The National Labor Relations Board (NLRB) in the United States stated that McDonald’s corporation (the franchisor or head office) is a joint employer of workers with its franchise locations.
As someone who has been a franchisee in different franchises over the last 14 years and still owns a franchise today, that is a complete 180 from everything that has been held “true” during my years in the industry.
It is stated very clearly from each franchisor that I have been involved with, that the hiring of staff, their management and all the legal requirements having staff entails has been my sole responsibility.
It has been my company that has employed them, so if I were to ever be sued for any wrong doing with staff, it was my company and not the franchisor that would be on the line.
At different times in each franchise system, they have checked to see its franchisees were doing the right thing, as not to hurt the brand. Otherwise, we were left alone to carry on in our own business.
What this ruling does it makes everything really grey.
If this is upheld, and McDonald’s has said that they are appealing the ruling, some questions instantly popped into my mind
- Does that mean I have to consult with head office anytime I want to hire someone?
- Does that mean that they will have control over that portion of my business?
- Why would head office then want franchises if they have to be responsible for the wages, one of the biggest costs in a franchise business?
- Does this mean the end of franchising, as they might as well just own the stores themselves and keep all the profits, not just the royalty and advertising percentage?
Being a franchisee can feel like its not your business sometimes anyway.
When you are told by head office when to report your figures, how to do marketing, what area you can operate in, etc., you already feel like it’s some of it is outside your control.
The flip side and benefit of being in a franchise is that they make you report your figures, so you know how your business is doing, they take care of the marketing for you and defining an area stops another franchisee from coming in.
It all depends on how you look at it and to be a successful franchisee, you have to accept and play within their guidelines and rules.
If you add this employee ruling to the mix, then how many franchisees out there are going to start asking why they would buy a business and sometimes pay out huge money to do so, to not have much say in how it is run and to feel like an employee themselves.
So, if the franchisor or head office is going to have to take on the risks and costs of employees, and franchisees are going to have less autonomy to run their business like they want, what does this do to the future of franchising?
We will have to wait and see. This is in the USA, and I’m in Canada, but you can bet it will affect things up here. The fastest growing sector in business growth will definitely slow for sure, so if you are a franchisee, watch this to cover your assets. Your business may be about to change.
To your business success,