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NLRB Speculation Could Blur Link between Franchisors and Franchisees

Clarity concerning how the relationship between franchisors and franchisees functions is a vital part of thriving franchise business operation across the country. Understanding the relative responsibilities of each party when franchise agreements are signed means that responsibilities and liabilities are carefully allocated.


With this in mind, it’s no wonder that many members of the franchise community across the country are unsettled as they contemplate the perspective held by the NLRB concerning how responsible franchisors are to respond directly to complaints aimed at their franchise partners.


In last year’s ruling concerning numerous complaints directed at both corporate-owned and franchised McDonald’s restaurants, the NLRB decided that if the parties concerned cannot reach settlement by March 30, 2015 then both franchisor and franchisees will be considered as joint employers, each having a responsibility to respond to the complaints.


This perspective on the accountability of franchisors and franchisees alike in matters of complaints issued on the store-front level, whether corporate-owned or operated by franchisees, is one that’s getting attention from both franchise leaders and worker’s rights advocates across the country.


Opponents to the ruling believe regarding franchisors as joint employers alongside franchisees is problematic and counterproductive for the starting of new franchise businesses, with concerns raised about increased liabilities if complaints arise and therefore increased insurance costs which must be shared between franchisors and franchisees. It is believed that such changes would seriously impact the way the franchise business model functions in the U.S. economy as we know it.


Should this ruling have a lasting impact on the franchise business model and the responsibilities of franchisors, many are distressed that future as well as current and past franchise agreements may be affected, not to mention the inevitable alterations to human resources management where it relates to avoiding potentially costly liabilities.


Supporters view the ruling as the correct response to addressing alleged unscrupulous dealings that should implicate both franchisor and franchisees. Viewed as a welcome act of government intervention, proponents of the NRLB’s perspective concerning joint employer status in this particular case hope to engage both the franchisor and franchisee to resolve complaints they believe inextricably involve both parties.


Though still faced with the input of numerous courts and having no definite impact as of yet, this NLRB ruling calls attention to the ways in which the desires of workers coupled with the dealings and business practices of members of one franchise system can undoubtedly impact the entire franchise community.

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