Here are the basic steps of the franchise model:
1. An entrepreneur-turned-franchisor turns the best practices proven at the mothership operation into licensed intellectual property (IP).
2. Independent franchisees purchase this IP and agree to follow rules prescribed in the franchise agreement about how the “product” is presented to the marketplace, like signage, branding and ingredients.
As the headwaters of modern franchising, the U.S. is the global leader in this business expansion model, with more than 3,000 franchise options in over 75 industries. And almost a million franchise establishments - all small businesses - employ almost 10 million people and generate roughly 5% of the U.S. economy. Indeed, franchising has been a big part of the American Dream for thousands of entrepreneurs on both sides of the franchise agreement for over 150 years.
Alas, recent actions by the National Labor Relations Board (NLRB) could put this part of the American Dream in jeopardy. In labor violation complaints against McDonalds, the NLRB says it intends to treat the franchisor corporation as joint employer with its thousands of franchisees. It gets worse: According to Kent Hoover, Washington Bureau Chief for American City Business Journals, “The NLRB as a whole may adopt this standard for all businesses.
Connecting franchisee employees to the franchisor corporation is not only technically flawed, but it serves no benefit for either entity, employee or customer. So what is motivating such an unprecedented deviation in the treatment of the franchise industry by the NLRB? Two words: unions and Obamacare.
As another straw man for the Obama administration, the NLRB pursuing this assault on franchises gives something to unions in return for the president opposing the XL Pipeline, which the unions want. With this single ruling changing the definition of a franchise employee, it would be much more feasible for unions to organize down to workplaces at America’s last mile, like the local burger and pizza franchise.
Moreover, since franchisees typically don’t have enough employees to fall under Obamacare’s employer mandate, the same ruling would serve to eliminate that distinction.
The NLRB must not be allowed to disrupt the proven and productive relationship between franchisor and franchisee. The franchise model produces entrepreneurship, which produces economic growth, which produces the American Dream.
Write this on a rock … Tell your Congressional delegation to stop the NLRB’s assault on franchises.