7-Eleven: The Price of Convenience

By Adele Ferguson and Klaus Toft

Updated September 30, 2015 14:25:00

Monday 31 August 2015

Gold Walkley Award-winning reporter Adele Ferguson returns to Four Corners with an investigation into the 7-Eleven business empire with revelations of dodgy bookkeeping, blackmail and the mass underpayment of its workforce.

7-Eleven is the business built for our convenience: selling the staples of life like milk, bread and phone cards, 24 hours a day, seven days a week. With more than 600 stores around Australia, they serve around six customers every second and generate more than $3 billion in sales.

"Welcome to a world of opportunity, brought to you by 7-Eleven, the brand that's world famous." 7-Eleven marketing

Thousands of people around the country are employed in 7-Eleven stores, run by franchisees.

But as this joint Four Corners/Fairfax investigation reveals, it's a business model that relies on the exploitation of its workforce.

"They can't run 7-Eleven as profitably and successfully as they have without letting this happen. The reality is it's built on something not much different from slavery." 7-Eleven insider

Based on painstaking research and insider accounts, the investigation has been months in the making. The findings will be released in a series of articles, online stories and social media content through Fairfax Media and ABC platforms culminating in the Four Corners broadcast on Monday night which will detail the full revelations.

7-Eleven: The Price of Convenience, reported by Adele Ferguson and presented by Kerry O'Brien, goes to air on Monday 31st of August at 8.30pm. It is replayed on Tuesday 1st of September at 10.00am and Wednesday 2nd at midnight. It can also be seen on ABC News 24 on Saturday at 8.00pm, ABC iview and at abc.net.au/4corners.

Transcript

31 August 2015 - 7-Eleven: The Price of Convenience

KERRY O'BRIEN, PRESENTER: Tonight on Four Corners: as 7-Eleven goes into damage control, we expose the wage scam at the heart of the multi-billion dollar convenience store empire.

7-ELEVEN WHISTLEBLOWER: There's been a sense of panic in the office. We've suddenly have gone to from turning a blind eye to digging up as much as we can on franchisees and then putting it on the record. And in the short time we've been doing that - the last three or four weeks - almost every franchisee has been caught not doing the right thing, that is to say: not paying correctly.

The only reason that anything has changed is that I think the company now fears that they're going to be exposed.

ADELE FERGUSON, REPORTER: By Four Corners?

7-ELEVEN WHISTLEBLOWER: It seems so.

KERRY O'BRIEN: There have been many inquiries instigated over the years as a result of Four Corners programs, but we've never actually had one announced before the story's gone to air - until now.

The story is our joint investigation with Fairfax Media, which reveals a pattern of widespread wage fraud inflicted on workers across many of the 620 convenience stores run by the 7-Eleven chain across Australia - an empire that generates more than $3 billion in sales a year.

We will clearly show this practice cannot be explained away simply as the fault of a few rogue franchisees. It's done with the complicit knowledge of head office.

At the top of the chain: a brother and sister who have amassed a fortune. In contrast, we have many examples of workers at 7-Eleven outlets being seriously underpaid or not paid at all, as well as falsified records and simple blackmail.

Having declined to answer the many awkward questions we'd have liked to ask them for the program, the 7-Eleven head office this afternoon announced that they would establish an independent panel, chaired by "an eminent and qualified Australian" to examine the allegations.

Our reporter is Adele Ferguson.

ADELE FERGUSON, REPORTER: In Australia, one family has built a fortune running a vast franchise chain: some 600 stores spread across the country. Yet most Australians have never heard of the man behind it all.

His name is Russ Withers. He is the founder and chairman of 7-Eleven Australia, an empire worth an estimated $1.5 billion.

(To Allan Fels) Overall, what was your impression of Russ Withers?

ALLAN FELS, FORMER CHAIRMAN, ACCC: Ah, a forceful businessperson.

ADELE FERGUSON: But has this massive fortune been built on the backs of 7-Eleven exploited workers and franchisees?

PRAKASH KUMAR, FORMER 7-ELEVEN STORE MANAGER: It scares me when I think about how I live with my life with $10 and how all the international students at the moment: they are being underpaid and how they are living in this economy. It's pretty hard.

ADELE FERGUSON: Prakash Kumar worked as a 7-Eleven store manager in Brisbane. He is one of thousands of workers who are overworked and underpaid.

When they don't get paid, they don't eat.

PRAKASH KUMAR: One of the guys: he didn't get paid for almost seven or eight weeks again. And he doesn't live. And they go, "What's wrong? Are you all right?" And then he says, "I'm hungry. I haven't eaten from, like, the last three days and nights. Can you give me the sandwiches that have expired; that you are going to put in the bin?" I ended up paying for his fresh sandwich.

At that time I was in the same scenario: I haven't got paid for eight weeks, so...

And every morning I used to go to the store. First thing I would hear is: "Hey, Prakash, I haven't got paid for, like, this many weeks. Can you please talk to Moobin?" And I've, I was in, "I'm in the same boat, mate."

ADELE FERGUSON: Workers claim they are being paid half the award wage or less - if they get paid at all.

(To Prakash Kumar) Why didn't you quit?

PRAKASH KUMAR: There's a lot of students that didn't get their pay where I used to work, because they left the job. So you leave the job because of the franchisee and you don't get the pay because of the franchisee, so you lose. You are in the lose/lose situation, you know? I mean, like, it has to be, you know, fixed.

ADELE FERGUSON: Michael Fraser is a consumer advocate.

MICHAEL FRASER, CONSUMER ADVOCATE: Somebody had to do something. I didn't see anybody else doing it. I was compelled to help.

ADELE FERGUSON: He's been watching 7-Eleven since 2012, when he moved to the Gold Coast, right next to a store.

MICHAEL FRASER: I'd go there frequently, every day for milk and bread and things of the sort. And from time to time I'd meet a guy there named Sam and I'd make, sort of, jokes about: "You must be getting paid a lot of money, you've got a never-ending shift." And he told me: he said, "No, I don't get paid good money. I don't earn good money. I, ah, I get $12 an hour."

One day he, he lent over the counter to me and he said, "Michael, this is not just this 7-Eleven; it's all 7-Elevens. They all do illegal wages."

(Footage of Michael Fraser and Sam Pendem talking over dinner)

SAM PENDEM, FORMER 7-ELEVEN EMPLOYEE: So that's repeated in findings: like, ah, every time they come to the store they check for the rosters.

MICHAEL FRASER: Yep.

ADELE FERGUSON: When Michael Fraser kept asking questions, Sam Pendem invited him to dinner and told him what was really going on.

MICHAEL FRASER: So did you see the payslip?

SAM PENDEM: I have seen the payslip on the...

MICHAEL FRASER: For Mohamed's wife?

SAM PENDEM: Wife, yeah. She's on payroll as well.

SAM PENDEM (voiceover): I used to work 70 hours; sometimes 80 hours. Low wages, no respite, no breaks at all and, eh, underpaid everything.

So that is the reason only has to do more hours so to compensate, to get that money. So run for a week, surviving here. They treat like dogs. He just, like, treats like an an- slum dogs.

ADELE FERGUSON: Sam's experience compelled Michael to visit dozens of 7-Eleven stores to investigate whether it was a few rogue franchisees or something far more widespread and sinister.

(Footage of Michael Fraser visiting 7-Eleven stores)

MICHAEL FRASER: Hi. Just doing a survey, finding out how much people get paid in 7-Elevens. Are you below 20 or above 20?

MICHAEL FRASER (voiceover): I've been to 60 stores in three states and spoken to hundreds of people. Every single person has been underpaid.

(To retail worker) Thank you so much. See you later.

ADELE FERGUSON: Michael now liaises with many victims in their homes - to avoid the extensive surveillance systems that operate in every store.

He has not yet met a single worker being paid the minimum award wage, today set at more than $24 an hour.

PRAKASH KUMAR: I was getting paid $10 flat: no weekend rates, no penalty rates, nothing. It was just $10 for day and night, whatever.

SAM PENDEM: Pay is $10, he offered me too - an hour.

MOHAMED RASHID ULLAT THODI, FORMER 7-ELEVEN EMPLOYEE: Same: no difference. Ten dollars an hour, minus tax.

YASHWANTH RADCHA, FORMER 7-ELEVEN EMPLOYEE: Fifteen dollars per hour.

PRANAY ALAWALA, FORMER 7-ELEVEN EMPLOYEE: Sometimes he paid $15 or $18.

(Footage of Adele Ferguson and Pranay Alawala driving through the streets of Brisbane)

PRANAY ALAWALA: My friend works in this 7-Eleven. He gets paid $12 per hour. There are about 70 stores I can show you that are like that.

ADELE FERGUSON: Pranay Alawala, a student on a visa from India, quit his job after suffering a back injury lifting boxes in a Brisbane 7-11 store where he worked.

PRANAY ALAWALA: I never got that much pain in my life. I thought, I'll go back to my home town so at least my Mum can look after me. So then my friends helped me. Now I can stand. I can work.

I don't want to repeat this again. I want to stand behind this. I want to raise a voice. I want to say that everyone has to pay the pay rate as per the Government.

(Footage of Michael Fraser on phone)

MICHAEL FRASER: When-when do you reckon you could get together? We could have a look?

(Footage ends)

ADELE FERGUSON: Stories like Pranay's prompted Michael Fraser to call 7-Eleven head office to fill them in on wage abuse throughout their stores.

MICHAEL FRASER: I phoned them and I wrote to them. Ah, they were quite dismissive on the phone. I said, "Well, I've got evidence here of people being underpaid in a store. Might you want to know about that? I would like to give you the evidence." And they told me on the phone, "We're not interested."

ADELE FERGUSON: In the past few weeks, Four Corners has spoken to many disaffected 7-Eleven workers. Our investigation reveals the extent of wage abuse.

It asks: how much does head office actually know about the exploitation? Indeed, is it complicit?

7-Eleven started humbly enough when Russ Withers and his sister, Bev Barlow, brought the franchise licence to Australia in 1977. Russ Withers, the son of a Melbourne grocer, opened the first 7-Eleven store near where they grew up in the working-class suburb of Oakleigh. The company took advantage of the controversial move to extend trading hours.

Later Withers took on the supermarket giants, expanding the business into the discount petrol market.

RUSS WITHERS, FOUNDER AND CHAIRMAN, 7 ELEVEN AUSTRALIA: The margin of, that's being passed on through four-cents-a-litre discount has got to come out of the grocery price, so it means either higher prices at the supermarket shelves or lower profits for shareholders. And I doubt whether the latter would be acceptable.

ADELE FERGUSON: There are now 620 7-Eleven stores in Australia, earning a profit of more than $140 million a year for head office.

The Withers and Barlow families own the business outright. Their lives have all the trappings: private jets and sprawling mansions. In May, Bev Barlow spent $20 million on a waterfront mansion in the Melbourne suburb of Brighton.

Russ Withers owns a 60-acre country property in the Yarra Valley, worth an estimated $10 million. He is a keen equestrian and his love of sport secured him a highly coveted position on the Australian Olympic Committee.

Their $1.5 billion empire includes the Australian arm of the Starbucks coffee chain, 300 Mobil petrol stations and an extensive property portfolio.

But much of the wealth of this intensively private family seems to be built on a business model that relies on exploiting some of the most vulnerable people in our society: cash-strapped students, visa holders, aspiring Australian citizens.

ALLAN FELS: When a franchisee breaks the law, there is a question of whether the head office itself is in some way abetting the behaviour. There is a provision in the Fair Work Act that if you abet unlawful behaviour, ah, by others then you are liable for a penalty - admittedly a very small penalty.

Franchising is a big part of the economy these days - $170 billion - so it's got to be run right and in accordance with Australian standards.

(Footage of Michael Fraser on phone)

MICHAEL FRASER: Hi, Stewart. Yeah, I've got this really, um, interesting thing about 7-Eleven.

ADELE FERGUSON: When 7 Eleven head office ignored Michael Fraser's calls he contacted a lawyer he knew, Stewart Levitt, who specialises in class actions.

STEWART LEVITT, CLASS ACTION LAWYER: Did he make notes or anything or keep proper records?

MICHAEL FRASER: Yeah. It, um, it seems like he...

(Footage ends)

STEWART LEVITT: He said he'd met a number of students who were being ripped off and it seemed to me that this was an opportunity for mass rorting of not only immigration laws, superannuation laws, the taxation laws, the employment laws and also abuse of, ah, people in Australia who deserve better.

ADELE FERGUSON: Australia has well-publicised challenges with illegal immigrants but the bigger issue may be the widespread exploitation of Australian visa holders.

The 7-Eleven workforce is built on the backs of 4,000 workers, many of them overseas students on visas. Students are only permitted to work 20 hours a week without breaching their visa conditions, which makes them easy targets for exploitation.

STEWART LEVITT: They can't work more than 20 hours a week. And so many students go and work for, ah, people like 7-Eleven who offer them 40 or 50 hours a week at a reduced rate of pay which is so, which is in total contravention of, ah, all of our labour laws and other laws. And, ah, in doing so they're breaching the conditions of their visa which gives, which puts the franchisee in a position where he can blackmail these people into silence. And once they've exposed themselves to that vulnerability, they have to keep their mouth shut.

ADELE FERGUSON: And they do?

STEWART LEVITT: And they do - or mostly they do. We've, we've encountered some people that don't, but they're few and far between.

Mohamed Rashid Ullat Thodi is living in Australia on a student visa. When he arrived in 2008, he was dux of his university in India.

He started working at a 7-Eleven store in Geelong, where his boss insisted he work up to 60 hours a week.

Mohamed was warned not to complain; that if the authorities learned he was working more than 20 hours, he would be deported.

MOHAMED RASHID ULLAT THODI: They wouldn't say that they will be in trouble; they will say, "You're in trouble. You'll get deported because you're working more than 20 hours. You're breaching visa, visa conditions."

(Adele Ferguson and Mohamed Rashid Ullat Thodi examining Mohamed's payslips and diary)

ADELE FERGUSON: Mohammed, tell me how the scam worked. Let's pick a date.

(Voiceover) According to his payslips, Mohamed was being paid award wages.

MOHAMED RASHID ULLAT THODI: So it shows 24.5 hours into $20 dollars an hour.

ADELE FERGUSON: But he was only paid for half the hours he actually worked every week. Workers call this the "half pay" scam.

(To Mohamed) So to all intents and purposes, this looks right.

MOHAMED RASHID ULLAT THODI: Yes. That's how the, it works. It's exactly the half number of hours but the double the p- double the pay. So that'll be the, exactly the same. But...

ADELE FERGUSON: That's how the scam works?

MOHAMED RASHID ULLAT THODI: Yes. That's how the, it works.

Let's say you're working 20 hours. In your payslip it'll only show, ah, 10 hours. I did enquire about it. They said be-, "So that you can work more hours." So basically you can work up to 40 hours and in your payslip it'll, it'll be still showing 20 hours.

(To Adele) If I compare that date...

(Voiceover) So that I- Immigration wouldn't know about the hours that you work. So that's when I started thinking: OK, this is actually a scam.

ADELE FERGUSON: For little pay, Mohamed was taking big risks. Working the late shift was dangerous.

MOHAMED RASHID ULLAT THODI: Every weekend we get fights, arguments, people coming in and, you know, maybe they- th- they would be angry outside of the store, they come in and pick on us because we are not Australians.

Like, once there's, there was a guy coming into store and peed inside the store. Couple of times we did have, you know, bad fights and things.

ADELE FERGUSON: 7-Eleven's 24-hour trading makes it a target for crime. On average, every three days a 7-Eleven store is robbed.

Sam Pendem, a student from India, lived through two armed robberies during his time at 7-Eleven - which were captured on the store video.

SAM PENDEM: He just, ah, start screaming and yelling at me: "Get into the counter. Give me the money." And, um, get a little panicked because he's too close to me with the knife. So he took the money and after that he asked for some smokes, like a customer: "Can I have a couple of smokes?" "Oh, OK, fine. Take it." And he ran away. And then I called police and security people and called my boss as well. They came.

ADELE FERGUSON: What did your boss say?

SAM PENDEM: Oh, he said he's not happy. Ah, "You should fight or do, throw the till on him: something. Catch him. Why did you give the money," like? Then he get aggressive, like, ah: "Why did you do that? You should fight." So... get angry on me, rather than sympathy. Like, ah... yeah, that's felt very bad for me.

ADELE FERGUSON: So he wanted you to fight the robber?

SAM PENDEM: Yeah, fight the robber. Or throw the till on him, like, ah, throw the money or something. Catch him.

ADELE FERGUSON: Risk your life for $180?

SAM PENDEM: Something like that.

ADELE FERGUSON: Mohamed's situation deteriorated when his franchisee insisted he work at the South Yarra store, 80 kilometres from where he lived in Geelong.

MOHAMED RASHID ULLAT THODI: I was doing double degree in architecture and construction management at Deakin in, ah, um, Geelong. Then third semester onwards I was, ah, in South Yarra. Working, um, in South Yarra was basically doing 10-hour shift and on top of, up and down, four hours on travel. So that's 14 hours gone. Then, ah, come back home: uni. And then so sleeping will be pretty less: probably two or three hours a day.

ADELE FERGUSON: So how much were you getting paid at South Yarra?

MOHAMED RASHID ULLAT THODI: Probably about $75 for 10-hour work plus four hours', four to five hours' travel. So you're getting only $5 in your hand. So it's not worth it.

ADELE FERGUSON: For Mohamed, the figures were no longer stacking up. He was working virtually around the clock at 7-Eleven to pay university fees of $10,000 a semester.

Deprived of sleep and time to study, he was failing on all counts. Down and out, he took one last shot. He decided to risk being deported by reporting the wage scam to the regulator, the Fair Work Ombudsman.

ADELE FERGUSON: What was it about that case that made Fair Work want to get involved?

NATALIE JAMES, FAIR WORK OMBUDSMAN: This was one of, um, the early examples we saw of a matter involving, um, deliberate manipulation of the records. This was a case where we had six employees who were underpaid around $85,000, whi- which is a large amount for these workers.

ADELE FERGUSON: The court found systematic exploitation of six highly vulnerable workers.

The judgement said that 7-Eleven management admitted "that non-compliance with workplace laws was relatively common among 7-Eleven franchises."

Despite this ruling, Mohamed and his co-workers are still waiting to get the tens of thousands of dollars they are owed, because the franchisee was put into liquidation.

MOHAMED RASHID ULLAT THODI: Although you won the case, technically you lost it because you lost your money, you lost your job.

ADELE FERGUSON: Mohamed's case triggered two separate raids by Fair Work: a total of 76 stores.

(To Natalie James) What was the outcome of the first set of audits?

NATALIE JAMES: The underpayment of, or the- the recovery of some $172,000 that we were able to deliver back into the hands of, of around 80 workers. So that was across 20 stores in Sydney and Melbourne and th- they were significant underpayments.

And, and I have no doubt that it was as a result of that work that 7-Eleven formed the view that they needed to do something about compliance with workplace laws in their franchisees.

The, um, outcomes of that audit were better than the previous ones, which perhaps lead us to think - wrongly, as it turns out - that 7-Eleven was, ah, improving; that 7-Eleven operations were picking up their act, so to speak.

ADELE FERGUSON (To Stewart Levitt): Do you believe you have a legal case against head office?

STEWART LEVITT: Oh, I think there's a, a legal case not only against head office but also against the, ah US, parent company.

ADELE FERGUSON: In the United States, 7-Eleven stores are also drawing attention for illegal work practices.

REPORTER (US TV news, 2013): The three local men indicted on federal charges of…

ADELE FERGUSON: In 2013 the Departments of Justice and Homeland Security raided 14 7-Eleven stores.

REPORTER (US TV news, 2013): The locations at West 26th Street in Norfolk; London Boulevard in Portsmouth; and two in Chesapeake: one on Taylor Road, the other on Portsmouth Boulevard.

ADELE FERGUSON: In the US, special agent Gabriel Garcia from the Department of Homeland Security is determined to come down hard on this type of wage abuse.

GABRIEL GARCIA, DEPUTY SPECIAL AGENT, DEPT. OF HOMELAND SECURITY: Within this office, as well as HSI globally, ah, it is a priority for us to pursue these types of investigations: showing the community and other companies that this is something that we were, we will pursue. And, ah, I- I strongly believe that we, we are deterring other similar conduct from other companies.

ADELE FERGUSON: Garcia believes this is not an isolated case at 7-Eleven stores.

GABRIEL GARCIA: It's very widespread. I think that it's, ah, it's a conduct that's, ah, widely used within the fra- those franchises.

ADELE FERGUSON: At least one Seven Eleven operator is now behind bars.

GABRIEL GARCIA: He pled guilty to conspiracy to commit wire fraud and conspiracy to harbour undocumented aliens for financial gain which, ah, he received a seven-year sentence. Additionally, ah, he was ordered to pay US$2.6 million in restitution to 30 employees.

STEWART LEVITT: If you compare that to the limp results which Fair Work Australia has achieved, there's no comparison. People go to jail in America for the sort of things that people don't even get prosecuted for in Australia.

SONG (to the tune of '16 Tons' by Tennessee Ernie Ford): I bought a 7-Eleven and what'd I get? / Stalked and bullied and deeper in debt / They pool that money and American dreams / Sellin' ice-cold Slurpees and magazines / I bought a 7-Eleven and what'd I get?...

ADELE FERGUSON: In Pennsylvania, franchise industry veteran Sean Kelly has set up a website called "Unhappy Franchisees." He claims it's not just the workers being exploited, but franchisees as well.

SEAN KELLY, PUBLISHER, UNHAPPYFRANCHISEE.COM: Many 7-Eleven franchisees have likened their relationship to slavery; um, that they feel like they're slaves to the corporation. Um, however, slaves don't have to pay to be slaves.

ADELE FERGUSON: Sean Kelly says head office controls virtually every aspect of how stores are run.

SEAN KELLY: 7- Eleven will claim that the franchisee is the employer and, ah, and all of that. And that is a standard response to labour issues from all franchisors.

However, 7-Eleven has a very central role in paying of these, ah, workers, because they've got, ah, they- they do all the payroll and they do all the, the back-end work.

When a company has that much control over people who are supposed to be business owners, a lot of these abuses can occur. And, you know, right now, eh, anybody who's thinking of buying a franchise - you know, a 7-Eleven franchise - has to take a hard look at what they're really getting.

ADELE FERGUSON: In Australia, too, there is disquiet - even inside head office.

A whistleblower has come forward on the condition of anonymity.

7-ELEVEN WHISTLEBLOWER: It's something which has bothered a lot of people, including myself. And it's something which you just can't... you get to a point where you just can't let it go for any longer.

You know, too many people are being exploited for us to just carrying on turning a blind eye. Enough is enough.

A lot of us know the kids who work at these stores pretty well. You see them every week and you know that they're working really hard for their future. They're usually students and you can... you know that they know that you're in on it. And you feel guilty. You feel sick. You feel like you're part of the exploitation. You're, you're just letting it happen.

But also you feel bad for the franchisees. A lot of those guys, ah... they're not all bad people. They're just trying to make a future, but they're, they're trapped. They've bought into a system which: well, they have to exploit kids to get by or they have to be exploited themselves. So you just feel... you just feel like everyone's in it: caught in a trap, aside from maybe, perhaps, the guys at head office.

ADELE FERGUSON: Under the standard 7-Eleven franchise agreement, head office takes 57 per cent of gross profit and the franchisee gets the remaining 43 per cent.

Out of its share, head office covers costs such as rent and maintenance. Employee wages come out of the franchisee's cut.

STEWART LEVITT: There's a real inducement in the store management agreement for them to minimise their payroll in order to justify their own drawings. And that's, that's actually a provision in the, in the agreement itself.

NATALIE JAMES: The 7-Eleven franchise model is a highly controlled model and so head office needs to take some responsibility for the system that they've put in place, given the prevailing pattern we're seeing of fabrication of records and underpayment of workers in its operation.

(Adele Ferguson and Michael Fraser in home office)

MICHAEL FRASER: Ah, thi- this is a recording that I made the other day.

ADELE FERGUSON: Consumer advocate Michael Fraser recorded a call he made to an agent who sells 7-Eleven franchises.

The conversation turns to award wages and head office.

FRANCHISE AGENT (recording of telephone conversation): Nobody pays their staff full wage, man. That's the thing. You, you wouldn't be able to afford to run it profitably if you were paying those wages.

MICHAEL FRASER (recording): Wow.

FRANCHISE AGENT (recording): It's impossible. There's no way. They are paying $12 bucks an hour. They all pay $12 bucks an hour.

MICHAEL FRASER (recording): Would 7-Eleven know this?

FRANCHISE AGENT (recording): It's not of their concern. They just, they just look the other way. All they are concerned with is getting their 57 per cent.

You don't buy a 7-Eleven, because they're shit. Right?

MICHAEL FRASER (recording) (laughs): I appreciate your honesty.

FRANCHISE AGENT (recording): Literally, they're shit. You don't need a 7-Eleven. There's, there's a reason why you don't see any people like you owning them: that's because you know that, you know, you're going to figure out that they're shit. Save your money.

(Footage secretly shot by Michael Fraser of meeting at 7-Eleven store)

ADELE FERGUSON: Michael Fraser then decides to meet agents and a franchisee selling a franchise in Brisbane. He secretly films the encounter.

Michael first meets the agents, a husband and wife team.

MICHAEL FRASER (off-screen): Are you Christina?

AGENT (laughs): Yeah. Michael.

MICHAEL FRASER: Nice to meet you.

AGENT (shaking hands): Nice to meet you.

MICHAEL FRASER: (Inaudible), nice to meet you. You're business partners?

ADELE FERGUSON: He then meets the franchisee.

MICHAEL FRASER: Nice to meet you.

FRANCHISEE: Nice to meet you. Michael?

MICHAEL FRASER: Michael.

FRANCHISEE: Michael, yeah, yeah. Good to see you, mate.

ADELE FERGUSON: The franchisee shows Michael the financial statements for the store, prepared by head office.

FRANCHISEE: $110,000, right?

MICHAEL FRASER: Yes.

FRANCHISEE: Profit.

ADELE FERGUSON: They then discuss pay rates.

MICHAEL FRASER: So what is night-time pay for here, then?

FRANCHISEE: Night-time normally is about $11, $12?

MICHAEL FRASER: Oh, that's good.

FRANCHISEE: Yeah! (Laughs)

MICHAEL FRASER: Mmm.

ADELE FERGUSON: The conversation then turns to the hiring of staff illegally, such as people without visas.

MICHAEL FRASER: OK. And they have to have a visa, do they?

FRANCHISEE: Of course, yes.

MICHAEL FRASER: OK.

FRANCHISEE: Or you can hire someone without visa. You can.

MICHAEL FRASER: That would...

FRANCHISEE: Oh yeah. You just... You know, you can. It's totally up to you, so you know…

MICHAEL FRASER: We, we can, um... yeah, we can get around that.

FRANCHISEE: If you hire someone without visa: like, $5 an hour, you know.

MICHAEL FRASER: Ah.

(Laughter)

FRANCHISEE: Pretty (inaudible) Sure.

(Footage ends)

(Footage of Adele Ferguson and Michael Fraser looking over documents)

MICHAEL FRASER: If you have a look here, you'll see in the year 2013...

ADELE FERGUSON: Right...

MICHAEL FRASER: ...the payroll...

ADELE FERGUSON: Later, Michael and I try to make sense of the financial statement.

MICHAEL FRASER: This business in 12 months is spending $64,000 on payroll.

ADELE FERGUSON: And how many staff does this shop have?

MICHAEL FRASER: Apparently six.

ADELE FERGUSON: So six staff, 24 hours a day, seven days a week...

MICHAEL FRASER: Yeah. And not only...

ADELE FERGUSON: That seems crazily low.

MICHAEL FRASER: It doesn't add up.

ADELE FERGUSON: Four Corners asked Allan Fels, the former chairman of the ACCC, to look over the 7-Eleven business model and the 57-43 per cent profit split.

ALLAN FELS: My impression - my strong impression - is that the only way a franchisee can make a go of it in most cases is by underpaying workers; by illegal behaviour. I don't like that kind of model.

ADELE FERGUSON: Would you sign a 7-Eleven franchisee agreement?

ALLAN FELS: I would never sign an agreement with 7-Eleven, because the only way of making profit in many cases is to underpay workers and to break the law.

ADELE FERGUSON: In every 7-Eleven store, sophisticated surveillance systems monitor and track each and every item and worker. Each Slurpee cup, each chocolate bar is tracked by a high-tech inventory system managed from head office.

Even the store temperature is monitored.

STEWART LEVITT: They have surveillance, ah, universal 24/7 surveillance on each of their, ah, franchisees, which is not only intended to maintain compliance with systems but also to maintain a watch over the staff. And this is not only, ah, visual surveillance; it's also auditory surveillance.

ADELE FERGUSON: 7-Eleven head office invests in extraordinary store surveillance and it manages the payroll of staff. And yet it claims ignorance when it comes to widespread wage abuse.

ALLAN FELS: It's just impossible to believe that they're unaware of it. I mean, a franchise store with 600 outlets or more would know what's going on.

ADELE FERGUSON: On September 13 last year, Fair Work raided another 20 7-Eleven stores across the country. It was the third raid in six years.

Again, the investigators took photos and interviewed staff, finding further evidence of widespread wage fraud by franchisees.

The regulator is now turning its attention to head office.

NATALIE JAMES: The question that I would put to 7-Eleven is: what's your contribution to this problem, to this conduct? We hear stories of some of these franchisees being put under quite a degree of financial pressure. What is 7-Eleven head office doing to ensure that the response to that pressure is not ripping off their workers?

ADELE FERGUSON: 7-Eleven head office is ultimately answerable to the board, which is led by major shareholder and chairman Russ Withers.

A key role of any board is to ensure a company properly manages its risk and compliance and protects its reputation.

It begs the question: what is this board and this chairman doing to address allegations of wage abuse?

Allan Fels has met Russ Withers several times in his role at the ACCC.

(To Allan Fels) The chairman, Russ Withers, is also the major shareholder. What sort of obligation does he have to clean this up?

ALLAN FELS: He obviously has a deep obligation. And there are also not only moral and legal obligations; there are reputation issues for 7-Eleven. Who will want to shop at 7-Eleven if, when you're going in there, you know that, ah, the law is being broken?

ADELE FERGUSON: During this investigation, Four Corners has endeavoured to speak to Russ Withers. We tried to catch him at his country estate.

(Footage of Adele Ferguson at front door of Russ Withers' rural property)

PERSON (off-screen): Hello.

ADELE FERGUSON: Hello. It's Adele Ferguson from Four Corners. Could I speak to Russ Withers, please?

PERSON: They're not home, sorry. They're not home at the moment.

ADELE FERGUSON: Do you know when they'll be home?

PERSON: I'm not really sure.

ADELE FERGUSON: Thank you.

(Footage ends)

ADELE FERGUSON (voiceover): Mr Withers and 7-Eleven head office would not be interviewed, nor would they put a figure on the number of franchisees exploiting workers.

Four Corners has obtained internal head office documents that reveal, in July and August, 69 per cent of franchisees surveyed had payroll compliance issues, including fraud and falsifying timesheets.

The document shows that the store surveillance is picking up fraudulent behaviour.

In fact, the misconduct by franchisees is even worse than 69 per cent, according to the insider.

7-ELEVEN WHISTLEBLOWER: It's almost 100 per cent of franchisees who engage in wage fraud. So head office are not just turning a blind eye: it's a fundamental part of their business. They can't, run 7-Eleven as profitably as they have without letting this happen. The reality is: it's built on something that's not much different from slavery.

ADELE FERGUSON: In February 2014 Russ Withers jetted off to Sochi in Russia, as an official of the Australian Olympic Committee, to enjoy the winter games. Back in Australia, some 7-Eleven workers finally took their complaints to the regulator.

Prakash Kumar's boss was ultimately fined $7,000 for underpaying him.

PRAKASH KUMAR: The Fair Work gave me a letter, saying that he has underpaid me $21,000 - approximately somewhere around - for one year, last one year of my employment with him.

ADELE FERGUSON: But Prakash Kumar will never see the money he is owed because the company went into liquidation. His former boss left the court in a black Porsche.

PRAKASH KUMAR: After all that - after all that frustration, after all the pain, travel, after all these interviews, recorded interviews - it's been a year and the franchisee, 7-Eleven franchisee has sold the business. He deregistered the company.

And, ah, I- as far as I know - I heard it from an outer source - all the money is in his family trust. There is a very less chance that we can- I can claim it later on.

ADELE FERGUSON: Prakash says there are thousands of students just like him, many pushed to breaking point.

PRAKASH KUMAR: One of the guys: he was so desperate, he needed to have money. He used to work three, four, five nights in a week, in a row.

And then he didn't get paid for seven, eight weeks and then he just finally gave up and stood outside the store with a banner, saying that: "This 7-Eleven hasn't paid me for," like, you know, "three months. Can you please help?"

ADELE FERGUSON: 7-Eleven head office was notified. It sent the closest representative to the store to fix the problem.

Prakash says head office told the employee to go to Fair Work. Head office then tipped off the boss, who called the employee.

PRAKASH KUMAR: And then he says, "All right. Get the facts straight. First thing: if you make a complaint, I'm gonna get you deported because in my store I have a proof, with your signature, that you have worked more than 20 hours. That's gonna put you in trouble first thing and you're gonna get deported.

"For me it's all right. I'll get couple of thousand dollar fine, maybe, and I'll pay it off your salary - which is pending still. So you decide who loses."

ADELE FERGUSON: The threat worked.

PRAKASH KUMAR: And then the, the guy with the placard outside the store: he comes back from the Fair Work and talks to me and say- explains me what happened and sits down on the floor in front of- in the broad daylight, in front of the customers and starts crying.

He says, "What can I do? How- where can I get a help? Because I try to go to Fair Work; they threatened me. I tried to ask the help from head office; they send me to Fair Work. So where do I go now? What do I do?"

He started crying, literally like a child in the, sitting down on the floor. I couldn't do much. I said, like, all I said to him: "Mate, you need to go home now. We'll talk later on." That's what I said to him and just, you know, went on.

ADELE FERGUSON: Workers like Pranay Alawala, Prakash Kumar, Sam Pendem and Mohamed Rashid Ullat Thodi are pushing back. They are ready to risk all to expose the muck that seems to lie behind the shiny 7-Eleven logo.

(Footage of Michael Fraser visiting 7-Eleven stores)

MICHAEL FRASER: Just wondering: how much do you pay for, ah, staff here?

7-ELEVEN MANAGER: Has to be an office query.

MICHAEL FRASER: Head office pay for it?

Ah, if you don't mind asking you: how much do you get paid?

7-ELEVEN EMPLOYEE: I get paid 15.

MICHAEL FRASER: Fifteen?

(Footage ends)

ADELE FERGUSON: For Pranay, it may result in deportation. But for him that's no longer the issue.

PRANAY ALAWALA: I want to raise my voice. I don't care about me. If the Government says to me, if: "You made a mistake. You did the wrong thing. You have to go back to India," then I'll go back to my home town, happily. But I need change.

ADELE FERGUSON: For his efforts, Pranay is now being threatened with legal action by his former boss, who is accusing him of breaching his visa.

(To Pranay Alawala) Are you angry?

PRANAY ALAWALA: No, I'm not angry. I'm disappointed.

MICHAEL FRASER: They say, "Why doesn't someone do something? The Government knows, the Tax Office knows, the Fair Work know, head office knows, everybody knows. Nobody seems to care." And they can't understand: why, why, why does no-one care?

ADELE FERGUSON: Michael Fraser and Stewart Levitt are working on a class action. A few workers have already signed up, but they hope more will come forward.

STEWART LEVITT: There's a very strong case and all we need to do is put fire in the bellies of the victims to the point where they have the intestinal fortitude and courage to come forward, regardless of immigration consequences.

ADELE FERGUSON: Our whistleblower says the entire 7-Eleven business model needs to be overhauled.

(To whistleblower) Do you think it's greed?

7-ELEVEN WHISTLEBLOWER: It's greed. Nobody needs $143 million profit in the year.

ADELE FERGUSON: Do you think the jig's up?

7-ELEVEN WHISTLEBLOWER: Absolutely.

ADELE FERGUSON: One of 7-Eleven's latest promotions to lure customers is coffee for $1. But what's the real cost for this convenience?

(To Prakash Kumar) When you walk past a 7-Eleven shop and see the $1 coffee sign, what do you think?

PRAKASH KUMAR: 7-Eleven: a barista-style coffee for $1. The people who are paying the real price are those international students. They're working like slaves in your stores, for $10. They have a tagline and it's called "Good call." That's what they call it. And I thought, like, "No. Not at all." It's not a good call at all, you know?

KERRY O'BRIEN: There are more than 1 million people on working visas in Australia. This is the second story we've presented this year on their mass exploitation.

Apart from what these stories say about the exploiters, the questions that won't go away are: why has it been allowed to get to this stage? Where else is it going on? And will it be allowed to continue?

Next week: religion and food. Do we care that much of the food we eat in Australia is certified halal? We take a look behind that noisy debate.

Until then, good night.

END

Background Information

STORY UPDATE

STATEMENT FROM 7-ELEVEN | 30 Sep 2015 - 7-Eleven Stores Pty Ltd advises that Chairman Russ Withers and CEO Warren Wilmot resign today. Read this statement sent to 4 Corners. [pdf]

7-Eleven chairman Russ Withers denies widespread wage rorting claims, says 'relatively few' franchisees at fault | ABC News Perth | 2 Sep 2015 - www.abc.net.au/news/2015-09-02/7-eleven-chairman-denies-wage-rorting-widespread/6743040

Labour says student workers to be given amnesty | ABC News | 2 Sep 2015 - www.abc.net.au/news/2015-09-02/labor-says-7-eleven-student-workers-should-be-given-amnesty/6742374

7-Eleven: Labor urges Government to give amnesty to students forced to breach visa rules | ABC News | 2 Sep 2015 - www.abc.net.au/news/2015-09-02/labor-says-7-eleven-student-workers-should-be-given-amnesty/6742374

7-Eleven: Head office is not fooling anyone, by Adele Ferguson | 31 Aug 2015 - www.smh.com.au/business/workplace-relations/7eleven-head-office-is-not-fooling-anyone-20150831-gjbr0p.html

STATEMENTS FROM 7-ELEVEN AUSTRALIA

Statement prepared for Four Corners by 7-Eleven stores | Aug 2015 - 7-Eleven Stores Pty Ltd does not condone the actions of any franchisee who does not meet their employer obligations. We will not hesitate to take the appropriate action available to us, under law and within the franchise agreement, where a franchisee is found to be in contravention of the law. Read more. twitdoc.com/4P1S

7-Eleven Australia support for Fair Work Ombudsman prosecution | 31 Aug 2015

Message for Franchisees' Store Staff | 29 Aug 2015

Statement from 7-Eleven Australia | 29 Aug 2015

FULL NEWS COVERAGE

7-Eleven scandal: Company announces review of pay practices | SMH Business | 31 Aug 2015 - www.smh.com.au/business/workplace-relations/7eleven-scandal-company-announces-review-of-pay-practices-20150831-gjbof4.html

7-Eleven investigation: Business model ripping off workers, former consumer watchdog says, by Adele Ferguson | ABC News | 31 Aug 2015 - www.abc.net.au/news/2015-08-31/7-eleven-business-model-ripping-off-workers-allan-fels/6733658

7-Eleven: Allan Fels says model dooms franchisees and workers | SMH Business | 31 Aug 2015 - www.smh.com.au/business/workplace-relations/7eleven-allan-fels-says-model-dooms-franchisees-and-workers-20150830-gjb0pu.html

7-Eleven: wage fraud cover-up from head office | SMH Business | 31 Aug 2015 - www.smh.com.au/business/workplace-relations/7eleven-wage-fraud-coverup-from-head-office-20150828-gjahrc.html

7-Eleven: A sweatshop on every corner - Part one of a joint Fairfax/Four Corners investigation | SMH | 29 Aug 2015 - www.smh.com.au/business/workplace-relations/7eleven-a-sweatshop-on-every-corner-20150827-gj8vzn.html

7-Eleven: Investigation exposes shocking exploitation of convenience store workers, by Adele Ferguson, Sarah Danckert, Klaus Toft | The Age | 29 Aug 2015 - www.theage.com.au/business/workplace-relations/7eleven-investigation-exposes-shocking-exploitation-of-convenience-store-workers-20150828-gja276.html

7-Eleven staff work twice as long at half pay rate, investigation reveals | ABC News | 29 Aug 2015 - www.abc.net.au/news/2015-08-29/7-eleven-half-pay-scam-exposed/6734174

Greens MP Adam Bandt to refer evidence of 7-Eleven worker exploitation to Senate inquiry | ABC News | 29 Aug 2015 - www.abc.net.au/news/2015-08-29/greens-to-refer-7-eleven-worker-exploitation-to-senate-inquiry/6734508

Man stabbed in chest during 7-Eleven robbery at Marks Point | Newscastle Herald | 19 Apr 2015 - www.theherald.com.au/story/3020447/man-stabbed-in-chest-during-7-eleven-robbery-at-marks-point/

Trio of masked men robs Mornington Peninsula convenience stores | Mornington Peninsula Leader | 29 Jul 2015 - www.heraldsun.com.au/leader/south-east/trio-of-masked-men-robs-mornington-peninsula-convenience-stores/story-fngnvmhm-1227461393351

7-Eleven owners the Withers Group to take over Starbucks in Australia | News.com.au | 28 May 2014 - www.news.com.au/finance/business/eleven-owners-the-withers-group-to-take-over-starbucks-in-australia/story-fnkgdftz-1226934958931

VIDEO: CCTV footage of an aggravated robbery at Fyshwick 7-Eleven | SMH | 9 Jan 14 - http://media.canberratimes.com.au/news/act-news/aggravated-robbery-at-fyshwick-7eleven-5064338.html

Man working at 7-Eleven petrol station had knife held to his throat on first shift | The Daily Telegraph | 6 Nov 2013 - www.dailytelegraph.com.au/news/nsw/man-working-at-7eleven-petrol-station-had-knife-held-to-his-throat-on-first-shift/story-fni0cx12-1226753879498

U.S. Seizes 14 7-Eleven Stores in Immigration Raids | New York Times | 17 Jun 2013 - http://www.nytimes.com/2013/06/18/nyregion/us-seizes-14-7-eleven-stores-in-immigration-raids.html?_r=0

VIDEO: Police release footage of 7-Eleven armed robbery in Tweed | Tweed Daily News | 31 May 2013 - www.tweeddailynews.com.au/news/police-release-images-of-men-who-robbed-7-eleven-s/1889917/

ADVOCACY AND FURTHER INFO

Australian Competition and Consumer Commission | @acccgovau - Australia's competition regulator and national consumer law champion. www.accc.gov.au/

The Arbitrator | @TheArbitratorAU - Michael FraSer's website offering consumer and business advocacy. thearbitrator.co/ | Facebook: www.facebook.com/TheArbitratorAU

Fair Work Ombudsman | @fairwork_gov_au - Information and advice about your workplace rights and obligations. www.fairwork.gov.au

Petition: 7-Eleven, stop treating Australian workers like slaves | Change.org - www.change.org/p/warren-wilmot-ceo-of-7-eleven-australia-stop-treating-australian-workers-like-slaves

Unhappy Franchisee (US) - Website set up by franchise industry veteran Sean Kelly, in support of the exploited franchisees. www.unhappyfranchisee.com/

RELATED FOUR CORNERS

Slaving Away | 4 May 2015 - The dirty secrets behind Australia's fresh food. Watch online.

Tags: corporate-governance, food-and-beverage, retail, careers, discrimination, fraud-and-corporate-crime, work, australia, united-states

First posted August 30, 2015 13:08:00

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