Posts tagged logistics
This New Labor Rule Could Be Trouble for McDonald’s
October 5, 2023 // McDonald’s and other franchise companies have made it clear they believe the stakes are high. The “reality is that our business model is under attack,” CEO Chris Kempczinski said of possible joint-employer regulations in a speech at a franchising industry conference in Las Vegas earlier this year, in remarks he also published on LinkedIn. Changes by the NLRB, he said, would transform franchisees “from independent small-business owners to employees of the parent brands.” Heightened joint-employer liability could hurt the franchise model in two main ways, according to the International Franchise Association. One possibility, along the lines of what Kempczinski described, is that a franchisor would exert more control over the franchisees. That undercuts one of franchisors’ big selling points to potential franchisees—that they’re offering a path to running their own business, with all of the freedoms that provides. It could also add compliance costs, and potentially, legal and liability expenses. Those increased costs are also a frequent worry for franchisees, says restaurant consultant John Gordon, principal at Pacific Management Consulting Group. Franchisees typically pay franchisors a percentage of their sales, and their profit comes after those fees and their operating expenses. Franchisees are “justifiably afraid of the franchisor passing costs onto them that weren’t part of the franchise agreement,” he says, and wary of joint-employer liability for that reason.