News ReleaseSelf-inspection Results and Improvement Plan Formulated in Response to the Fact-Finding Survey Conducted by the Japan Fair Trade Commission

NEWS RELEASE

TOKYO, JAPAN, 11 30, 2020

Based on the content of the “Fact-Finding Survey Report on Transactions between the Headquarters of Convenience Stores (Franchisers) and their Franchisees” (September 2020) and the “Fact-Finding Survey on Transactions between the Headquarters of Convenience Stores (Franchisers) and their Franchisees (Overall Questionnaire Results)” compiled by the Japan Fair Trade Commission, Lawson, Inc. has implemented self-inspection measures and formulated an improvement plan. Results of the self-inspection measures and details of the improvement plan are as shown below.

Self-inspection Measures and Improvement Plan

■Self-inspection measures

Self-inspections were carried out centered on five items: (1) Explanation at time of recruitment; (2) Coercion, etc., of purchase quantities; (3) Clearance sale limitations; (4) Operating hours; and (5) Area dominance strategy. In addition, questionnaire surveys of SVs (Supervisor: Store Management Instructor) and RFCs (Recruit Field Counselor: Person in charge of store development) nationwide were carried out and various issues were identified.


(1) Explanation at time of recruitment
Lack of essential knowledge and insufficient notification of rules when explaining open accounts and related interest calculations, handling of waste/inventory loss, and profit models are issues.
In addition, since the opinion was expressed that “contract periods are long,” we intend to begin operating with five-year franchise contracts next spring.


(2) Coercion, etc., of purchase quantities
Franchise stores and SV need to secure time for formulating, considering, and discussing proposals related to store management.


(3) Clearance sale limitations
Insufficient explanation that franchise stores will not be treated unfairly even if they carry out clearance sales, and lack of understanding that Headquarters is recommending clearance sales to franchise stores are issues.


(4) Operating hours
With regard to franchise stores making requests to change operating hours, while a policy has been set forth for Headquarters to listen to the franchise store’s request and have the store decide its own operating hours based on sufficient discussion, Headquarters’ negotiating remains problematic. Accordingly, education of SVs, etc., is necessary.


(5) Area dominance strategy
Headquarters need to establish provisions to the effect that new franchise stores are to be opened with consideration given to existing stores so as not to significantly lose the operational cooperation of franchise stores and, as a concrete measure for preventing such a loss of cooperation, provide sufficient explanation at the time franchise store contracts are concluded regarding recommendations for opening multiple stores in the same area.

■Improvement plan

(1) General discussion

Based on the Japan Fair Trade Commissions survey report and the results of the above-mentioned self-inspection measures, we formulated an improvement plan while bearing in mind the question of to what extent the existing antitrust law compliance system can be improved, strengthened, and implemented across-the-board. We believe that the ideal form of Headquarters and franchise stores within a franchise business will be achieved after Headquarters and franchise stores fulfill their respective roles based on thorough discussion and understanding, realizing coexistence in mutual prosperity. To achieve this, it is important that Headquarters sufficiently identify and comprehend the situations of individual franchise stores in a timely manner while at the same time promoting accurate communication of information to and understanding of franchise stores, and then resolving any issues that are discovered. Accordingly, we will construct mechanisms and environments for this purpose, ensuring that all executives and staff understand that implementing this improvement plan is an important matter in terms of management, and carry out regular monitoring in order to guarantee the plan’s effectiveness.


•Creating mechanisms and environments for promoting the communication of accurate information to and understanding of franchise stores
•The existing system for training/educating employees in the workplace regarding antitrust law compliance will be reviewed and compliance with antitrust laws will continue to be enforced across-the-board.
•All explanatory tools, manuals, and explanatory materials for (candidate) franchise stores will be reviewed through measures such as updating public disclosure documents. Efforts will be made to make explanatory materials easy to understand.
•Methods for communicating information to employees in the workplace will be reviewed, and so that detailed explanations (management guidance/discussions) can be provided to franchise stores based on the understanding and analysis of information by employees at individual stores, we will encourage franchise stores and SVs to make time for discussing and considering various information by reviewing the way in which information regarding campaigns and sales promotional activities, etc., is communicated in addition to implementing measures for increasing franchise store profits (personnel-saving and labor-saving using digital technology, reduction of waste loss, installation of self-service coffee machines, installation of energy-saving equipment, etc.).
•The Board of Directors will check on the progress of improvements in franchise store profits as an important management indicator.
•We will improve the quality of management guidance by establishing personnel evaluation axes (personnel evaluations related to franchise store profits) with regard to the accuracy of explanations and quality of management guidance.


*This fiscal year we newly introduced improvement in franchise store profits as an important indicator for both company-wide organizational evaluations and personnel evaluations for all employees. Through this measure, we will further enhance our support system for franchise store management and improve franchise store satisfaction.


•Understanding the actual situations of franchise stores and strengthening improvement functions
Through implementation of the following measures, we will identify franchise stores’ actual situations even more accurately and swiftly than previously, and in the event that improvements are found to be necessary, we will swiftly strengthen the necessary functions for implementing these measures.


<Measures to be implemented continuously>
•Identification and understanding of the actual situation of franchise stores through communication between each franchise store and Headquarters Direct line to the CEO, store inspections by the CEO, Lawson Owner Hotline, Lawson Owner Welfare Association, MO Executive Committee meeting •Communication of messages aimed at boosting compliance awareness among all employees, including employees in the workplace, by top management and executives in charge of compliance.


<Measures for reviewing methods for understanding the actual situations of franchise stores>
•To the annual owner questionnaire, we intend to add questions to check whether or not actions and behaviors that could become problematic under antitrust laws are being carried out.
•Across-the-board notification of internal reporting (whistleblowing) and consultation systems, as well as identification of the actual situation for franchise stores and promotion of utilizing of these systems, such as by SV.


<Measures to be newly implemented in order to strengthen improvement functions>
•Routinization of branch audits by the Auditing Department in relation to the trading situation with each franchise store.
•Routinization of hearings with franchise stores by the Legal Affairs Department.
•Checking and review of progress by the Board of Directors and Executive Committee Meeting, etc., following the formulation of the improvement plan.


(2) Item-by-item discussion


(a) Explanation at time of recruitment
When concluding a franchise contract, sufficient consideration time should be given to the candidate franchise store and explanatory methods adjusted to ensure careful and thorough explanations, such as using easy-to-understand explanatory materials with regard to items such as open accounts and related interest calculations, handling of waste/inventory loss, and profit models, which take a comparatively longer time to comprehend.
Furthermore, because it is easier for candidate franchise stores that are existing stores with established performance than for those that are new stores with no performance record to visualize concepts such as expenses and sales in concrete terms, as a general rule we will particularly give priority to introducing existing franchise stores with established performance to new candidate franchise stores, disclosing and explaining information such as the existing store’s actual performance value and personnel status for candidate stores to use as reference materials when considering whether or not they wish to join the franchise.
In case it is decided to operate a new store with no performance record at the strong request of the candidate franchise store, because differences in sales after the store’s opening can occur due to how the store is operated, we will consider taking the approach of providing information, such as information on the business area in which the relevant store is located as reference materials for the candidate franchise store to formulate their own sales estimates rather than disclosing or explaining sales forecasts to the candidate store moving forward.


(b) Coercion, etc., of purchase quantities
In providing management guidance to franchise stores, SVs will clarify internal company rules and ensure that these are made known across-the-board.
Furthermore, in order to enhance the effectiveness of SV explanations and create an environment that makes it easy for franchise stores to understand and consider this information, beginning in November of this year we have been gradually implementing measures such as, for example, having product development personnel and marketing personnel explaining new products and campaign details to franchise stores online. In addition, we are promoting personnel-saving and labor-saving at franchise stores through the installation of customer-operated cash registers and utilization of other digital technologies. By expanding these activities, we are endeavoring to create time for franchise stores and employees in the workplace to thoroughly discuss issues for individual stores, as well as for Headquarters and franchise stores to work together to think up appropriate product lineups that firmly meet customers’ needs.


(c) Clearance sales
A system has been implemented whereby products can be discounted at the store register at the free discretion of the franchise store. Lawson, Inc. recommends reducing waste loss by selling out products, and disadvantageous treatment of franchise stores for conducting clearance sales is strictly prohibited. Accordingly, moving forward we will continue to thoroughly implement this policy, expanding and improving education and training of employees in the workplace so that franchise store clearance sales are not limited. In addition, as a new initiative, we are considering measures to boost customer store visits, depending on the situations of individual stores, by disseminating information about discounts to a limited number of customers who seem likely to visit the store via an app.
By combining digital technology and price discounts, we will endeavor to reduce the waste loss born by franchise stores.


(d) Operating hours
We will strengthen SV education and training, responding swiftly whenever a request is received. Furthermore, to ensure that responses are made with sincerity, moving forward we will continue to disseminate messages from top management and executives in charge of compliance in order to enhance the awareness of employees in the workplace.
On top of these measures, we will continue to present franchise stores with materials for determining the impact on sales of shortening operating hours and conduct sufficient discussions with franchise stores so as to contribute to franchise stores making appropriate decisions.


(e) Area dominance strategy
Lawson, Inc. does not employ an area dominance strategy, and we do not prescribe territory rights for franchise stores. When considering opening a new store in the neighborhood of a planned or existing store, explanations are provided in advance to the candidate franchise store and/or relevant existing franchise store, and only after their full understanding has been obtained do we decide whether or not to open the new store. Furthermore, with regard to selecting management for new stores, in order to prioritize the operations of existing franchise stores in the neighborhood, we will first of all propose that the relevant franchise store operates as a multiple store.

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