Behind the Headlines – Jason Gehrke

• First joint employer prosecution commences five years after laws introduced


• New owner for Boost Juice parent


• Former Subway international CEO invests in Australian health chain


• Former franchisor executives declared bankrupt


• Pizza Hut claims world's largest pizza


• Brand under fire for adding pronouns to staff name badges


• Insights into resolving franchise disputes


• New tips to leverage marketing budgets at Marketing Forum

First joint employer prosecution commences five years after laws introduced

The Fair Work Ombudsman (FWO) has commenced proceedings against Sydney-based coffee brand 85 Degrees for alleged non-compliance by eight of its franchised outlets which underpaid nine workers a total of $32,321. 

The FWO alleges that the franchisor should have reasonably known that its franchisees would underpay their workers following a previous action in 2015 resulting in an enforceable undertaking being given by the company to the FWO in 2015, and the franchisor’s knowledge of its franchisees’ financial circumstance, and their franchisees’ limited English capabilities and understanding of workplace laws. 

A total of 20 workers were impacted by underpayment or record-keeping and payslip violations. Just last year, the company was penalised $475,200 for exploiting young Taiwanese students under a purported internship arrangement, and is potentially facing penalties of up to $63,000 for each of the current violations. 

Changes to the Fair Work Act introduced in September 2017 designed to protect vulnerable workers introduced a form of joint employer liability for franchisors for wage underpayments by their franchisees unless they take reasonable steps to ensure workers are paid correctly. The FWO action against 85 Degrees is the first prosecution to be mounted since these laws were introduced. The brand does not appear to be currently listed on the Australian Government’s Franchise Disclosure Register, which is a mandatory requirement for franchisors.  Read more 1;  Read more 2

Listed franchisor's $10m settlement in ACCC action

The ACCC commenced legal action against RFG in December 2020 alleging the company engaged in unconscionable conduct and made false or misleading representations when dealing with franchisees. Specifically allegations related to payments made from the Michel Patisserie’s marketing fund that were not legitimate expenses and had not been adequately disclosed to, or agreed to, by the majority of franchisees, and the knowing sale or licensing of loss making corporate Michel’s Patisserie stores to franchisees. The marketing fund breaches occurred between 1 July 2012 and 30 June 2017 while the store sales took place between 1 January 2015 and 31 December 2018.

The enforceable undertaking details payments of $8.04 million to be made to franchisees, including a $5 million refund to Michel’s Patisserie’s marketing fund, and a further $1.82 million to waive the debts of franchisees. RFG must also pay a contribution towards the ACCC’s legal costs, implement a compliance program related to Australian Consumer Law and the Franchising Code of Conduct, and regularly report to the ACCC regarding actions taken and payments made under the undertaking.

Extensive media reports about RFG’s conduct toward its franchisees in late 2017 and early 2018 prompted the Federal Government to undertake another review of the Franchising Code of Conduct, which resulted in major changes to the Code in 2021, and the creation of the Franchise Disclosure Register later last year.  Read more 1; Read more 2; Read more 2; 

New owner for Boost Juice parent

The deal values Retail Zoo at approximately $350 million and includes the acquisition of shares from previous private equity owner Bain Capital, as well as part of the stake of founders Janine and Jeff Allis. New owner Adamantem is retaining the company’s current management, and expects to continue to roll out new stores for Retail Zoo brands Boost Juice and Betty’s Burgers. The Retail Zoo also operates CIBO Espresso and Salsa’s Fresh Mex, and across all brands has 750 company-owned and franchised stores worldwide. Sales from company-owned stores, royalties, franchisees’ fees and supplier rebates increased 24.3% in the 12 months to June 30, 2022, to $178.2 million. Net profit for the same period was $14.6 million.  Read more 1; Read more 2

Former Subway international CEO invests in Australian health chain

City Cave has approximately 50 outlets in Australia providing float therapy, massage and sauna services, and won the NextGen in Franchising Award at the 2019 International Franchise Association annual conference in Las Vegas, an annual competition which invites young entrepreneurs from around the world to submit innovative business ideas to grow via franchising.  Read more

Former franchisor executives declared bankrupt 

The Australian Competition and Consumer Commission (ACCC) commenced a three-year investigation into Geowash in 2016, the same year it was placed into voluntary administration. In 2019 it was found guilty of offences including acting unconscionably and making false and misleading representations to induce franchisees to join the brand.

The company was fined $4.2 million in January 2020, including $1.045 million against its former director Sanam Ali, and $656,000 against former national franchise manager Charles Cameron. Ali and Cameron were also disqualified from managing corporations in Australia for five and four years respectively. Consumer redress amounts of $500,000 each to be paid by Ali and Cameron have gone unpaid as both have since been declared bankrupt.  Read more 1; Read more 2 

Pizza Hut claims world's largest pizza

The “Big New Yorker” was created in California with the 13,990 square-foot pizza yielding 68,000 slices which were immediately donated to local food banks after the feat was documented for a Guinness World Record.  Read more

Brand under fire for adding pronouns to staff name badges

The high-street bakery chain with more than 2,000 outlets across the United Kingdom introduced the concept following a Your Ideas Matter consultation with employees in 2022. Staff can choose to add any pronouns including ze, zir, and it, which are known as neopronouns and are not recognised in traditional language.  Read more

Insights into resolving franchise disputes

The interactive and live online workshop will be conducted in two parts on March 14 and 16 from 1pm-3pm AEDT, and will include strategies and tactics to avoid disputes and repair franchise relationships, as well as content on common causes of disputes, methods to avoid unnecessary escalation, maintaining continuity of support services during disputes, and the importance of trust, transparency and respect in the franchise relationship. For more information, click here.  

New tips to leverage marketing budgets at Marketing Forum

The highly-interactive Forum is the only event of its kind for franchisor marketing personnel to share their experiences and insights into the execution of effective marketing campaigns while leveraging often modest budgets and managing the input and interest of franchisee stakeholders.

The program features case studies from franchise brands which are leaders in their respective market segments, expert panels and group discussions on current and topical marketing issues, including a detailed panel session on how to operate an effective and compliant loyalty program. For more details, click here.