Q. WHAT IS THE BIGGEST CHALLENGE FACING THE FRANCHISE INDUSTRY TODAY?
Dexter Manning: The biggest issue creating waves right now is the National Labor Relations Board’s ruling that McDonald’s can be treated as a joint employer with its franchisees. The NLRB ruled that McDonald’s is a joint employer with its privately owned franchise restaurants and legally responsible for workplace practices and the general welfare of franchise employees. If this ruling is upheld, it will have major implications for all franchise businesses because it makes franchisers everywhere potentially liable for employee complaints that take place at individual franchises and for providing required employee benefits, such as health insurance under the Affordable Care Act. For example, the ruling could make the franchise parent culpable in a wage dispute between an employee and a franchisee, or it could be held responsible for the bad behavior of an individual employee at one franchise unit.
This all started with a case the board ruled on involving a company called Browning-Ferris Industries of California, which the NLRB found was a joint employer of workers hired by a contractor to help staff the company’s recycling center. The ruling had an immediate impact on McDonald’s and several of its franchisees.
Q. DO YOU THINK THE NLRB RULING AGAINST MCDONALD’S IS CORRECT?
DM: No. It violates what it means to be a franchise. Franchises are independently owned companies that use the intellectual property and trademark of the franchise and, in return, pay a royalty fee to the franchiser. With more than 14,000 restaurants in the United States alone, McDonald’s is one of the largest franchise chains in the country. However, more than 90 percent of McDonald’s restaurants are franchise-operated. It’s not surprising that standards and working conditions can and will vary from franchise operator to franchise operator […]
Dexter Manning is an audit services partner at Grant Thornton and national practice leader for food and beverage. He has more than 20 years of experience in financial accounting and advisory services specializing in the food industry, including eight years as CFO of a regional beverage distributor.