The New York Times recently released an article highlighting rising tensions between franchisors and franchisees. According to the article, the Government Accountability Office released a report that support’s franchisee’s claims that they are being pushed out of profits generated by their business to new fees, required vendors and restrictions on their ability to sell.
The report states that franchisees “do not enjoy the full benefit of the risks they bear” and that they lack control over basic operations that determine their ability to earn a profit.
The article discusses that franchisees are receiving support from the Biden administration and state legislatures, resulting in a growing wave of proposals to limit the power of franchisors, but that franchisors have been largely successful in stopping new laws and rules, with McDonald’s CEO, Chris Kempczinski, describing them as an “existential threat” to the business model. The franchise industry claims that its business model remains beneficial to individual owners, and that additional regulation would protect substandard franchisees at everyone else’s expense.
Legislative battles at the state and federal level reflect rising tension, with proposed legislation being introduced in New Jersey, Arkansas, and Arizona. Meanwhile, the FTC has issued a request for more information on relationship between franchisors and their franchisees, while the NLRB proposed making it easier for franchisors and franchisees to be seen as joint employers.