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Red Rooster halts wage fraud

Sarah Stowe

Inside Franchise Business: Red Rooster tackles employee wage fraudFast food franchisees guilty of exploiting workers have lost their businesses after Red Rooster took action to protect the brand.

The franchisor took charge of seven Queensland stores following the termination of franchise agreements for employee underpayments and working visa issues.

Chris Green, CEO of Red Rooster, told Inside Franchise Business “There’s never an excuse to underpay staff. These were profitable restaurants, this is a clear case of franchisees doing the wrong thing.

“We value people and expect franchisees to pay correctly. Prospective franchisees like to see a system that takes a stand.”

And the franchise network has backed the moves, Green says.

“I’ve had a number of franchisees responding, saying ‘spot on, we’re glad you’re standing up and protecting those of use who are doing it right’.”

Why were the franchise agreements terminated?

Channel 7 Brisbane ran a recent story highlighting the wage rorts at the stores but Red Rooster reports swift action was taken to halt the underpayments once claims came to light late last year.

When the company received a complaint from an employee in October 2016 it immediately began an internal investigation into the four franchisees operating seven outlets with the goal to ensure the best possible result for the employees.

The investigations found evidence of employee underpayment and breaches of working visa issues. Specifically, there were instances of Student Visa Holders working more than 20 hours and not being paid correctly for all hours worked.

This was a clear breach of Red Rooster’s franchise agreement and one of the chief grounds for the December 2016 terminations, Green says.

“The reason we terminated these agreements was to protect the other franchisees in the system who are doing the right things. The vast majority are, and we didn’t want to tarnish their businesses.”

He believes the process has been positive for the system.

“It demonstrates that if people don’t comply we will take action.”

How Red Rooster dealt with repaying staff

Employees were visited by top level Red Rooster executives and advised of an independent hotline set up specifically to deal with this issue.

While management remained available for employees, the franchisor required each franchisee to appoint an independent facilitator to oversee the backpayment settlements to ensure transparency of the process.

The culprit franchisees were given the opportunity to continue running the restaurants for a set period under an agreement with Red Rooster to allow them to repay the outstanding wages.

Green confirms these costs were purely funded by the franchisee.

“Not only can I confirm that all but one employee came to a back-pay settlement agreement with their franchisee but that 149 employees will be offered employment with Red Rooster effective immediately,” Green says.

But as one franchisee’s temporary arrangement had expired, and the other three failed to meet stipulated commitments, the franchisor recently took possession of the restaurants.

Red Rooster is not aiming to scoop profits from this process, Green says. The company will continue to operate them, paying off creditors, until new buyers can be found.