‘Like a parent scolding a child’: How has 7-Eleven handled a PR nightmare?
Four Corners’ investigation into 7-Eleven’s employment practices has led to huge brand damage. Miranda Ward examines how the brand has handled the attention, and whether it can recover.
Last night more than a million Australians tuned in to get the full picture on the 7-Eleven expose which has been teased in the media since the end of last week. The reputational damage to a brand which appears on most high streets has been immense, but its response so far has been at best – muted.
The joint Fairfax and Four Corners’ expose on the company’s staff exploitation and wage-fraud went to air last night after three days of media coverage, and without an appearance from a 7-Eleven representative.
The embattled company released a press statement on Friday expressing its disappointment in its franchises, before the CEO stepped forward yesterday afternoon to announce an independent investigation into the issues highlighted by the Fairfax and Four Corners investigation. This morning the company announced it will spend millions of dollars to pay storeholders to leave their businesses as it tries to head off the deepening crisis.
But while the company has come forward and attempted to address the issues, Mango Sydney managing director Fern Canning has said the original statement was “disheartening”.
Canning
“It used the word ‘disappointed’ – given the enormity of the situation, that felt weak – like a parent scolding a child rather than a retail giant acknowledging fraudulent and exploiting activities of their franchisees,” she said.
Canning said the company’s update issued by the CEO yesterday was “hard to comprehend” given it was the first update since the company’s original media statement since last Friday.
“A more systematic crisis response would have been expected from such a major retailer,” she said.
Media response
On what should have happened Canning said a “media response unit should have been set up over the weekend with a key spokesperson nominated to ensure the filtration of transparent and open communication throughout the most crucial initial 72 hours”.
The process they are undertaking is as important to communicate as any final outcomes – an effective, open and honest process could save them,” she said.
Jaques
Tony Jaques, owner and director of strategic consulting company Issues Outcomes, said when it comes to a “reputation, and potentially legal crisis ‘no comment’ is just not good enough”.
“Nor is it good enough to pass all the blame onto franchisees,” he said.
“7-Eleven must have known about the upcoming Four Corners program, but reportedly declined to appear,” he said.
“We can assume this was done on either legal or public relations advice, but was it the right decision?
“It goes without saying that it’s plain dumb to throw yourself on the mercy of a crusading TV program, especially one with the credibility of Four Corners. And we know from what has already been published that the company was very well aware of major problems at its outlets,” he said.
Internal communications
On the approach 7-Eleven needs to undertake Red Agency Sydney associate director Grant Richmond-Coggan said franchises such as 7-Eleven “need to accept that communication is an essential channel to maintain and open dialogue with each store”.
“By having this proactive internal communication as part of the franchise culture, companies will be in a much better position to hear of, and deal with, any issues that may arise before they enter the public space and become a wider PR issue or crisis,” he said.
Richmond-Coggan
Richmond-Coggan said for 7-Eleven this issue of “human exploitation has the potential to completely and greatly damage trust in the brand and cause shoppers to head elsewhere.”
His advice to the embattled retail chain was to “communicate on the level of human emotion, react with sympathy and accept the disgrace of the situation, moving the conversation away from what they have done to what they are doing to rectify it”.
“As with any PR crisis if a communications void is left, the brand has no possibility of keeping any control of the narrative, the empty space will just be filled with more negative conversations, allegations and rumours,” he said.
“7-Eleven must take positive steps such as fully compensating aggrieved workers and re-configuring the business model so this does not happen again.”
Mango’s Canning was in agreement, saying Australians “may be forgiving provided responsibility is taken and the path to redemption is openly shared”.
“And that means communicating what 7-Eleven HQ is doing to engage key stakeholders and ensure they are looked after whilst future-proofing the business to guarantee no repeat offenders,” she said.
National conversation
Willcox
While declining to comment on the situation specific to 7-Eleven, Weber Shandwick head of corporate and public affairs practice Jacquelynne Willcox said the agency advises companies in similar situations to be aware “of the national conversations underway”.
“In this case, there has been a national discussion underway about employment policy, the effectiveness of Fair Work provisions in protecting lower paid or vulnerable workers, campaigns about hiring cheaper overseas labour and the effectiveness of visa programs vis-a-vis safety provision for foreign students,” Willcox said.
She said the wider picture issues “can play into the issue and its management beyond the initial charges”.
But while it is widely agreed 7-Eleven has made some errors in handling the situation, Canning said “they have a brief window to still get it right”.
“Yesterday’s statement is a step in the right direction,” she added.
However Jacques is on the other side of the fence.
“The 7-Eleven controversy is just starting and the company are showing every sign of getting it wrong right from the beginning,” he said.
Miranda Ward
Miranda Ward worked for Mumbrella from 2013 to 2017, eventually becoming deputy editor. Miranda joined Mumbrella in September 2013 from Sky News.
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Like most companies in that situation they are so paralysed and consumed by the perceived risks of being proactive, visible and engaged that they barely have time to consider the (even bigger) risks associated with doing nothing
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Great insight. This will get worse if they find out that political donations kept this issue under the carpet for as long as it has. The privately owned parent company is owned by exceedingly wealthy individuals. Political assistance is not beneath people at this level.
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Mumbrella you need to do more articles like this – great insights into what could have been done to save this.
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Why would anyone voluntarily want to get their head kicked in by four corners? NO, it is often the best advice NOT TO APPEAR on that show. However, what they should have done is pre-empted it by announcing their own independent investigation using someone like a PWC, and published a written statement to the Ombudsman /Fairwork Australia. Very badly managed.
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There is nothing that they can say as the model was broken from the beginning – how can you have a 50/50 revenue split in USA where employment costs are much lower than here, then adopt a 43/57 model here where the 43 pays for employment costs – should have been the other way around.
The 57 (Head Office) made all the money whereas the 43 (franchisee) was put on struggle street.
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Leo burnett have been their agency for years. Do they have anything to say??
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Hey! its old Mr Withers!
“I woulda got away with it too, if it wasnt for you pesky kids!”
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I think the real question is – if you’re a marketing provider of 7 Eleven, at what point do you sacrifice your own morals by continuing your association with them? If you pass your defence of them off as a necessary part of your job, then you’re really no better than the franchisee owners who undercharged their employees in order to make their businesses profitable.
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Spot on Sage Observer. The model is completely flawed, so we need to ask who has advised these franchisees to accept this type of arrangement and purchase this type of business. You don’t stand a chance of making a 7-11 profitable unless you adopt this type of ruthless and exploitative approach to staffing the 24-hour business.
I also agree with Richmond-Coggan and Canning that 7-11 has to look at fully compensating aggrieved workers and re-configuring the business model and forgiveness might come – but in the longer term. Because they’ve left it so late to accept any responsibility and take action (they knew about the Four Corners expose for a month before it aired), I think it’s too late. They’ve lost my business.
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The point at which marketing company should withdraw to save their own skin is if it becomes apparent that they were working for people who knew their business was based on the abuse of workers. Or if their response it not adequate. Leo Burnett should probably make a statement in the next few weeks if they intend to keep taking their money.
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