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Massive burden imposed on Japan convenience store franchise owners amid crisis

A passerby is seen looking at a sign indicating a temporary closure in front of a Seven-Eleven store in Kawasaki, Kanagawa Prefecture, on April 14, 2020. (Mainichi/Hajime Nakatsugawa)

TOKYO -- Anxiety is mounting among the owners of franchise stores under major convenience store chains in Japan as they struggle to stay in business amid the novel coronavirus outbreak.

There are a number of stores of such giants as Seven-Eleven Japan Co., FamilyMart Co., and Lawson Inc., that were forced to close after employees were found to be infected with the virus. However, the disposal of products and disinfection measures are costly and headquarters are not able to provide sufficient assistance to their franchise stores. More shop owners are increasingly struggling to sustain their businesses as they are unable to secure enough workers. These franchise stores are bearing a large burden following the national government's request that convenience stores stay open, which was made after the state of emergency declaration.

Among convenience stores in Japan, 17 Seven-Eleven stores, three FamilyMart stores, and two Lawson stores have been closed due to employees contracting the virus. There is a shortage of employees including part-time workers in convenience stores as many people fear the risk of getting infected in a confined space where many people can leave and enter. The total numbers of convenience stores that have closed as of April 13 are roughly 150 Seven-Eleven stores, 194 FamilyMart stores, and 162 Lawson stores. Among this number are stores that closed due to a shortage of workers and shops located inside commercial facilities and buildings that have been shut.

The government of Japan has instructed supermarkets and convenience stores, which are considered essential suppliers, to remain open amid the state of emergency. Accordingly, the headquarters of convenience store operators are asking their franchise stores throughout Japan to continue business. In the case that a store has a staff member that contracts the virus, the shop is required to be closed for around two weeks after disposing of its products and undergoing sterilization.

"Damage due to the disposal of products has reached around 3 million yen for one store. Even if outlets reopen, they suffer from reputational damage and profits from sales have dropped by 40% compared to the same period of the previous year," said sources familiar with the matter. Some owners say that there may be stores in the future that cover up infection cases in order to avoid closing down, given that headquarters are not planning to provide compensation to stores under closure.

In order to reduce the burden on franchise stores, Lawson is shouldering all expenses for disinfection measures and the partial cost of product disposal. A FamilyMart representative commented that they will "respond to each case in accordance with each store's situation." Seven-Eleven is currently bearing 15% of costs incurred from disposal, but is having franchise stores pay the full cost for disinfection measures. A Seven-Eleven Japan public relations official told the Mainichi Shimbun, "Going forward, we are considering providing assistance toward franchise stores that are in business, not just those that have closed."

There are also instances where franchise stores closed under the discretion of the owner in order to prevent infection among workers. A Seven-Eleven store in Kawasaki, Kanagawa Prefecture, decided to ask for permission to close after voices of concern about continuing to interact with customers were raised among workers from late March, including a university student part-time worker who requested time off as their parents were worried. "If an employee became infected and were to pass away, I would be held responsible," said the male owner in his 50s who requested that headquarters agree to the store's closure. Seven-Eleven Japan was initially reluctant to accept the request as convenience stores serve as a significant infrastructure for society, but after negotiations, the closure was approved on April 13.

When subject to closure, convenience stores will naturally cease to make a profit and their owners must shoulder costs for compensating employees and product disposal among other expenses, which can total several million yen. The store owner in Kawasaki spoke of his difficult situation, saying, "There are owners who claim that it is best to continue business especially at a time like this. The government also speaks easily of its desire for stores to be kept open without considering the sacrifices that have to be made in the workplace. I do not know what is the right decision."

(Japanese original by Hajime Nakatsugawa, Business News Department)

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