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Brisbane-based Domino's Pizza Enterprises (ASX: DMP) and its high-profile managing director Don Meij (pictured) will soon be served with a claim in the Federal Court by one of their long-term franchisees.
As reported by The Courier Mail, the franchisee in question is Perth-based fast-food veteran Frederick Aloysius Mario White.
White reportedly alleges that earnings at his three Perth Domino's stores shrank after Domino's failed to mention plans to force franchisees to sell pizzas below cost at $5 in 2014 and forced him to buy ingredients at "unreasonably high" marked-up price of about 18 per cent.
The publication also says the allegations relate to misrepresentations from DMP about likely sales and about sales at a second store it opened in Balcatta, Perth.
Ultimately White alleges that Domino's and Meij engaged in false and misleading conduct, unconscionable behaviour, misuse of market power, exploited its bargaining power and breached the franchise code of conduct by failing to act in good faith.
The ASX-listed pizza chain says it will defend the claims brought against it and considers them to be without merit.
"We refer you to our previous public announcements on our efforts to improve the standards of our franchisee network, a program that started two years ago," says Domino's.
"We have shared that these efforts would likely lead to some franchisees being unhappy with DPE and choosing to leave the network."
"We also flagged some of those franchisees may choose, as an attempt to achieve leverage to bargain with us, to take legal action or to raise the threat of litigation through the media."
"This is one such case in our view. Therefore, we are disappointed, but not surprised, by this action by an Australian franchisee which we do not consider represents the relationship with our wider franchisee community."
White's claim against Domino's is the latest litigation to be brought against the pizza chain, following a class action alleging Domino's underpaid delivery drivers and in-store workers.
Phi Finney McDonald alleges that between 24 June 2013 and 24 January 2018 delivery drivers and in-store workers who worked for Domino's and its franchises in Australia were employed under a series of employment agreements that did not pay certain entitlements.
These underpayments allegedly included Domino's not paying 25 per cent loading for casual workers, additional penalty rates for working after-hours, on weekends and on public holidays, and a laundry allowance to assist with uniform cleaning.
The law firm is looking to win Domino's employees the difference between the wages paid under the employment agreements and the amount they should have been paid under the Award.
Shares in Domino's are up 2.21 per cent to $54.99 per share at 10.20am AEDT.
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