NLRB Hearings Begin; Franchises in the Crosshairs

Posted on March 30, 2015 by

Today marks the start of what could unravel of one of the most successful business models this nation has ever seen – the franchise business model.

An administrative judge for the National Labor Relations Board (NLRB) begins a series of hearings today which will ultimately determine if McDonald’s Corp. should be legally responsible for the employee decisions made by individual, local McDonald’s restaurant owners.

This is the first true test of the so-called “joint-employer” rule, laid out by the NLRB general counsel last summer. Right now, the parent company has a say over the local owners’ use of brand and quality standards, but local franchise owners can hire, fire and pay the local workforce as they see fit.

This makes sense. Market conditions such as available workforce, cost of living and number of competitors vary from town to town, and state to state.

But should this joint-employer ruling stand, the parent company would have to get involved in these local decisions. This would remove the autonomy enjoyed by tens of thousands of franchisees throughout the country who simply used franchising as an opportunity for complete business ownership and a shot at the American Dream – particularly among minorities.

A corporation may be less likely to want to offer franchising opportunities if they are just as liable for employment decisions as the local owner.

And it’s not just fast food. As pointed out by Bernie Marcus in a recent op-ed, more than 770,000 small businesses owe their existence to franchising and cover a wide variety of industries:

“Avis, Circle K, Great Clips, and Hilton Hotels – all are franchises. The business model accounts for 18 million direct and indirect jobs and adds $2 trillion to the GDP.”

Labor attorney and Littler Mendelson co-chair Michael Lotito told The Hill, “I think all businesses should recognize this is bigger than a McDonald’s problem,” adding, “The labor board is embarking on a process that fundamentally redefines who an employer is and who an employee is.”

Today’s hearing in New York will be followed by similar hearings in Chicago and Los Angeles. Opening arguments in the actual case will not start until at least May but the groundwork is already well-underway for a dismantling of the franchise model. This is why Job Creators Network has embarked on a campaign to defend America’s small business owners by defending franchises. You can read more and get involved at our Defend Main Street website.

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