Tensions Between McDonald's And Its Franchisees Could Get Even Worse

McDonald’s could be held liable for labour violations involving franchisees, according to a new ruling by the National Labour Relations Board.

Under the ruling, if the manager of a franchised restaurant illegally withheld pay from an employee, then McDonald’s would be legally responsible for the violations along with the franchisee.

The decision is considered a major win for labour leaders who want to hold corporations like McDonald’s liable for what they call widespread abuses within the industry. But it has infuriated business leaders, who argue that it could put a freeze on franchising.

“The NLRB’s contempt for hard working business men and women is on full display when they completely disregard established laws that govern the franchise model — a practice that has literally created thousands of small businesses in communities across America and employ millions of citizens of all ages,” David French, the National Retail Federation’s senior vice president for government relations, said in an e-mailed statement.

If upheld, the decision could lead to increased corporate oversight of McDonald’s franchisees.

“For McDonald’s to have any control of the employees of franchisees, McDonald’s would have to build an entirely new bureaucracy of field people to work in the restaurants and monitor all employee relationships,” said Richard Adams, who worked in McDonald’s corporate offices for nearly two decades before starting his own consulting firm for franchisees.

Franchisees could also be asked to purchase some sort of liability insurance to protect corporate management from instances of labour violations, according to another franchisee consultant with knowledge of these matters.

More oversight and added costs could cause friction with restaurant operators.

In a recent survey by Janney Capital Markets, more than two dozen McDonald’s franchisees were asked to rate their relationship with corporate management on a scale of one to five. The respondents gave an average response of 1.94, which is below the survey’s historical average of 2.2.

In anonymous comments, the franchisees complained about the complicated menu, profit-squeezing promotions, and costly kitchen upgrades mandated by corporate management.

“All the money spent on rebuilds and remodels got us nothing,” one franchisee said, according to Nation’s Restaurant News. “It’s all about the menu. The recent Consumer Reports survey reflects this. Our competitors with simpler menus are doing just fine and run with far less labour. All the investment just increased operator debt load, making it harder to do much of anything for seven years until the debt is paid off.”

Kitchen upgrades are costing operators at least $US15,000, according to Blue MauMau, a trade publication covering the franchise industry.

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