The decision by the National Labor Relations Board was being closely watched because it could potentially expose McDonald's to liability for the working conditions in its franchisees' stores. It also puts pressure on the world's biggest hamburger chain at a time when protests for higher wages in the fast-food industry have captured national attention.
McDonald's and other fast-food companies have repeatedly said they are not responsible for determining wages and other terms at their franchised locations.
The International Franchise Association, which is currently suing the City of Seattle over our new $15 an hour minimum wage law, has maintained throughout their opposition to our tiered minimum-wage timeline that franchises should count as small businesses under Seattle's law because their operations are so totally separate from the parent company. This NLRB decision is unrelated to that suit, but it's certainly a ruling the franchise peeps are gonna hate.
In fact, the franchise association's president and CEO, Steve Caldeira, sent a long opinion piece out to media in early July with the association's fears about this potential NLRB ruling. It read in part:
Entrepreneurs are drawn to franchising because it is a proven, time-tested business model. But if control is taken away from these small-business risk takers who invest their own financial resources, fewer new businesses of this kind will be started.
This, in turn, will slow job growth. Unlike many other sectors of the economy, franchising has been growing consistently. In addition, large brands will probably opt to open corporate locations instead. That will reduce the number of entrepreneurs who are the backbone of Main Street America and help to create two-thirds of net, new small-business jobs in the U.S.
If it’s thinking about breaking the tried-and-true franchise business model, the NLRB’s Department of Advice should keep its advice (and blatant political agenda) to itself.
The horrors, you guys, THE HORRORS! What if there were no more Quizno's in Seattle? What's gonna happen to my KFC?! I WANT MY SMALL-BUSINESS MCDONALD'S BACK!!!
Meanwhile, Working Washington, the group behind Seattle's fast-food strikes and a big force behind the $15 minimum wage law, has a different view on today's decision. Spokesman Sage Wilson says via e-mail, "Today's decision confirms what workers already know: in the fast food industry, the money and the power are concentrated at the headquarters of the global franchise corporations that bring in billions of dollars a year on poverty-wage business models." He adds that "it's time for them to reckon with their responsibility, stop making excuses, and ensure everyone who works for these chains can support themselves, afford the basics, and contribute to the economy."
UPDATE: The NYT now has a much more thoroughly reported story up than the initial AP story I linked to at first, if you want more information on the NLRB decision.