American business has long relied upon the franchise model. Brands like McDonald’s grant individuals a license for the right to use their trademarks and sell their products. McDonald’s also gives franchisees marketing plans and operations manuals. The franchisee pays McDonald’s agreed-upon fees for use of their business model.
Traditionally, a franchisor like McDonald’s has little to do with day-to-day franchise operations. The owners and managers at the franchise are responsible for hiring, firing and disciplining employees. They make promotional decisions independently, and they determine things like compensation and hours without input from the corporation.
It’s a business model that has succeeded for many companies over a span of many years. Now that model is in jeopardy because of a National Labor Relations Board (NLRB) opinion which states that corporations like McDonald’s are actually joint employers along with their franchisees. If the opinion is allowed to become policy, then large parent corporations would be just as liable in labor disputes and lawsuits as the franchisee.
Formalizing the concept that a parent corporation is a joint employer could be disastrous and may spell the end of the franchising business model. Franchisors could be held responsible for everything from a patron choking on their meal to an employee alleging discrimination. Legal costs would quickly skyrocket, and corporations could become mired in endless litigation. Franchisors would no longer enjoy the layer of protection from claims that they currently have thanks to the franchise business model. Accordingly, some companies may decide to do away with franchising entirely.
The NLRB’s findings are connected to complaints filed by fast food workers who protested the unfairness of their wages. The workers claimed that their rights were violated in retaliation for their protest. Legal counsel for the NLRB decided that the workers’ complaints had merit and stated that the franchisor may be named as a co-respondent.
A final determination about whether or not the McDonald’s corporation will be considered a joint employer in the matter has not been made. If the corporation is named a co-respondent, it may set a legal precedent for countless legal matters.