Convenience store chains in Japan should consider shortening their business hours and help franchise owners cover rising labor costs, a government panel said Thursday.

The recommendations come as some franchise owners are struggling to keep convenience stores open 24 hours a day despite plateauing demand from consumers and a severe shortage of workers.

The Ministry of Economy, Trade and Industry had tasked the panel, consisting mostly of academics and business leaders, with drawing up a report on measures to place the industry on a more sustainable path.

Warning that the current business model of convenience stores is "facing a crisis," the panel urged chains to take a more flexible stance on business hours.

The panel welcomed Ministop Co.'s decision to shoulder part of the cost of paying workers starting in the business year from April 2021, and called on other major chains such as Seven-Eleven Japan Co., FamilyMart Co. and Lawson Inc. to consider following suit.

"I hope they will look at the report and take steps allowing them to adapt to and succeed in changing times," industry minister Hiroshi Kajiyama said.

The panel also called for greater flexibility in setting royalty fees paid by franchise owners, suggesting a revamp of the current practice of collecting a set amount based on gross profit.

It pointed to long-term contracts, often spanning 10 to 15 years, as favoring convenience store chains and making it harder for franchise owners to adapt to changing business conditions.

The debate over the future of Japan's convenience stores comes at a turning point in the industry.

The rapid expansion of the past has become untenable as a shrinking population means a dearth of both consumers and workers. The number of stores nationwide as of the end of 2019 was down 0.2 percent from the previous year, the first decline since 2005 when comparable data became available.

The panel urged chains to improve communication with franchise owners and to establish ways to settle disputes without taking them to court.

It also encouraged investment in technology such as artificial intelligence and automation, and greater efforts to reduce food waste such as discounts for products nearing the end of their shelf life.

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