GABA business model, by special request.

On today’s topic, the business model for GABA Eikaiwa works like this:

1) Rent facilities.

2) Hire native English speakers under the most ambiguous of terms. Create a bureucratic maze of flat-rate hourly payments.

3) Market to Japanese who want to learn or practice English, and charge them more than what the rent, other overhead, and money you pay out to the native English speakers cost you.

4) Because previous competition has already imploded under the pay-by-deposit for future lessons method, try to offer lesser discounts for services not too far into the future.

As you can see, this would be a touch-and-go type business. If the customers show up that month, you have a business. If they don’t, you don’t have the revenue. Your revenue streams aren’t dedicated in any way, in fact. So to make the business model work, you need to blur the distinction as to whether your employees are really employees.

After all, what is the product? A talking gaijin. The atmosphere of the Learning Center. How is this any different than the freelancing Eikaiwa teacher doing “privates” at the Jonathan’s or the Dotour’s? When you strip away the marketing and the talk about “training” and “methods”, the product is really the freelance private model. Except you are telling the freelancer what to wear, when to show up, and what to do. (So in that sense, it’s more like McDonald’s.)

16 thoughts on “GABA business model, by special request.

    1. So when I go to McDonald’s, it’s really just an Atlas Shrugged inspired agreement of independent project managers and designers, isn’t it? I’m the contractor and I want them to make me a hamburger. They’re free to either walk out the door or make me one. So we make a contract. I will pay 660 yen, and they will make me a BLT “setto” that looks similar to the design specifications displayed on a panel above.

      After some project planning that looks like it’s been thought out well in advance, about a minute later I receive delivery based on the specs. Then–maybe to emphasize that the whole thing is an arm’s length transaction between freedom loving, autonomous persons—I can either take the food with me or consume it in the Eating Studio.

      Da da da DA da . . . [<— I'm lovin' it jingle.]

  1. Hoofin, while not disagreeing that Gaba is perhaps not offering the best conditions, I want to point out that point #3 is the same across all profit-driven businesses. They do charge more than their expenses, because that’s how they (and we, and everyone else) make a profit.

    1. Simon, thank you. I put that in there as part of the humor, because it’s clear that in the freelance model, the English tutor keeps all the money, unless they want to / have to buy something from the Starbucks.

  2. “In 2009, the company spent nearly ¥854 million on advertising and about ¥637 million on labor costs for its 850 independently contracted instructors and 434 employees.”

    -Not to mention the simple overhead costs must be tremendous. They only rent spacious ekimae locations, and the studio design is artsy and chic. So they advertise an upscale product, ensure their independent contractors are wearing a suit, and there you have the Gaba model. Students pay to be marketed at rather than taught. And that’s where most of the 8,000yen lesson fee goes.

    If customers don’t show up, you don’t have revenue, but neither do you have to pay wages. Or shakai hoken, unemployment insurance, transportation allowance, training, etc.

    It’s an abuse of the independent contractor status, because the independent contractors are all at the same place at the same time, following the same dress-code, doing the same thing and earning the same wage , all under the directive of management, on company property.

    And unlike McDonald’s, there is no guaranteed salary, since McDonald’s schedules are determined in advance. Calling it the “freelance private model” is disingenuous. The company began that way, but it ceased being that way when they brought the lessons into the studio.

    1. GTJ, I appreciate your comment.

      This is further reasoning that the company only exists because of the failure of the Japanese bureaucracy to enforce labor law when it involves a foreigner.

      As I am studying the U.S.-Japan Treaty of Friendship, Commerce, and Navigation (FCN) treaty, I tend to wonder how the U.S. State Department lets Japan get away with this. But I have enough on my plate, so to speak, already.

    2. Oh, and by the way:

      http://gaba.generalunion.org/news/779

      I am amenable to getting the union’s point out there, when it’s got the credible data to back it up. Here, yes. With Interac, I was a little skeptical as to what they were up to; but I still put in the good word. Keep up the good fight.

      1. Saw your post on Debito/LJ and gave the Japan Friendship Commerce and Navigation Treaty a read through. I’m not sure how you could use this to improve conditions of foreign workers in Japan (but am open to ideas!).

        The only part I found applicable were articles III and IV:
        Article III

        1. Nationals of either Party should be accorded national treatment in the application of laws and regulations within the territories of the other Party that establish a pecuniary compensation. or other benefit or service, on account of disease, injury or death arising out of and in the course of employment or due to the nature of employment.

        2. In addition to the rights and privileges provided in paragraph 1 of the present Article, nationals of either Party shall, within the territories of the other Party, be accorded national treatment in the application of laws and regulations establishing compulsory systems of social security, under which benefits are paid without an individual test of financial need: (a) against loss of wages or earnings due to old age, unemployment, sickness or disability, or (b) against loss of financial support due to the death of father, husband or other person on whom such support had depended.

        Article IV

        1. Nationals and companies of either Party shall be accorded national treatment and most-favored-nation treatment with respect to access to the courts of justice and to administrative tribunals and agencies within the territories of the other Party, in all degrees of jurisdiction both in pursuit and in defense of their rights. It is understood that companies of either Party not engaged in activities within the territories of the other Party shall enjoy such access therein without registration or similar requirements.

        2. Contracts entered into between nationals and companies of either Party and nationals and companies of the other Party, that provide for the settlement by arbitration of controversies, shall not be deemed unenforceable within the territories or such other Party merely on the grounds that the place designated for the arbitration proceeding is outside such territories or that the nationality of one or more of the arbitrators is not that of such other Party. Awards duly rendered pursuant to any such contracts, which are final and enforceable under the laws of the place where rendered, shall be deemed conclusive in enforcement proceedings brought before the courts of competent jurisdiction of either Party, and shall be entitled to be declared enforceable by such courts, except where found contrary to public policy. When so declared, such awards shall be entitled to privileges and measures of enforcement appertaining to awards rendered locally. It is understood, however. that awards rendered outside the United States of America shall be entitled in any court in any State thereof only to the same measure of recognition as awards rendered in other States thereof.

        But since you can freely take any labor violation to a labor standards office or labor commission, Japan can claim (and I feel honestly here) that they are meeting their obligations under this law. Also this law seemed primarily to focus on insuring free trade, so is a protection for investments, capital, overseas business and shipping. I don’t think any politician/legislator in the US would be keen to wave this law around in defense of wage workers, but they’d certainly use it to protect an American company here and insure it free competition.

        But I did just give it a quick read through, and I’m not very knowledgeable about law. What did you have in mind for using this?

        1. It has nothing to do with GABA per se. I’m afraid I don’t have time to blog the particular details. (I think you are quoting me off Debito’s site actually.)

  3. Thanks for posting the link!

    The Labor commission doesn’t have the power to order companies to change their policies, only to make “recommendations.” Primarily, they deal with Trade Union Law, as opposed to Labor Standards Law, where our rights are contained. The Labor Standards Office deals with Labor Standards Law, and is a tough nut to crack. Taking a case to the Labor Standards Office, and getting it thrown out, pretty much leaves you with nowhere else to go. I believe this is why unions here tend to first go through the Labor Commission and get a favorable ruling, then take that to Labor Standards to increase their chances of a favorable ruling. That process takes years, and leaves the impression that “nothing is being done.” It is, just at a snail’s pace.

    To me, it seems there are only two other options – risk taking a case directly to the LSO without supportive rulings from an LC, or – preferably, having a strong membership so you have leverage against the company, and can force them to the bargaining table through threat of strike, etc. ECC is a good example of this. Their union is able to make demands on the company over small, workplace issues, whereas other schools without a strong branch must go through the courts over clear legal matters.

    Gaba instructors aren’t yet covered under Labor Standards Law, so the bureaucracy has nothing to enforce. Like a lot of areas in Japanese law, the Itaku status of instructors is in a “gray area.” I would venture to guess that since the Central Labor Commission threw-out Gaba’s appeal of the 2009 Osaka labor commission ruling last week, the union will now turn to the LSO. But how long until they give a ruling and we see concrete change? Probably not for awhile yet. Unions in Japan have difficulty organizing due to high turnover. Hence low memberships. The most powerful tool in the hand of a union, the right to strike, is deprived to them. If people want fast change, they have to actually join the union at their workplace and put themselves out there. If you wait for the courts it can take many years, and even then you can’t negotiate for improvements outside of the minimum standards labor standards law provides. If you read the labor standards law, it clearly states that the laws are the minimum framework, and that companies should endeavor to improve the standard. But they only do that through union pressure.

    BTW – I like your blog, and appreciate the labor friendly posts! Thanks for getting all this info out there.

  4. I like Gaba. I set my own schedule. I don’t have to find clients. Yeah, there are the occasional whiners at work but they are rare. Most of us are very happy with Gaba. The day I am no longer a private contractor will be the day I leave Gaba. Given that, I resent the activist whiners who would take my private contractor state away from me. If you don’t like Gaba, then go away. No one is holding a gun to your head to stay.

    1. This is an interesting talking point. As I understand how the law works, the facts surrounding someone’s work for (or in) a company determine what kind of status that person has under Japanese labor law. When companies try to get around the real law (what I call Real Rule), they start to make stuff up. I think the problem at GABA back in Japan is that their business model depends on skirting labor law. This maybe works to your advantage, but doesn’t mean that GABA isn’t violating the Real Rule.

  5. Well, let the courts decide. You mention “skirting labor law” but there is no “skirting” if the labor law provides for such “skirting” … We’ll see what the courts decide.

    You know, the “do-good-ers” in life decide, that, the poor slobs in life, such as myself, just won’t have a chance without their benevolent intervention. They’ll tell you that the greedy corporations will hang you out to dry at the first sign that it is in the corporation’s best interest to do so.

    The public school system (in the US, at least) is filled with “do-good-ers” (most of whom have never had a job other than teaching – and who were taught by other “do-good-ers”).

    The real heart breaker for me is that the “do-good-ers” have never learned to value the human spirit. The heart breaker is that they actually believe that they are superior to “the least of these my breathern” and so, regretfully, they believe that “the least of these my breathern” just won’t make it without their grandiose wonderfulness to save the day against the evil corporation. It is heart breaking.

    The truth is: there is no such thing as “the least of these my breathern” … we all, equally, have the power to succeed against all odds… But spite and anger and the victim mentality “leads to the dark side”… (a little ‘Star Wars’ philosophy there).

    Social structuring will be going on forever… Perhaps the “do-gooders” will win the day in court. What really matters, in the end, is that something comes forth which shows to all the power of one’s own uprightness and impeccability so that blame of others for one’s condition is no longer even a faint possibility.

  6. The wheels of bureaucracy turn slow, but undoubtedly the courts will decide in the union’s favor. Internationally, bodies like the UN International Labor Organization are issuing recommendations to close labor loopholes, their “skirting.” See the R198 Employment Relationship Recommendation 2006 for example (training.itcilo.org/socdial/webcontents/R198EmplRel.pdf). In Japan, the extraordinary session of the Diet (2010) proposed legislation to revise the Workers Dispatch Law, aimed at severely limiting or in some cases even banning the use of dispatch, or temporary, contractual employment, which will likely be approved in the next regular session of the Diet. The courts have thrown out Gaba’s appeal of the Labor Commission ruling already. r chrysocolla, you are going to be on the wrong side of history. If the day you lose your private contractor status is the day you leave Gaba, I’d advise you to start looking for other employment.

    As for “activist whiners,” they tend not to exist where labor conditions are good. Unions are made up of workers, afterall. In my branch, there is a lot of complaining. The first rule in union-busting is “run a good shop.” If employees are treated well they wont unionize. From the opposite perspective, that of a union organizer, “unions don’t organize workers, companies do.” The fact that a union exists at Gaba, is growing and making progress in court, are good indications to an outsider that things at Gaba aren’t very rosy.

    In any case, Gaba is most certainly guilty of not holding collective bargaining with the union, which is their obligation under the law. That is their opportunity to negotiate with the union, and reach a negotiated settlement so they don’t have to go to court. Ironically, the fact that they are refusing to do so might be their undoing. Another thing about unions is that their demands are voted on by their members. Again quite ironically, if people didn’t want to lose their contractor status and receive the right to negotiate with the company yearly, receive benefits, stability, etc. it would be in their best interest to join the union and vote against those demands or limit them. Since they don’t, the program of the union is dictated by the “activist whiners” you speak of, who vote on demands in their own interest, rather than ‘benevolent intervention” for your sake.

    All your talk of “the human spirit,” spring forth the power of uprightness” etc. is dripping with religious platitudes and is extremely far removed from reality. Those phrases don’t put food into people’s mouths. You are right, social structuring will go on forever. But the wheels of social change aren’t moved by poor slobs like you, nor should they be if you are happy with your lot in life. Misery is a far more influential cause of social change than benevolent intentions.

    1. I just want to point out to you that the Japanese government only talked about getting rid of dispatch when it concerns manufacturing workers. They have no problem with it for occupations that employ foreigners.

      Also, I”ve never said that the union were activist whiners. I support the unionists, but I routinely question some of the strategy.

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