A former franchisee has lashed out at Domino's chief executive Don Meij after being depicted, along with other franchisees, as a blackmailing "criminal" for speaking out about wage fraud inside the pizza network.
Mr Meij told ABC Radio Brisbane on Thursday morning that franchisees who had made public criticisms about the company's model were "criminals" who had previously tried to blackmail the company.
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'They blackmail us': Domino's boss
Domino's CEO Don Meij blasts franchisees who have underpaid 2,400 workers by $4.5 million as "criminals".
Former franchisee Kamran Talebi, who had spoken out about profitability and wage fraud, said Mr Meij's comments were out of line.
"I am so offended at the comments that franchisees who spoke out are criminals or doing it to blackmail Domino's," he said.
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"I had nothing to gain speaking up except to show what is going on. Some franchisees are doing the wrong thing, they are scared. I don't want to be scared. I want to stand up."
Mr Talebi operated the Domino's store in Mount Colah, a northern suburb of Sydney, for two years from 2014 until 2016. He said he had no compliance issues, including no wage fraud complaints. He sold his store because it was not profitable, despite making about $35,000 in sales each week.
"I sold in 2016 and my involvement is finished," he said. "I spoke up to expose what is going on. The role of the whistleblower job is important to support the media."
'Wrong thing'
Mr Meij told the ABC's Steve Austin that allegations about wage fraud and profitability had been made by franchisees who had tried to blackmail the company.
"These are the criminals who did the wrong thing," he said. "Here we have people who have done the wrong thing and they are not taking responsibility for their actions and decisions, they blackmail us up front and say, 'We are not paying [workers] back, we are going to the media.' "
The Fairfax investigation exposed wage fraud not just among franchisees, but also in Domino's own company-run corporate stores.
In 2015, an employee at a Darlinghurst store, which was not owned by a franchisee, emailed Mr Meij, claiming rosters were being tampered with and that he was being forced to deliver pizzas even after he had finished his shift, amid other complaints. He said the stress led to him being admitted to hospital for depression.
"I have been on an ongoing basis [abused] as an em and been taken undue advantage of," he said in the email, seen by Fairfax Media.
Documents seen by Fairfax Media show he was repaid almost $7000 in unpaid wages and super. Domino's told Fairfax Media after this complaint an investigation was conducted and any underpayments identified were rectified.
The company has spent the week defending itself against wage fraud claims. On Tuesday it revealed it had investigated 88 complaints and completed about 102 payroll audits, while four franchisees were terminated and 22 were negotiating to leave the system.
On Thursday, Mr Meij said an estimated 2400 workers had been underpaid over three years, and about $4.5 million had been collected from franchisees found to have been involved in underpayment.
Since the wage scandal erupted, the shares have fallen 10 per cent to close on Thursday at $57.70.
Analysts who watch the company closely are also concerned about the issues surrounding franchisees.
Yesterday Ord Minnett cut its target price for the one-time market darling from $73 to $59, despite "strong" half-year results, warned about the potential for future earnings downgrades and highlighted concerns about the franchising model.
"Concern regarding the franchise model is likely to remain a negative, despite the increased disclosure, with the possibility that employment law compliance obligations from actions of the franchisee could transfer to the franchisor," it said.
Deutsche Bank's described the half-year result as weaker than expected and highlighted the company's "poor cash generation" and projected increases in labour costs. The company is rolling out wage increases, including penalty rates, across its network while it negotiates a new enterprise agreement.
"In our view, the requirement to pay penalty rates remains a risk to the Australia and New Zealand store rollout target, particularly given franchisee profitability has not kept pace with inflation over the past 12 years, even in the absence of material wage cost increases."
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