Do Franchises Face Brunt of McDonald’s Labor Woes?

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July 31 (Bloomberg) -- Steve Caldeira, Chief Executive Officer at International Franchise Association, talks with Betty Liu about how the labor ruling against McDonald’s harms franchise owners instead of the corporation. He speaks on “In The Loop.”

In this industry, tell us why this will hurt the franchisees.

First and foremost, franchisees are independent owners.

They put their own skin in the game.

They take out loans.

They use their investment savings, their regular savings, to take a shot at the american dream.

They have the ability to hire, to fire, and they process their own payroll.

They pay their own taxes.

And they set their own wages.

And there recognized by the internal revenue service with their own employer identification number.

It is a way to be in business for yourself, but not by yourself.

It is the reason it we are outpacing the overall growth of the economy.

It is a time-tested business model.

As i was looking into the story and digging deeper, having, let's say, fast food workers, or unions go against now not just the franchisee, but the franchise or, mcdonald's for instance, is there some benefit for the franchisees?

Where at least they would be teamed up with the corporate owner in fighting these lawsuits?

Am i missing something?

I don't think there is any benefit.

They would be the middleman and middle women between the consumer and the corporate entity.

All of the hard earned equity they have put into their business would be put into question.

We don't think this is a good thing at all.

What this is, is a special interest benefit by a prounion government entity.

It is no secret that private-sector union membership has been declining for years.

This is, we believe, part of a broader effort led by the service employees international union to unionize quick service restaurants.

And again, we believe this has broader invitations -- implications beyond the franchise industry, which could be devastating for business and stifle job creation and small business entrepreneurship.

Although i want to read form -- read for you one quotation from the person representing some of mcdonald's employees in new york city.

He says "mcdonald's can try to hide behind its franchisees, but today's determination shows there are no two ways about it.

The golden arches is an employer, plain and simple." while you are saying that we should be separating the two, their argument is, look, they are one and the same, and mcdonald's, the company, has to stop hiding behind its franchise model.

He is certainly entitled to his opinion, but this model has worked for over 60 years.

Again, there is a reason why franchisors and franchisees continue to work together and grow as an industry.

Mcdonald has a responsibility to its franchisees to protect brand standards, to ensure a consistent quality experience to the consumer relative to the products and services whatever the franchisor might serve.

Technically, they might be separate, but from the union sir -- union side, they are saying, look, they are one in the same.

The franchisee cannot run its business without getting the approval from the franchisor.

The franchisee doesn't run its business.

I just went through all of the latitude they have to hire -- does run its business.

I just went through all the latitude they had to hire and fire, etc.

The franchisor has the responsibility to ensure aces -- a consistent quality experience for the consumer.

That is why they have worked together well for years.

It is a flawed and politically motivated decision.

We've got to run.

Thank you.


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