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Franchising

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The Service Employees International Union (SEIU) is asking the Federal Trade Commission to investigate the system of franchising used by fast food companies, charging that it is designed to hold down wages unfairly.

The union, which has been pushing to boost the pay of low-wage fast-food workers, said the current structure gives too much power to franchisers on issues such as revenue-sharing, capital expenditures, and termination and renewal of contracts.

As a result, too many franchise owners are locked into a model that limits their control, said Scott Courtney, assistant to the president of SEIU. Franchisers, he said, have built low wages into the system and it’s not possible for a franchisee to increase wages they pay to workers without reforming the model.

“Franchisers like McDonald’s control virtually every aspect of the business operation at their franchise stores. They set the cost and effectively set the low wages paid throughout the industry,” Courtney said in a conference call with reporters. He added, “Reform of the system is important to ending poverty wages in the franchised food sector.”

McDonald’s said in a statement it has a strong working relationship with its 3,100 independent franchisees. McDonald’s said it supports its franchisees and protects the brand by providing “optional resources” and setting quality standards that help franchisees operate successful businesses.

Franchising, like temporary work and subcontracting, exists solely to promote the interests of corporate executives over that of workers. That you can have multiple employers employing workers in the same factory making the same thing or that you can outsource production or that you can franchise is a sign of the extremely aggressive move by corporations in recent years to limit corporate obligations and liability. SEIU is right in fighting this. Perhaps the franchising model should not exist at all, but in any case, the corporate home must be held legally responsible for everything that goes on in each and every establishment.

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