Discuss about the 7-Eleven Scandal Analysis.
The present assignment aims to evaluate and examine the scandal of 7-Eleven in which franchisee underpay their employees in Australia. It includes background, structure, problems and detailed analysis of the allegations made against the company of employee underpayment.
Background & Structure of Organization
7-Eleven Inc. is an international chain of convenience stores operating in approximately about 18 different countries. The company franchises and licenses about 55,000 stores worldwide and was recognized by the name of The Southland Corporation till the year 1999 The company is known to be the largest operator and franchisor of convenience stores internationally (7â€‘Eleven Profile, 2016). 7-Eleven Stores Pty Ltd, has become first choice of Australia in convenience stores. It is private owned company and has obtained franchise of 7-Eleven stores from the US based 7-Eleven Inc (About 7-Eleven Convenience Stores, 2016).
Problems & Issues
7-Eleven scandal occurred in the franchise convenience stores of Australia which highlighted the unethical practices prevalent in the company. The employees were underpaid and also get threatening from the senior management of the company if they raise their voices against their exploitation. The cash-back scheme of the franchisee forces the employees to pay back their wages (Karp, 2016). The employees were also enforced to stay in the office and work for late night hours. The employees of the company were mainly international students and accordance to their visa can work only for a time period of 20 hours to complete a given work. These students were threatened by the franchisees of breaking the visa regulations if they complain to Fair Work Australia about being underpaid (7-Eleven Scandal an Ethical Failure of Leadership, 2013). The employees were told that they would have to prove their underpayment in the court. The employees who were mainly international students believed in them due to lack of knowledge. Also, there were evidences of physical violence with the students and threatening made to their families overseas by the franchisee (Karp, 2016).
The main reason for the occurrence of 7-Eleven scandal was unlawful conduct from the franchisee. According to FWO’s report, the main factors responsible for the misconduct in the franchisee was absence of auditing and monitoring by the franchisor. The head office of franchise convenience stores in Australia does not pay any attention to employee complaints (Stricter laws for franchisors? Responses to the 7-eleven wage scandal, 2016). The employees working in the franchisees were mainly international students who were threatened and as such were afraid of reporting the misconduct by their employers (Marginson et al., 2010). These all factors were responsible for the underpayment scandal of 7-Eleven.
The Fair Work Ombudsman of Australia after the occurrence of employee underpayment scandal in 7-Eleven has scrutinized the duties of franchisors towards the franchisees. However, according to a franchisee agreement, franchisors and its franchisees are individual parties who are not connected with each other. Franchisors only provide their business model to the franchisee for carrying out its operational activities. Thus, as per the Franchising Code of Conduct, franchisors do not own any responsibility for the franchisees actions towards their employees (Rouse & McKavanagh, 2016). The scandal of 7-Eleven has highlighted the importance of introducing changes in the present Franchising code of Conduct so that all franchisees carry out their business in an ethical manner. The franchisors should own a control over the business processes and procedures of the franchisee to restrict them for indulging in any type of unethical practices (7- Eleven, wages and the Franchise Code: The story so far, 2016)
This can be done by conducting audit of the franchisees on a continuous basis to govern their organizational behavior. The auditing of franchisees on a regular manner would help in the identification of unethical practices prevalent in the organization. Also, strict employment laws should be enforced on the franchisee and also they should be made aware of the serious actions that can be taken against them in case of non-compliance with these laws (Rouse & McKavanagh, 2016). The franchisors on identification of misconduct from their franchisee should terminate the franchisee agreement. The Labor Party of Australia are emphasizing on reforming the workplace laws for ensuring employees protection after the occurrence of 7-Eleven scandal. In this context, it is becoming highly important for the franchisors to analyze and examine the legal action that can be taken against them in case of unlawful practices inculcated by their franchisees (Stricter laws for franchisors? Responses to the 7-eleven wage scandal, 2016).
As per the recent Coalition laws, franchisors are entrusted with huge responsibility of controlling and reviewing the franchisee business practices in order to ensure that they are in compliance with the workplace laws. The franchisee agreement should clearly state the duties and obligations of the franchisor and the franchisee in order to abide by the recent workplace laws. The disclosure of employee wages should be properly drafted and provided to the franchisee before entering into the franchisee agreement to avoid any discrepancy in future (Stricter laws for franchisors? Responses to the 7-eleven wage scandal, 2016). There was no monitoring and reviewing of employment reports by the franchisor in case of 7-Eleven scandal. This encouraged the employers of the company to underpay their employees and lead to their exploitation. Thus, franchisors should continually monitor and review the wages reports of the employees for ensuring that they are not underpaid. Also, franchisors must design a proper communication flow so that employees of the franchisees are able to reach the head office to report any type of issues faced by them. The franchisor should introduce necessary changes in the business structure of the franchisees on the identification of any type of problems encountered by them to pay out the employee wages (Rouse & McKavanagh, 2016).
Thus, the occurrence of 7-Eleven scandal has emphasized on the need of adoption of a proper regulatory framework to govern a franchisee agreement. The brand image of 7-Eleven Inc was negatively impacted by the employee underpayment fraud and it has to also provide compensation to the underpaid employees. The changes introduced in the Franchising Code of Conduct would also ensure the protection of good will of franchisors in a franchisee agreement.
Thus, it can be stated after the analysis of 7-Eleven scandal that an organization should carry out its business ethically. The presence of Law of Conduct is necessary in each and every organization to govern its organizational behavior.
7- Eleven, wages and the Franchise Code: The story so far. (2016). Retrieved August 12, 2016, from https://www.nra.net.au/7-eleven-wages-franchise-code-story-far/
7â€‘Eleven Profile. (2016). Retrieved August 12, 2016, from https://corp.7-eleven.com/corp/7-eleven-profile
7-Eleven Scandal an Ethical Failure of Leadership. (2013). Retrieved August 12, 2016, from https://planforpersonalsuccess.com/7-eleven-unethical/
About 7-Eleven Convenience Stores. (2016). Retrieved August 12, 2016, from https://www.7eleven.com.au/about-us
Karp, P. (2016). 7-Eleven workers beaten and forced to pay back wages, Senate inquiry hears. Retrieved August 12, 2016, from https://www.theguardian.com/australia-news/2016/feb/05/7-eleven-workers-beaten-and-forced-to-pay-back-wages-senate-inquiry-hears
Marginson, S. et al. (2010). International Student Security. Cambridge University Press.
Rouse, P. & McKavanagh, L. (2016). What the 7-Eleven Scandal means for Franchisees in Australia. Retrieved August 12, 2016, from https://rouselawyers.com.au/what-the-7-eleven-scandal-means-for-franchisees-in-australia/
Stricter laws for franchisors? Responses to the 7-eleven wage scandal. (2016). Retrieved August 12, 2016, from https://www.corrs.com.au/publications/corrs-in-brief/stricter-laws-for-franchisors-responses-to-the-7-eleven-wage-scandal/