Hot Topics: Behind the Headlines

BEHIND THE

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Jason gehrke is the director of the Franchise Advisory Centre and has been involved in franchising for more than 30 years at franchisee, franchisor and advisor level. He advises both existing and potential franchisors and franchisees, and conducts franchise education programs throughout Australia. He has been awarded for his franchise achievements, and publishes Franchise News & Events, Australia’s only fortnightly electronic news bulletin on franchising issues. In his spare time, Jason is a passionate collector of military antiques. www.franchiseadvice.com.au

Management buyout for fitness chain

The CEO and management team of Jetts Fitness Australia has led a management buyout of the brand’s franchise division from parent company Fitness & Lifestyle Group (FLG), according to a media report. FLG retains full ownership of the brand and operations in New Zealand, Vietnam, and Thailand but has divested itself of 129 franchised clubs in Australia and international franchised businesses in the Netherlands and the UK. Jetts’ new owners are reportedly looking at targeted international growth in South-East Asia, India, and Europe, while maintaining and nurturing domestic operations in suburban communities.

food brand kicks off huge australian sports sponsorship

Sandwich chain Subway has signed on as the Australian senior men’s soccer team’s naming rights sponsor in a deal reportedly worth around $12 million over three years, according to a media report. The senior men’s team, the Socceroos, have struggled to find a major corporate sponsor since the end of their 10-year arrangement with Qantas in 2013 after which they were without a sponsor for four years. Their most recent sponsorship contract, with Caltex, expired at the end of 2019. The deal is the largest ever national team deal in Australian football history and gives Subway naming rights to Australia’s junior male national teams, including the Olyroos, Young Socceroos, and Joeys. The Subway Socceroos are currently engaged in their

new model disclosure document available

The Australian Competition and Consumer Commission (ACCC) has released a new model disclosure document in time for franchisors to update their disclosure documents using the new guide by October 31. The model disclosure document is markedup with guidance notes throughout that provides tips and insights into how to correctly disclose information required by the Franchising Code of Conduct. Franchisors whose financial year ends on June 30 are required to update their disclosure documents no later than October 31. Click here to access the model disclosure document.

holden parent offers buyouts to us dealers

Holden parent General Motors (GM) is offering to buy out its 2,000 Buick franchise dealers as the brand moves to all-electric vehicles (EVs) by 2030 in the United States, according to a media report. Shifting to EVs would require significant investments by the franchised dealers in the US to ensure they are appropriately equipped to sell and service the vehicles. A similar offer to GM’s Cadillac dealers in 2020-21 reportedly cost the company USD$274 million to buy dealers who were unwilling or unable to spend up to USD$500,000 per store in equipment and training to move to an all-EV offering. GM rationalised its Australian network of Holden dealers in 2020, offering dealers compensation which was described at the time as “grossly inadequate” and prompting a Senate inquiry into the company’s operations in Australia.

pizza chain in 287-store asian acquisition

Listed pizza chain Domino’s Pizza Enterprises (DPE) has announced its acquisition of 287 stores in Malaysia, Singapore, and Cambodia, in a deal estimated to be worth $214 million and set to be finalised by the end of 2022, according to a media report. DPE intends to apply its technology, operational expertise, and high volume approach to the newly-acquired stores to drive growth in those countries. The acquisition aligns with DPE’s recently revealed plans to expands its footprint in Asia from 2,400 to 3,000 stores by 2033. DPE’s earnings for othe 2022 financial year before interest and taxes (EBIT) for Asia was $31.7 million, 59.4% higher than pre-Covid levels.

former soviet leader remembered for franchise ad

Former Soviet leader Mikhail Gorbachev who passed away recently has been remembered simultaneously as the most significant political leader of the second half of the 20th century, and a spruiker of Western Capitalism for his appearance in a Pizza Hut commercial, according to media reports. Gorbachev’s political reforms during his seven

years as General Secretary of the Communist Party of the Soviet Union, resulted in policies of glasnost (transparency) and perestroika (restructuring) that ultimately led to the demise of the Soviet Union. He famously featured in a television commercial for Pizza Hut filmed in Russia (but never broadcast there) which was reported to at the time be the world’s most expensive celebrity endorsement, and which featured guests in a Moscow Pizza Hut debating how they were better off under capitalism, until they realise that capitalism gave them pizza, and they all raise a pizza slice in salute to Gorbachev.

local brand replaces starbucks in russia

Outlets previously owned by Starbucks in Russia are being re-opened by a Russian rapper and a restaurateur who acquired the rights to the chain in Russia after the company exited the market in May in response to the war in Ukraine, according to a media report. The coffee shops are re-opening under a similar but new brand called Stars Coffee, with a new circular shaped, cigar-brown coloured logo featuring a siren wearing a traditional Russian kokoshnik headdress. The rapper, Timati, who reportedly supports the Kremlin and released a song in 2015 titled My Best Friend is Vladmir Putin, claims continuity was key when designing the logo. His restaurateur partner claims the Stars Coffee and Starbucks’ logos bear little resemble to each other aside from the circle.

Prior to its exit, Starbuck’s had been operating in Russia for nearly 15 years with 130 stores across the country employing nearly 2,000 people.

union makes $250m claim against fast food chain

Fast-food giant McDonald’s is facing a new Federal Court lawsuit brought by fast-food workers union, the Shop, Distributive and Allied Employees Association (SDA), for allegedly refusing to grant 250,000 employees their entitled rest breaks, according to a media report. The employees worked at nearly 1,000 current and former McDonald’s locations across Australia operated by 400 franchisees. Employed under the earlier McDonald’s Australia Enterprise Agreement (2013 – February 2, 2020) and the current Fast Food Industry Award, they were entitled to a “compliant” break or breaks when working shifts of between four and five hours duration. Compliant breaks are defined as paid breaks for 10 consecutive minutes which can be used as an employee chooses and are not limited to drinking or using the toilet. The SDA is seeking $250 million in compensation plus penalties claiming McDonald’s has been systematic and deliberate in encouraging franchisees to deny workers paid rest breaks. Managers have reportedly been incorrectly taught that breaks have to be given in the form of a single, continuous, and uninterrupted break, while one young employee claims she is deliberately rostered onto three-and-a-half-hour long shifts to avoid being given a break. The claim is the 16th Federal Court suit brought by the SDA against McDonalds or its franchisees. McDonald’s maintains that it complied with “applicable instruments” to provide rest breaks, and denies claims by the SDA that the issue of breaks had been raised in the past two rounds of Enterprise Agreement negotiations.

law firms consider franchise share price crash of 90%

Listed Australian-based fitness chain F45’s shares have declined by more than 90% from USD$16 in July 2021 to USD$1.35 in August 2022 amid declining franchise sales, according to a media report. In May, F45 increased its sales guidance from 1,000 to 1,500 new outlets to be opened for the year as a result of strong franchise sales for the first quarter of 2022. However, franchisees who had paid licence fees for outlets were struggling to secure financing and approvals, thus delaying the opening of their studios and payment of ongoing fees until 2023. To assist new franchisees, F45 procured more than USD$200 million of off-balance sheet funding from third-party financiers which would reduce the time from contract signing to studio opening to six months, however by Julythe franchise funding was no longer available. F45 has reported more than 300 US franchise sales have been cancelled as a result of the collapse of the external financing, with another 300 in doubt. The company has revised its expansion target of 1,500 new branch openings to 350, effectively reducing expected revenue for the year by more than 50% from USD$275 million to USD$120 million. Meanwhile, it continues to pay millions to celebrity influencers for endorsements to support the chain’s growth. Meanwhile, a number of United States-based law firms are investigating F45 Training Holdings with a view to representing aggrieved investors in a class action lawsuit based on F45 potentially breaching federal securities laws, according to a media report. The law firms are seeking investors who owned F45 stock or options that were impacted by the company’s July trading update and the subsequent decline in share price. At least two high-profile Australian investment firms hold share in F45, with one investing $100 million at $14.95 before the share price collapsed. v