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Latest News - May 2015

May 1, 2015
A big union wants to help the owners of your local Arby's and Wendy's to organize, too

From the outside, it would appear that labor unions are at war with the franchise industry: They're waging nationwide protests in front of McDonalds and Burger King. They've filed hundreds of complaints with the National Labor Relations Board, and are pushing to get the big companies designated as "joint employers" with their franchises.

But unions and franchises actually have some common goals: Both want big companies to give more power to their local affiliates, so the franchises can be run more profitably, and the workers can be paid more. As former McDonalds franchisee Kathryn Slater-Carter argued last year, franchisees often struggle just to pay their franchise fees and keep up with mandatory renovations, which means they usually don't have much left over to raise wages.

That's why the Coalition of Franchise Associations, which represents16 associations that have 35,000 franchise members among them, has joined up with the Service Employees International Union to push legislation that would strengthen franchisees' legal rights. The SEIU launched a Web site yesterday to highlight ways in which franchisees struggle to stay profitable. (In general, it's hard to generalize what franchisees think; an SEIU-commissioned survey found that many of them are economically insecure, while the Franchise Business Times found 82.2 percent of franchisees approved of their franchisor. The International Franchise Association, the main lobby for franchisors, has not signed on.)

"While we have different goals, some of the solutions to our goals intersect," said Keith Miller, president of the CFA, on a press call yesterday with the SEIU. "It’s no secret that SEIU seeks to enhance workers’ pay. But they realize that if our efforts on behalf of franchises fail, then there’s really no way for them to achieve their goal."

Miller isn't kidding about franchisees and unions having different goals. He opposes SEIU's drive to make chains liable if franchise owners are found guilty of the labor law violations. Making the franchisor liable would raise his insurance costs, he argues, and lead to more oversight by franchisors. He also would prefer his employees not unionize at all.

But even if they did, under the circumstances, he says it wouldn't do the workers much good.

"If I was unionized, which I would prefer not to be, I’m not sure a collective bargaining agreement could get the workers much more money, because I’m already working on such tight margin," Miller says.

The CFA has been pushing legislation in states around the country that would give franchisees more rights. It's worked with legislators to offer proposals in Pennsylvania, New Hampshire and Maine, but at the moment the only live bill is AB 525 in California -- Gov. Jerry Brown vetoed last year's version because he said it created a vague legal standard, so advocates came back with a fresh version.

The bill would do a few things. First, it would make it harder for franchisors to terminate contracts with franchise owners unless it finds serious violations. It would also make it easier for franchisees to sell their businesses, and allow them to get back what they put into the business (by selling equipment, for example) if the contract is terminated.

So what part of that allows franchise owners to raise wages, exactly? The bill doesn't address how much the franchise owner has to pay for the privilege of operating a McDonalds or an Arby's, or the prices that franchisees are allowed to charge for their products, so it doesn't seem like it would impact their profit margins. John Gordon, an independent chain restaurant analyst, says the legislation might have a more indirect impact.

"Everything relates to everything else. And if business conditions overall are improved, it makes it easier for wages to be paid," Gordon says. "I think the SEIU is taking the longer view. It’s the nature of legislation. You never get all that you want, so you start somewhere."

In other words, the SEIU is trying to help franchisees pursue the same strategy with franchisors as workers do when they join a union: Attain greater job security, so that they don't fear they'll be fired for organizing. Then, when the balance of power shifts, push for more money and better benefits. In the fast food industry, of course, it could be a long time before either actually happens.




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