THREAD: A lot of talk about raising the #minimumwage (which is something I support), centers around companies like "McDonald's", as if the corporate giant owns all their stores (they own less than 20% of US locations). Most are owned by local investors: the franchisees.

Minimum wage increases should be accompanied by better Fair Franchising Laws. Most franchise agreements are extremely one sided, as any attorney familiar with franchise law will tell you.

Franchisors in the US have broad power to dictate how their franchisees operate their restaurants: Almost full control of what is offered on the menu, including requiring sale of unprofitable items.

They can also require only purchasing equipment & products from certain vendors. Sometimes the vendor may pay a “kickback” to the corporate franchisor for this exclusivity, and this is generally not required to be disclosed.

While franchisors can generally not engage in “price fixing”, they are usually free to advertise national price points.

While, for example, selling a nationally advertised sandwich for $4.99 might be fine in some rural parts of the country, it can be painful to franchisees in larger high wage/COL markets.

More often than not, the advertising behind these promotions (TV, radio, coupon mailers, etc) is paid for by funds directly contributed from the franchisees, as required by their franchise agreements. Local owners often have no real say in how these funds are spent.

Franchisors can dictate hours of operation. They can require stores to be open a certain minimum number of hours/week, even if those hours make no sense. Staying open until 10 PM might be fine in some markets, but ludicrous in others.

(Yes, operational waivers often exist, but the process can be cumbersome, or designed to make it basically impossible to get approval).

Have a grievance with something? Often, there is no one really to run complaints “up the flagpole” to. If the company is privately held, the true ownership of the company may even be extremely obscured or impossible to determine.

Finally, many small businesses fail, including in franchising. Most franchise agreements allow the corporate franchisor to seek “liquidated damages” from the local owner for future “royalties owed” and other fees. This can force many individuals into bankruptcy.

Franchising was historically a way for Americans to build wealth & grow jobs in their communities, by owning a business. However, there needs to be better oversight of how franchise agreements are implemented, especially if #minimumwage will more than double in near future.

Interestingly, the #Trump admin’s @chopraFTC has actually been conducting a broad review of US franchising. I hope the @JoeBiden administration will continue this work, in order to ensure millions of Americans can continue to live out their dreams of owning their own businesses.

More background info on these issues can be found here: https://www.restaurantbusinessonline.com/financing/calls-grow-tighter-franchise-regulations
/END #SmallBusiness #restauranteurs