Many people do not realize that 90 percent of the restaurants in the United States belong to independent operators or franchisees.
Traditionally, business owners and union organizers have stood on opposite sides of the spectrum in relation to labor issues. The restaurant industry has for the most part remained free from big business constraints through small independent owners and the franchise system, which have also kept franchises free from union organizing.
Since 1984, the franchise system drew clear distinctions between franchisee owners and franchises. For decades, the franchise model gave small business owners the advantage of resources to start new businesses while at the same time having the freedom to run the businesses themselves. The franchise expands the reach of the brand, while the franchisee manages daily business operations and personnel.
Until recently, the National Labor Relations Board (NLRB) followed the tradition of viewing franchises and franchisees as separate in their legal responsibilities. While a disgruntled employee could sue the restaurant owner (franchisee), the franchise would not automatically be liable as well. In December 2014, the NLRB allowed several complaints, one against McDonald’s USA LLC and McDonald’s franchisees to proceed as a joint action, alleging unfair labor practice charges. However, McDonald’s USA LLC does not control labor relations at the franchised stores.
The NRA opposes this change taken by the NLRB and is reaching out to Congress for legislation to curb the NLRB’s authority. The potential harm to business franchisees is as follows:
- Organized labor’s ability to unionize the restaurant industry by re-labeling franchise stores as big business
- Discouragement of small business owners to launch new businesses through franchises
- Turning daily business operations (hiring, firing, shift schedules) over to the franchiso
- Economic repercussions of fewer jobs created, less capitol re-invested into the economy and fewer taxes paid
- Loss of small businesses and less contributions to the economy by independent entrepreneurs
Stephen Hans & Associates represents small business owners in labor disputes in regulatory actions, lawsuits and negotiated settlements. If you face a labor dispute, find out how we can help.