7-Eleven owners say wage rise has made them losers

PUBLISHED : Monday, 30 April, 2012, 12:00am
UPDATED : Monday, 30 April, 2012, 12:00am


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Workers at 7-Eleven stores may be guaranteed a minimum hourly wage of HK$28, but some of their bosses say they are earning less than that.

More than 10 7-Eleven franchise holders - squeezed by the minimum wage law that took effect a year ago tomorrow and an unfavourable agreement with local brand-owner, Dairy Farm - have in the last year given up the right to run the convenience stores, said Thomas Hung Wing-yu of the Hong Kong Franchisee Association.

'Life is very tough,' Hung said. 'In a bad month we earn HK$7,000 or less. A boss running a store in Chai Wan works around the clock and sleeps fewer than three hours.'

Some 563 of Hong Kong's 964 7-Eleven stores are operated by franchisees. Each is required to pay a one-time fee of HK$300,000 to HK$800,000, depending on the shop's size, before they start running the business.

Once they take it up, franchisees bear labour costs while Dairy Farm, a subsidiary of Jardine Matheson, pays the rent.

Each month's profits are shared, with Dairy Farm getting 60 per cent to 70 per cent. Profit is calculated by deducting the cost of products from business turnover, but the formula does not account for wages.

Franchisees say they have been forced to make up the difference between previous rates and the minimum wage from their own pockets. Worst hit have been those in Tuen Mun, Kwai Chung, Tsing Yi and Sham Shui Po, where the hourly rates have shot up to HK$28 from HK$21.

Cutting staff is difficult because many shops already employ the minimum four to five employees needed to run a 24-hour store.

It is also hard to offset costs by raising prices on items sold in the stores because franchisees get an even smaller portion of the profits from food and other goods.

'Even if we raise the prices of goods, it would be Dairy Farm which benefits from it,' Hung said, adding that it was unfair for Dairy Farm to refuse an adjustment in the profit-sharing ratio.

'When rent increases, it lowers our profit-sharing ratio. Now wages have increased, it refuses to let us share more of the profits.'

A spokeswoman for the 7-Eleven brand that the chain has been monitoring the impact of higher wages on business and the franchisees' operations since the implementation of the minimum wage law last year.

The spokeswoman said an increase in cash profit per store showed that the average business performance of 7-Eleven franchises had improved in the past year.

Apart from 7-Eleven, Dairy Farm runs a list of well-known retail chains in Hong Kong, including Ikea, Mannings, ThreeSixty and Wellcome.

It also owns 50 per cent of Maxim's, a catering company with more than 560 restaurants, fast food stores and cake shops. It also has sole rights to the Starbucks brand in Hong Kong and Macau and holds the local Genki Sushi franchise.