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Leaders rally to protect franchising model

The NLRB’s push to shift franchisors’ responsibility of franchisees is seen as a lose-lose for all.
rlc panel stage

Industry leaders sounded a call to action from the main stage at the Restaurant Leadership Conference in March to protect restaurant franchising from a regulatory reinterpretation widely seen by the industry as a potentially lethal threat to that mode of development.

The panel was focused on a preliminary move by the National Labor Relations Board to hold franchisors culpable for the labor policies and practices of their franchisees. If the NLRB’s recent reclassification of McDonald’s as a “joint employer” should stand, employees who feel they’ve been wronged by a franchisee—their actual employer—also could take legal action against the franchisor.

Because of brand owners’ deep pockets, franchisors fear that they would find themselves the frequent targets of lawsuits and charges of regulatory infractions. The risk could prompt restaurant chains to reconsider franchising, a point made repeatedly during the discussion.

“I would hate to see this industry implode because of the action of one of these unelected legislators,” Matthew Patinkin, a franchisee of Auntie Anne’s, Red Mango and Jamba Juice, said of the NLRB’s appointed members. “We can fight back, and we will fight back if we coalesce.”

A similar message was voiced by the franchisor on the panel, Don Fox, CEO of Firehouse Subs. “If properly applied, the franchise model is a win-win for franchisor and franchisee,” he said. “If this goes through, it’s a lose-lose.”

The reclassification of McDonald’s as a joint employer by the NLRB’s general counsel can be halted, but it won’t be easy. Unions favor the change in designation, because organizing a whole chain is easier if the infraction of one link is regarded as the exploitation of the whole brand.

“We can’t fight the unions head-to-head—they have too much money,” said Patinkin. “The best way to do that is to get in front of your legislature. Nothing resonates more with lawmakers than small business owners telling their own story.”

“If we don’t galvanize now, then shame on us,” said Steve Caldeira, CEO of the International Franchise Association and moderator of the panel. “Now is the time.” 

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