McDonald’s Franchisee: Not Lovin’ Corporate Control

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Aug. 12 (Bloomberg) -- Bloomberg View’s Megan McArdle looks at the franchise model at McDonald’s as owners seek more control over how they run their businesses independent of the corporation. She speaks on “In The Loop.”

Well, onto another big story, mcdonald's -- the face of the minimum wage debate is the center of a new debate over its relationship with franchise owners.

The federal labour agency recently declared the fast food giant should be considered a joint employer with its franchisees, a ruling that has many franchise groups up in arms, but one franchise group feels the family, speaking out against the donald's, opposing the legislation before the california assembly that would give franchise owners more rights and mcdonald's even less control over how they do their business.

A bloomberg view economist, the author of the book "upside is down," recently wrote a piece asking a lot of big questions about mcdonald's, and one of the questions you asked was not an obvious 1 -- that mcdonald's franchising to get around labor laws, something they are accused of, or is there something more at work as to why mcdonald's want to keep that system.

You found what?

I heard this first from my business school profession -- professor in 2000 and he asked the same question, why do they franchise -- they have companies and stores run by managers, why don't they keep the profits for themselves?

It turns out franchises gives people skin in the game.

An owner of a fast food franchise can make a lot of money.

Mcdonald's franchises are very profitable.

So, why -- what happens is these guys go in and clean the bathrooms themselves, man the drive-through, and the reason they do that is because they have skin in the game.

They are out there in the trenches making sure everything in their store is perfect because that is the personal asset against more value or less valuable depending on how many customers there are.

You cannot buy that from a manager.

There are other reasons people franchise -- for example, to get capital to expand -- if you're a small business that wants to be nationwide, you might not get the money to build other stores, so you reach out and bring other people into the operations.


But for mcdonald's, that is not what is going on.

That is exactly -- i want to emphasize that point.

It is what mcdonald's has been saying and why the french use are so angry about this labor board willing -- franchisees are so angry about this labor board ruling.

They go in there, when the bathroom is a mess, the claimant themselves.

They fry the fries.

They might be multimillionaires, but this is their business.

They own this business.


My grandfather owned a gas station.

He was in there making sure the toilets were clean for the same reason.

These are not the most fun jobs, but for a businessman passionate about his business, they have the pride of ownership that is hard to find in a manager.

Megan mcardle, you do not believe this ruling will hold up?

I think it is unlikely.

It is a big stretch and it has a lot of way to go through the court.

It is technically a charge, not a ruling because it is from the general counsel of the nlrb, not the board.

It still has to go through the board, write?


It will go through the board.

Some judges might uphold this, but i would be surprised to find it stand because it is a major rewriting a franchisee law and has major applications for all sorts of businesses -- everything from foot -- fleming -- everything from plumbing to mary kay.

That would have an impact on millions of people.

You wrote a couple of other columns that i thought were interesting, another one tackling walmart and the idea that walmart offers medical services -- you can go there for your physical versus going to your local doctor's office, and it makes sense.

Speaking of businesses that are not run that well, i am not sure there are many small doctors offices run that great.

It is hard.

You do not go to medical school because you have amazing administrative skills.

You go to medical school because you are good at doing medicine.

Administrative overhead is multiplied.

As you have the need for things like information technology, it just was not a big deal 50 years ago.

As that has gotten more complicated, it makes somewhat less sense to have a lot of primary care physicians offices.

Physicians like operating that way, but health-care experts think they will move away from that model and walmart is a natural place to look for that.

They are good at logistics, massmarketing, and finding locations that are convenient for people.

And unnecessarily the doctors you want to go to if you -- these are not necessarily the doctors you want to go to if you are a high-risk patient, but for someone that needs to go once a year, this is probably a good alternative.

It is very low cost, $20 for an office visit or a physical compared to a lot more than that for any primary care physicians.

And maybe last hassle.

On a final note, you asked another really great question in a column about multimillion dollar trailer park homes in the u.s.. we focus on one, paradise cove in california, and it is a great question -- if these trailer park homes can be multimillion dollar, state-of-the-art, beautiful -- wisest market not bigger question is why isn't there a bigger -- market not bigger?

Why is there not a bigger housing market?

There are some answers.

It is hard to move houses because they are big, wide loads.

They can only travel itself -- certain times, and so forth, but the fact is modular housing construction is getting better, and it is more widespread, but it is not taking off the way you expect when you think about everything else mass-produced.

Housing, we're still pretty much in the 19th century with some innovation in terms of tools, but not in terms of how we construct them.

We still bring sticks to the site and put it all up.

As you described, leaving our

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