Births, deaths and marriages 2016

From underpayment scandals to retail names on the rocks, we look back to the year that was in franchising. 

The $146bn Australian franchise sector has had a busy year. Franchise Australia 2016, the latest bi-annual survey of the sector conducted by the Asia-Pacific Centre for Franchising Excellence at Griffith University made the following insights:

  • The retail (non-food) industry dominates the Australian franchising sector, with 26 percent of brands operating in this segment.

  • Following the retail industry is the combined accommodation and food services sector which makes up 19 percent of franchise brands.

  • Fifteen percent operate in administration and support services, and 10 percent in other services such as personal services, automotive repairs and IT.

The numbers speak for themselves, but what did the headlines say in 2016?

Paying up for non-compliance

We can’t look back on 2016 without mentioning the big issue of underpayment which dominated the headlines. Starting with of course, 7-Eleven.

In January this year, 7-Eleven cut off two franchise agreements after it was revealed that staff were being underpaid within New South Wales stores. But that was only the beginning as more and more cases of systemic non-compliance, thousands of dollars in fines and claims of cash-backs and even battery at the hands of franchisees were revealed. 7-Eleven appointed Angus McKay as the new CEO and brought the wage repayment program in house.

The chain has since signed a deed with the Fair Work Ombudsman and made propositions for franchise reform.

But the convenience chain was not the only franchise business hitting the headlines for underpayment.

In November, a Yogurberry master franchisee was fined a whopping $140,000 for underpayment, and a Hobart-based Muffin Break franchisee shortchanged two employees $46,000.  

But the last few months has seen the rise of another brand in the non-compliance conversation; Caltex.

Starting with allegations that franchisees told employees to lie about their wages to the FWO, Caltex could now face a class action lawsuit.

And finally, embattled pharmacy chain Chemist Warehouse joined forces with the Fair Work watchdog this month after back-paying 6000 workers more than $3.5m.

Brands shutting down

The year also saw some big name retailers shutting down.

Starting with the fall of home improvement chain and Bunning’s competitor, Masters. By July, pizza franchise Eagle Boys had shut down all of its company-owned stores. But it came back to life after being bought by Pizza Hut.

The most recent retailer to go into voluntary administration was Howards Storage World, just last week.

Brands say “I do”

But it’s not all bad. There were some high profile mergers in the sector this year. In August, Australian Skin Clinics merged with Ella Rouge Beauty (acquired by Hairhouse Warehouse), becoming somewhat of a powerhouse brand in the beauty industry.

Another marriage in the same month was between Terry White Group and Chemmart. The franchise management entity was set to be renamed to reflect the multiple brands within the group and a broader health focus.

More recently, Retail Food Group (RFG) partnered with British Petrol (BP) looking to leverage RFG’s coffee and fast food capabilities with BP’s retail offering.

Overseas brands in Australia

There were a number of overseas brands that were born in Australia this year, some of those included:

After four busy franchising expos in Sydney, Perth, Brisbane and Melbourne and National Franchise Convention in Canberra also saw new players and familiar faces make an appearance.

Here’s to another year of franchising news in 2017 from Inside Franchise Business.