Attendees hear an alarm to protect the franchising model

A call to action was sounded from the main stage at the Restaurant Leadership Conference 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, could also take legal action against the franchisor.

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

“I would hate to see this industry implode because of 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 lawmaker than small business owner 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 yesterday’s panel. “Now is the time. “

If the restaurant industry can pool its financial and manpower resources, it can prevail, said Michael Lotito, co-chairman of the Workplace Policy Institute.

“At the end of the day, we will win,” he said. “Because at the end of the day, what the labor board is doing is downright goofy.”

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