As I wrote in November, franchising has served Australian business – large and small – very well for decades, providing economic returns and opportunities for both franchisors and franchisees. While the industry is well-regulated by the ACCC and the Fair Work Ombudsman, the number of ongoing incidents relating to wage underpayment or mistreatment of workers by franchisees is undermining community confidence in franchising.
While there is no excuse for any employer to underpay or exploit their employees, franchisors like Caltex Australia bear a responsibility to ensure our business continues to generate appropriate returns for all parties – that's shareholders, franchisees and employees.
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Do Caltex franchisees need wage fraud to survive?
Investigations are being carried out as to whether Caltex franchises are financially viable and if this results in Caltex franchisees underpaying staff.
That is why I initiated a review of the profitability of the Caltex Australia franchise model. This review is now complete and has confirmed our model allows franchisees to draw a wage, make a profit and pay employees in accordance with lawful wage rates. The review included external legal advice supported by an independent assessment of franchise profitability by a leading advisory firm.
The review findings are supported by the strong demand we continue to receive from people wanting to become a franchisee with Caltex Australia and from existing franchisees who want to grow with us and franchise more sites.
I acknowledge there is a small percentage of sites that may not be profitable from time to time because of external factors beyond the control of the franchisee. This is consistent with local and international franchise benchmarks. In such circumstances, the Caltex Australia franchise model has a safety net which provides support to franchisees so they can operate viably.
We continue to enhance our governance procedures for franchised sites. We have already implemented changes to the process for approving franchisees to join our network, such as additional acceptance protocols and reference checks. We are also reviewing the process for consenting to assignment of franchises.
We also continue to work with the Fair Work Ombudsman to identify, report, prevent and eliminate wage underpayment from our network.
This includes keeping the Fair Work Ombudsman updated on the progress of the network-wide independent workplace audits we commenced in 2015. This in-depth approach has revealed some franchisees within our network whose behaviour I do not condone and will not accept. We will be finalising our current round of audits in the next few months.
I will not allow a franchisee to operate a Caltex Australia franchise where they do not pay their employees their full entitlement. We have taken action against some of these franchisees already and we are continuing to take appropriate action to eliminate unlawful practices from our network. I am committed to ensuring the majority of our valued franchisee partners who do the right thing are not unfairly affected by the inappropriate actions of others.
Both the Turnbull government and Shorten opposition have committed to policies strengthening protections for vulnerable workers. Caltex Australia agrees better protections are needed for these mostly young, foreign students. These measures include stronger enforcement powers for the Fair Work Ombudsman and harsher penalties for businesses doing the wrong thing by their workers.
Caltex Australia has been part of Australian corporate life for more than 115 years and we care deeply about doing the right thing, including paying fair and reasonable wages. We want to continue to grow and thrive in Australia into the 21st century and a sustainable business model offering reasonable returns for all participants is vital to our success.
There is no excuse for underpaying workers. Caltex Australia is taking positive action so our franchisees can continue to be among the two million thriving small businesses that nearly five million Australian workers rely on for employment.
There is no excuse for underpaying workers.
Julian Segal is the managing director of Caltex Australia.
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