HOW TO RESPOND TO A NATIONAL PR CRISIS: A CLOSER LOOK AT 7ELEVEN AND UNDERPAYMENT OF WAGES.

The systematic underpayment of employees by 7-Eleven back in 2015 made national headlines and left founder Mr Russell Withers and co scrambling to restore confidence in the chain of convenience stores.

Since this time, the list of big business coming forward or caught in a ‘wage theft’ scandal continues to grow with Domino’s, Caltex, Michael Hill Jewellers and Retail Food Group joining the list of franchise models caught ‘stealing’ from workers. 

The Fair Work Ombudsman (FWO) Sarah Parker has declared that they won’t be going soft on any business coming forward with “sloppy” accounting practices. At a minimum, court-enforceable undertakings and a public apology. In addition to the FWO, the federal government is looking to criminalise charges for underpayment. 

From a PR perspective, this is a challenging time if you are involved with a national franchise. Without a quick, thought-out response, the image of underpayment can be catastrophic to a brand. These businesses need to be prepared for the long term with a strategic, carefully planned PR response to protect the reputation of the franchise and work to recover the image of the brand. 

It is important to note that every case is different, and we can only comment on a PR perspective of what to do and what not to do. In situations of crisis management, we will always work with the legal team appointed as to where the lines are, and what boundaries are malleable in communications.

As many of the cases mentioned above are in the earlier stages of the media cycle, we will more specifically consider some of 7-Eleven’s PR strategies and lessons.

Don’t respond with “no comment.”

When Fairfax Media and Four Corner’s joint investigation into 7-Eleven aired on national television on August 2015, the convenience store declined a request for comment from reporter Adele Ferguson. In our opinion, this did little to protect its reputation. 

When a business uses the ‘no comment’ response, it suggests that they have something to hide. To the public, it’s essentially a confirmation of guilt.

7-Eleven would have benefited from a brief comment that not only served to protect its reputation but displayed itself as a brand that was ethical, compassionate, humble and fully transparent with the public. Something perhaps along the lines of:

“The allegations made against us are serious and extremely concerning. At 7-Eleven we pride ourselves on the integrity of our business and the hard work and dedication of our employees. We are looking into this to gather the facts as quickly as possible. Unlawful actions by employers at 7-Eleven is not tolerated, and we are investing deeply to rectify this situation.”

Getting a response out to the media as quickly as possible is essential, even if it’s something as minimal and generalised as the suggestion above. Note that we also don’t draw attention to the franchise business structure, it would be easy to do so but serves no gain initially.  

For more on this, see our blog post ‘What to say instead of “no comment”'.

Be transparent, fast and fully co-operative.

7-Eleven and Domino’s published media releases both in response to the allegations and to update the public on the proceedings. As noted above, providing comment suggests the business has nothing to hide, which is why willingly informing and updating the public through official press releases can be compelling.

Customers are more likely to be loyal to a transparent business. Transparency evokes a sense of trust and is particularly essential when your business is facing damaging media coverage.

If you don’t engage with the media, only one-side of the story will be circulated within the media cycle. You need to get your response out as soon as you are able, if possible, within 72-hours of the allegations breaking.

Don’t deflect the blame.

If the allegations are proven to be correct, you will need to publish a very carefully considered statement - and fast. As discussed above, the news cycle will run with what they have - one-side of the story. Allowing this to happen will further damage your brand image.

While your first instinct might be to deflect blame elsewhere, this is not going to serve in your interest, and will likely hinder your business further.

7-Eleven released a statement following the scandal, which essentially detached head office from the underpayment of employees by instead placing the blame on the franchisees. This was likely seen as an opportunity to maintain the overall brand image by dissociating 7-Eleven’s head office with the branches acting unlawfully. They did not apologise for the misconduct but instead said in a follow-up statement that they were “extremely disappointed” in the franchisees that had acted unlawfully.

In our opinion, this was a mistake. 

An insider to the business said on the Four Corner’s episode that it was a result of the franchise model enforced by head office that employers had to underpay their workers. They had to do this to keep the stores afloat. 

This is a big sympathy win for the franchisee's - instead of being united and rebuilding as a strong brand, there is now an ugly division. 

This statement was supported by a variety of experts including Professor Allan Fels, chairman of the Australian Competition and Consumer Commission from 1995 to 2003, and Elizabeth Gore-Jones, Principal of The Franchise and Business Lawyers.

Consequently, 7-Eleven was seen to be blaming managers that were desperately trying to survive in conditions head office had imposed. Additionally, it left many franchisee’s disgruntled, with some approaching the media to defend themselves and point the finger back at the franchise model.

The tactic undertaken here is a prime example of why, instead of deflecting blame, you apologise for the misconduct and accept the wrong-doings committed. Franchise model or not, you are responsible for the business and the brand image, that is why people pay the franchise fees. It wasn’t until 10 September, nearly two weeks after the Four Corners episode aired, that Mr Withers came forward to accept responsibility.

The convenience store would have likely benefited from accepting responsibility in the immediate aftermath, particularly since it had already acknowledged in the Four Corner’s episode that their franchise model was partly to blame. The time-delay and perceived attempts to blame the franchisees only resulted in greater backlash when credible sources spoke to the media with different opinions.

Show how you will rectify the situation.

You need to show both the media and the public how you are going to right this misconduct: actions speak louder than words. The sooner you can do this, the quicker the discussion will change.

7-Eleven announced an independent panel to investigate the claims less than a week after the episode aired, which was relatively well-received (at first - more on this below). Additionally, it was chaired by Professor Allan Fels, adding to its credibility, and providing evidence that 7-Eleven was as committed to exposing unlawful franchisees as it had claimed.

Furthermore, the store announced what changes would be made to prevent this occurring again, including a review of the profit share model, as well as repaying any money owed to underpaid employees.

The public and media will likely appreciate your steps made to resolve the situation quickly.  Doing so will aid in re-establishing your business’s brand image and continuing to deny allegations and refusal to accept responsibility risks further interrogation and scrupulous discussion against your brand within the media.

It is vital through this time to personify the brand; the image of empathy from the business owners is essential. All stores need to be equipped with the skills and the conversation points to be able to communicate with the general public. 

7-Eleven’s biggest PR pitfall following the scandal.

As aforementioned, 7-Eleven announced soon after the claims employees were underpaid that an independent panel - headed by Alan Fells - would be utilised to investigate.

Initially, this was a great move. It suggested head office had nothing to hide, indicating they were not involved or aware of the misconduct, in turn increasing consumer confidence in the overall brand. It also supported previous comments that they did not condone these actions and would take necessary action against unlawful franchisees.

It backfired in May 2016 however, when 7-Eleven announced the claims process (made by employees that believed they had been underpaid to receive repayment) was to be moved to “an independent unit within 7-Eleven”, with the panel and Professor Fels allegedly in agreement.

Of course, this was not well-received, and numerous media outlets implied that 7-Eleven had abandoned their promises of an independent investigation to reduce payouts. Questions on whether the panel had been working too efficiently, with back-payments to claimants being far higher than 7-Eleven had anticipated.

This was hugely damaging to the image they had begun creating; a co-operative brand seeking to fully compensate their employees. 7-Eleven chairman Michael Smith said they believed moving the process in-house would drive faster results, with more people getting paid.

In our opinion, this did little to resolve the PR crisis.

Professor Fels exposed to ABC News on the 7.30pm prime-spot that the panel had actually been fired, and he had not agreed to it as 7-Eleven had stated in the media release. He also spoke of how 7-Eleven was “trying to work up a story there is fraud going on”, shattering the image they had been trying to create of a transparent and ethical company.

This was a PR disaster.

Final thoughts

Most successful businesses will face a PR crisis at some point; in many instances, it is the price you pay for being a success. You must have strategies in place to communicate internally and with the media to help protect and repair your brand image. When developing them, it might be useful to consider the following summarised points:

• Regularly publish media releases on any developments - this creates an opportunity to be transparent and open with the public.

• Instead of placing blame elsewhere, accept responsibility: even if you did not have direct involvement, your position as founder/director/CEO makes it something you should have been aware of.

• Give solutions. How are you going to resolve this issue? What precautions or strategies will you put in place to assure the public it won’t happen again? Express sincere remorse, and then move the discussion to how this will shape the company’s future.

The article is written by Director of POPCOM Amanda Lacey with help from Intern at POPCOM Sophie Richardson. For more information about POPCOM, PR or crisis management, please reach out to Amanda directly on +61 418 448570 or amanda@popcom.com.au www.popcom.com.au.