing up to a chain, but research shows franchisees are often overconfident and ignorant of the risks.Jenny Buchan, Associate Professor in business law, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/593022016-05-12T23:55:39Z2016-05-12T23:55:39ZCan 7-Eleven be trusted to clean up its own mess?<p>The head office of the 7-Eleven franchise is dismantling an independent claims panel headed by Professor Allan Fels, established in the immediate wake of the underpayments scandal. In its place, 7-Eleven Stores Pty Ltd (7-Eleven) intends to process any outstanding wage claims in-house.</p>
<p><audio preload="metadata" controls="controls" data-duration="336" data-image="" data-title="Allan Fels speaks about sacking from 7-Eleven panel with Jenni Henderson" data-size="8083104" data-source="The Conversation" data-source-url="" data-license="CC BY-SA" data-license-url="http://creativecommons.org/licenses/by-sa/4.0/">
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Allan Fels speaks about sacking from 7-Eleven panel with Jenni Henderson.
<span class="attribution"><span class="source">The Conversation</span>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a><span class="download"><span>7.71 MB</span> <a target="_blank" href="https://cdn.theconversation.com/audio/405/fels-interview-mixdown.mp3">(download)</a></span></span>
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<p>In response, Professor Fels is calling for the Senate to reopen the original inquiry into the scandal now that the compensation process has been railroaded by head office:</p>
<blockquote>
<p>“They wanted to curb our independence as much as possible without losing our names …and now they’ve decided to be judge and jury.”</p>
</blockquote>
<p>This latest development is troubling in a number of respects. While 7-Eleven has stated that the internal unit will apply <a href="http://www.7eleven.com.au/media-centre/article/media-statement-11052016">‘enhanced investigative protocols and evidentiary standards’</a>, it seems that a stricter standard may be applied to determine whether a wage claim is ‘legitimate’ and should be paid out. A higher standard of proof is likely to make it more difficult (if not impossible) for underpaid workers to claim their full entitlements because employment records are often absent or inaccurate. </p>
<p>The integrity and independence of this process may also be compromised. Many of the affected workers, particularly those who continue to work under the 7-Eleven banner, may be more reluctant to proceed with their claims now there is an increased risk of being personally identified. This magnifies their precarious employment and immigration status and exposes them to further intimidation on the part of franchisees. </p>
<p>Whether or not this shift in approach is deliberately designed to minimise the mounting costs associated with paying out these claims, it seems that this will be the likely result. Professor Fels observes that 7-Eleven’s decision represents a ‘massive triumph’ for franchisees - who may not only reduce costs associated with past contraventions, but may continue to employ workers in flagrant breach of the law.</p>
<p>However, this latest change in position raises a more fundamental question about the role and responsibilities of head office and the effectiveness (or otherwise) of self-regulatory measures in tackling systemic non-compliance with employment laws. In an increasingly consumer-savvy age, it is not uncommon for leading companies to promote their commitment to <a href="http://www.7eleven.com.au/media-centre/article/7-eleven-stores-pty-ltd-has-welcomed-the-report-of-the-fair-work-ombudsman-into-its-franchisee-network">best practice</a> or to publicly acknowledge their <a href="https://www.fairwork.gov.au/about-us/news-and-media-releases/2014-media-releases/october-2014/20141007-coles-eu-presser">ethical and moral responsibility</a> to end worker exploitation throughout their franchise network, supply chain or business undertaking. </p>
<p>While voluntary mechanisms, such as ethical sourcing policies, codes of conduct and independent panels, are commendable, it is questionable as to whether these initiatives are sufficiently rigorous to achieve substantive and sustainable changes in compliance culture. <a href="https://www.dol.gov/whd/resources/strategicenforcement.pdf">Research undertaken in the United States</a> suggests that when a firm experiences a regulatory crisis, where they are faced with severe reputational damage or the threat of legal sanction, they may initially agree to far-reaching compliance measures. </p>
<p>Since at least 2010, the Fair Work Ombudsman has had growing concerns about franchisee behaviour within 7-Eleven (including the falsification of employment and payroll records). While the regulator conveyed these concerns to head office, 7-Eleven only took proactive steps to prevent further non-compliance once the media story broke and the brand faced a significant public bruising. </p>
<p>Research from the US also shows that the strength of self-regulatory mechanisms tends to fade as reputational concerns ease or enforcement pressure weakens. It’s unlikely to be a mere coincidence that when the Fair Work Ombudsman confirmed that they would not be bringing enforcement litigation against the 7-Eleven head office last month, the firm has subsequently decided to step away from some of its earlier and more promising commitments. </p>
<p>In response to questions about 7-Eleven, Prime Minister Turnbull replied that the government would <a href="http://www.smh.com.au/business/workplace-relations/7eleven-scandal-takes-disturbing-twist-says-labors-bill-shorten-20160511-got5m4.html">‘make sure the law is enforced’</a>. But if there is anything to learn from the 7-Eleven case, it’s that the law – at least in its existing form – may not be enough to ensure that employers duly comply with the minimum wage, employees are properly paid and lead firms adopt the necessary measures to make certain this occurs. </p>
<p>Indeed, while the Fair Work Ombudsman recently found that 7-Eleven Stores <a href="https://www.fairwork.gov.au/about-us/news-and-media-releases/2016-media-releases/april-2016/20160409-7-eleven-presser">“could have acted earlier and done more”</a> in terms of curbing non-compliance within its franchise business, the regulator ultimately concluded that it did not have sufficient evidence to pursue 7-Eleven under the Fair Work Act 2009. </p>
<p>One major difficulty was that a number of key individuals employed or engaged by 7-Eleven were unwilling to go on the record about what they (or others) knew about franchisee non-compliance. This meant that the Fair Work Ombudsman was not in a position to meet the relevant statutory test and prove that 7-Eleven had been
‘knowingly concerned’ in the contraventions of its franchisees and should be held liable as a consequence. </p>
<p>In order to better address these evidentiary obstacles, the Ombudsman has called for enhanced investigative powers. While this may resolve part of the problem, it does not necessarily address a more profound issue presented by the 7-Eleven case. That is, whether the existing enforcement regime of the Fair Work Act 2009 is able to effectively prevent firms, such as 7-Eleven, from having it both ways – where they are able to exercise high levels of control over the performance of work, but remain legally insulated from the problems this creates. </p>
<p>The 7-Eleven case suggests that we cannot trust companies with clear economic interests to act on ethics alone. If we believe that lead firms should do more, not less, to combat employment non-compliance within their franchise, supply chain or business, we must ensure that such firms are held legally accountable. To achieve this, the law must change.</p><img src="https://counter.theconversation.com/content/59302/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tess Hardy has previously received funding from the Australian Research Council (LP099990298) to conduct research on the enforcement of employment standards.</span></em></p>7-Eleven’s decision to take charge of the compensation process for underpaid workers highlights the problems with voluntary commitments and underlines the need for increased legal accountability.Tess Hardy, Lecturer in Law, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/529662016-02-05T00:28:21Z2016-02-05T00:28:21ZContract law change leaves franchisees vulnerable<p>Recent amendments to laws extending individual protections against unfair contracts to cover small business activity may miss the mark in protecting potentially vulnerable franchisees.</p>
<p>Under the revised provisions, which will not come into force until November this year, there are two threshold levels. For contracts up to 12 months, the total upfront price should not exceed $300,000. For a longer contract, greater than 12 months, the upfront price should not be more than $1 million. </p>
<p>According to the amendments, a small business owner will not be eligible for protection from unfair contract terms if the value of their agreement exceeds these limits during the specified timeframe. Contracts entered into before this date will not be affected. </p>
<p>The initial purpose of the consumer-only protections was to ensure that those in an inferior bargaining position did not sign standard form contracts full of unfair terms. </p>
<p>But the incoming legislation seems to have missed the mark for prospective and renewing franchisees, who instead of being protected by the amendments, may now find themselves in a more vulnerable position.</p>
<p>Business format franchising, the most common form of franchised activity in Australia, is typically a long term contractual agreement lasting between one and 25 years. These contracts will therefore fall within the $1 million threshold. New and renewing franchisees will only be protected by the provisions if the total amount of the sign-on fee and other fixed amounts payable will not exceed $1 million during the term of the franchise agreement. </p>
<p>While this amount may seem excessive, in a long-term business contract it is not the reality. </p>
<p>To put it in perspective, let’s take a conservative hypothetical example and say that a new franchisee is signing on to a 10 year term. The theoretical initial franchise fee is $50,000. This would mean that the total amount of ongoing fees, fixed royalties, advertising fees, property lease fees and the renewal fee must be forecasted to be less than $95,000 per annum for the duration of the agreement. The inclusion of property lease fees alone seems to make this an unsuitable limit. </p>
<p>This article serves as a warning to new and renewing franchisees that they need to be wary of the total forecasted value of their investment. There is no statutory requirement for franchisors to disclose whether the proposed agreement falls within the scope of the protections. What’s more franchisors may become incentivised to increase fees beyond the threshold levels.</p>
<p>I would also like to draw attention to this seemingly irrational policy-making evident in the amendments. It is puzzling that a monetary value has been put on the point at which a small business person should be able to make the distinction between what are fair and unfair contract terms. </p>
<p>How does an ability to finance a $1 million business make a small business person any less vulnerable? It seems a long leap to assume that the money used to finance a $1 million-plus business was earned in the course of doing business, thus making investor business savvy enough not to need protection. </p>
<p>The average house price in Sydney is currently $800,000. This fact alone is evidence to suggest it would not be difficult for an inexperienced business person to borrow $1 million dollars and for them fall outside the scope of the protections. </p>
<p>Is the law suggesting that small business people falling outside the limits have enough capital to pay for professional advice? If this was the case, wouldn’t it have been more appropriate to enforce a compulsory advisory clause where small business people are legally obliged to talk to expert lawyers and/ or accountants before signing on the dotted line?</p>
<p>So where to from here? Undoubtedly the new legislation will face revision at some point in the short-mid term future. When this occurs I encourage small business people, in particular franchisees, to submit their concerns on the monetary thresholds. </p>
<p>Business ownership and sector experience is an alternative measure for commercial savviness that could provide a better assessment and more sensible benchmark.</p><img src="https://counter.theconversation.com/content/52966/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Courtenay Atwell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Extending individual protections to franchisee owners is supposed to offer protection, but will have the opposite affect.Courtenay Atwell, Casual Academic/ PhD candidate in Business Law, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.