Los Angeles Franchise Owners Apprehensive about Joint Employment

Most everyone in the U.S. has eaten at a McDonald’s restaurant at least once in their life.  While most are aware that many fast food locations are franchises, they probably have not given much thought to how that works.

burgersWhile a portion of the locations are company owned, meaning they are owned, operated, and staffed by company employees, more than half of the locations are franchised.  This means that a person who wants a McDonald’s franchise, for example, can apply for a license from the company if they can meet all of the requirements.  This can include going to a training program, paying several hundred thousand dollars, and even purchasing land and giving it to the company.

You may have noticed that most McDonald’s locations are on the corner of a major intersection.  In terms of real estate and urban planning, these busy corners are known as 100 percent corners and are among the most valuable to type of commercial property.  It is said that even if all the restaurants went out of business, the company would still own billions of dollars worth of these 100 percent corners making them one of the largest private landowners in the world.

The franchise owner will then pay a monthly fee to the company and must also purchase food from the company.  The franchise owners are responsible for hiring employees and then training them according to company standards. The question being examined in a recent feature from Express News is who do these employees actually work for.  Do they work for the company or the franchise or both?

This is all related to a case in which the National Labor Relations Board is suing the McDonald’s corporation claiming the parent company should also be considered an employer with respect to all those working at the many franchise locations. This would mean the employer would have to cover the employees in terms of workers’ compensation, health insurance, and other benefits typically provided by a large employer.  Currently these are only provided by the smaller franchise operator, and this has created some major problems for franchise employees.

While it might seem like local franchise owners would be happy for the parent company to take on the responsibility on behalf of their employers, they claim they are not too happy that it seems to be moving towards joint employment at the very least.  While it might just be that the franchise owners are publicly supporting the company, since they have a lot to lose if they upset the company, the reason they claim they are not happy is because they fear that if it becomes more expensive for the parent company, they will have to pay more in franchise fees and more in insurance policies, and this may result in the business model being too expensive to work.

However, as our Orange County employment lawyers have seen in many cases, employers typically try to claim it would be expensive to provide healthcare, benefits, or pay overtime, the reality of the situation is that taking care of the employees often makes the business more profitable than less.

Contact the employment attorneys at Nassiri Law Group, practicing in Orange County, Riverside and Los Angeles. Call 714-937-2020.

Additional Resources:Franchisees fear moves toward joint employment, March 11, 2016, Express News, By David Hendricks

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