Fast Food Franchisees: Are You Ready for the Union Wave?
Fast food franchise owners can make significant money, but they also know that success requires vigilance over costs, particular food and labor. And as chains have promoted low-cost menus, labor costs have proportionally risen because it takes more transactions and items, and more labor, to reach the same revenue levels as in the past.
Those labor costs in major metropolitan areas may be on the rise if fast food workers have their way. In cities like New York and Detroit, employees are starting to push for higher pay and union representation -- and using strikes as a tool. Although the efforts seem concentrated among some of the largest chains, any change there will likely permeate throughout the industry.
Detroit workers staged a walkout in May, targeting one or two locations for each of six chains: Burger King, Long John Silver's, McDonald's, Popeye's, and Subway. That followed similar actions in New York, Chicago, and St. Louis.
In Detroit, the demands were $15 an hour wages and union representation, with unions part of the coalition supporting the action. A similar organization in New York City is also pushing for $15 an hour, focusing on how workers often make minimum wage of $7.25, which they claim is only a quarter of what they need to live in the city.
This puts franchise owners into a difficult position. They have depended on low wages to help keep profitability of their operations, and alleged statements that workers are treated well enough to not need unions can sound absurd, especially when someone like a Domino's spokesperson reportedly points to pizza delivery personnel making "up to" $10 including tips. That effectively argues that workers are doing better than it seems because customers subsidize their pay.
At the same time, the large annual revenues of the fast food industry that union organizers claim don't look at how much is left after costs. They also conflate the individual operations, often owned by franchisees, with the central operations that have far different business models, including royalty streams from the franchises.
Winning the PR battle on this would be difficult. It gets harder when workers claim to have been fired for bringing coworkers to pro-union rallies. As walkouts spread to other cities, more negative attention will fall on major franchise operations, and that will spill over onto smaller ones as well.
There are three things, at least, that franchise owners need to consider:
- Is there a way to pay people more? No, you don't want to lose profit. But at the same time, there is something questionable about claiming that people can choose to work for wages which realistically don't go very far, particularly when there are no benefits. Yes, it might require raising prices, but you could also gain customers by publicizing such a stance.
- Do you understand how to deal with bad publicity? There will be plenty of ill will going around. Lashing back by trying to demonize workers is a good way to get your customers to hate you. Time for some serious research into crisis communications, assuming that you can't afford a firm to do it for you.
- Are you on the right side of labor law? Although legal protections for unions have been diluted over time, there are still significant protections for many workers who want to organize. You can't afford to get into lawsuits from people claiming that you took job action in retaliation for the legal exercise of their rights.
This is not an issue that will blow over and go away if you keep your head down and wait. For thinking out your options and strategies, the time is now.
ERIK SHERMAN | Columnist
Erik Sherman's work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, and Fortune. He also blogs for CBS MoneyWatch.