Did you start your career at McDonald's? Chances are, more than a few of you did, and those who didn't may have worked for another business that operated on the franchise model.

How the franchise model works is that a person or group buys the rights to open a restaurant (or other franchised business). The business gets the benefits of the global branding and is bound by numerous corporate rules, but the employees report to the local owner.

That limits corporate liability. If Jane, who owns a McDonald's franchise, doesn't pay overtime, it's Jane that's liable, not McDonald's corporate office. Jane, you might have guessed, doesn't have the deep pockets that the corporate office has.

All of that might change.

McDonald's has agreed to settle a lawsuit that would pay several workers for labor violations that occurred in franchised locations. The settlement has to be approved by the National Labor Relations Board, and that's where it gets sticky.

The National Labor Relations Board under the Obama administration was very labor-friendly and was steering the rules towards a joint employment policy, which would make the corporate office liable for bad and illegal practices that happen in the franchises. Additionally, this would change how workers can unionize.

A new Trump appointee swings the board back to Republican control, and (theoretically) a more pro-business attitude than the previous board.

This may affect your next Big Mac.

You probably couldn't tell the difference between a corporate owned and franchisee-owned McDonald's by walking into it and ordering. But, if corporate offices become joint employers, then corporate will necessarily have to play a bigger role in how the franchisees manage their restaurants. Instead of the freedom to operate as they will, you can expect to see a more heavy-handed role from the corporate offices.

Additionally, this change would favor unions, meaning that employees are no longer limited to their direct co-workers when it comes to forming a union. They could band with employees at a wide variety of McDonald's restaurants.

This may affect your next home purchase as well.

While this case is specifically about McDonald's, the implications will spread to all franchises. When people think of franchises, they often think of restaurants, but that certainly isn't the only type of company to use that model.

Hotels, cleaning companies, rental cars, and real estate agencies all use the franchise model. If corporate offices are made joint employers you'll see changes across all these industries.

In other words, while this seems like something that won't affect your life, it could have a tremendous impact on many aspects of your life and might affect your own business plans.

How to Franchise--The Right Way

Published on: Mar 20, 2018