Franchises not lovin’ new labor push
Calling HQ, owners ‘joint employers’ would hurt, they say
NEW YORK — Last Thursday, in the middle of a vast convention hall floor in the bowels of the Javits Center in Manhattan, Pedro Gallegos stood at a podium and described how he had arrived in the United States from his native Ecuador carrying just two suitcases. Within a few years, he and his wife were able to invest in a moving franchise called Two Men and a Truck. They’ve gone from two trucks to 10 in San Diego, and have earned themselves a spot in the middle class.
“I am passionate about franchising because of the opportunities it has offered my family,” Gallegos said, in front of a small group at the International Franchise Expo, a trade show where prospective business owners can shop for new opportunities.
But now, Gallegos said, there’s a fight in Washington that could change how he runs his business day to day. And it’s all because of a different company that has nothing to do with his: McDonald’s.
There’s a basic question before the Labor Relations Board right now that affects franchise owners like Gallegos around the country. If a McDonald’s worker has his or her rights violated, who’s liable? The franchise owner running the McDonald’s? Or the executives at McDonald’s headquarters, or both? The NLRB’s general counsel says it ’s McDonald’s responsibility and that companies like it should be treated as “joint employers.”
If that’s true, then suddenly a franchise owner like Gallegos is going to start hearing a lot more from the home office for Two Men and a Truck — and Gallegos and his wife say they would start losing their independence as small business owners.
“We don’t want to be glorified employees,” said Alicia Sorber Gallegos.
Small-franchise owners like the Gallegoses are getting swept up in a national push for improving how employees at places like McDonald’s are treated and in particular, how much they get paid. New minimum wage mandates cropping up all over the country are trying to make $15 an hour an industry norm.
The franchise system status quo is also under attack by the powerful Service Employees International Union, which has argued that workers can’t effectively bargain with their employer if the franchiser actually calls the shots. That’s why it brought the case against McDonald’s that the National Labor Relations Board may use to decide that the corporate office has enough control over working conditions on the shop floor to be responsible for those employees alongside the franchise owners.
If it does, that could smooth the road toward unionization in the fast-food industry by bolstering the legal argument that a company like McDonald’s or Two Men and a Truck is the employer of all the workers at the individual franchises, making the bargaining unit for the workers much broader and more powerful.
At the same time, with the SEIU’s support, some franchisees are pushing bills in state legislatures that would give them more rights — making it harder for a franchiser to terminate a contract, for example. Franchisers, represented by the International Franchise Association, say that would just mean fewer opportuni- ties for people to own their own businesses.
“They’re trying to drive a wedge between franchisers and franchisees,” says Matt Haller, a senior vice president with the IFA. “It’s a death-by-1,000-cuts strategy.”
In a presentation to franchisees about regulatory threats, Haller’s PowerPoint calls out the SEIU, the NLRB, and the Department of Labor’s David Weil as the primary culprits.
Worried about the onslaught of potential change, the IFA is trying to get its membership engaged in protecting the status quo. They’re reaching out to institutions representing people of color, who make up a disproportionate number of franchise owners. And through a new website, they’re trying to create the impression that franchises aren’t one huge corporation with tentacles everywhere, but rather small businesses just like a local mom and pop store.
“The franchise business model is a victim of its own success,” says Haller. “We’ve perfected uniformity, so consumers don’t differentiate who’s making those decisions at the local level. They get the same experience, so they don’t know that it’s a local business.”