Protect Your Franchise from the Same Fate as McDonald's

10/15/2014 04:12 pm ET Updated Dec 15, 2014

The National Labor Relations Board's recent ruling labeling McDonald's as a joint employer of their franchisees struck a current of fear into most franchisors. In many ways, the ruling was an attempt to redefine the role of the franchise in employee disputes, broadening the scope of what a joint employer looks like.

How did they get there? Without diving deep into McDonald's Franchise Disclosure Documents (FDDs) or Operations Manual, it's hard to say. But what we can say is that McDonald's will continue to fight the ruling. While currently limited only to McDonald's, the precedent is still set, exposing other franchisors to the risk of the same label.

In an effort to avoid that, franchisors should look under the hood of their franchise, working to lessen the chances of meeting McDonald's same fate.

Review your FDD and Operations Manual

Look for any language that presents the image of the parent franchise strong-arming or micromanaging the franchisee, especially in relation to employees. While the franchisor will want to maintain certain expectations of the employees, avoid any implication that the parent corporation is controlling the employees. Hiring, firing, training and reprimands should all be managed by the franchisee and managers, as clearly stated in both documents.

Review Training Policies

When determining training practices, focus on measures that position the emphasis on the parent company training the franchisee and managers, relying on them to train their staff. For organizations that feel the need to be more hands on, consider implementing organizational wide standards, such as core competency tests. Some franchises call these their universities, and can cover a variety of areas like customer service, store appearance and brand jargon. Again, these must be distributed by the franchisee to their prospective employees.

Maintaining Quality

Because every employee at a franchise represents the overarching brand, the franchisor will want to maintain the standards synonymous with the brand at all locations, which is why many franchises have involved themselves in the training of employees to such extents.

With parent organizations emphasizing their removal from the day-to-day operations of the franchise, especially the training of employees, parent corporations can implement secret shoppers to their franchises, determining if the owner has been training staff to their standards. With some brick and mortar franchises, parent organizations can install security cameras, allowing them to monitor activities.

Why It's Important

Being labeled a joint employer leaves the franchisor liable for the actions of the franchisee in relation to the employees. In McDonald's case, the parent corporation is looking at being liable for the complaints surrounding recent protests. This ruling opens up the parent franchise to being held liable if the franchisee withholds wages, had an employee injured while not paying worker's compensation, sexual harassment charges, and so many more as the list of complaints is endless.

Conclusion

If you are a franchisor concerned about this recent ruling and unsure if your FDD, Operations Manual or other areas of your business might put you at risk of being labeled a joint employer, contact a lawyer for legal advice.