A panel of industry experts Friday warned that an upcoming labor board rule won’t just damage the franchise model, it will significantly hurt veteran and immigrant business owners.
Speaking at the U.S. Chamber of Commerce, economists and franchise owners spoke in detail on how a upcoming rule change issued by the National Labor Relations Board (NLRB), under the Obama administration, will benefit unions at the expense of workers and small business owners, many of whom are veterans and immigrants.
“What the NLRB is doing in this respect is simply wrong both factually and morally, franchisors do not joint-employ with franchisee employees,” Andrew Puzder, the chief executive of CKE Restaurants, told the crowd.
“The NLRB is trying to make someone responsible for the employment activities, with respect to employees, they don’t employ,” he continued. “We don’t hire them, we don’t fire them, we don’t tell them what do to nor do we tell them when to do it.”
The franchise model is unique because it allows entrepreneurs, who wouldn’t otherwise be able, to open their own business while still having the name recognition and support of a major corporation. The NLRB ruling changes that and makes the individual franchise owner just a part of the corporation as opposed to a private partner.
“There’s really no other reason to do this,” Puzder continued. “This is a great business model, people are protected, everyone understood the relationship when we entered into it. There is only one reason this would happen and that is to empower private sector labor unions.”
Several of the experts on the panel noted that union membership has been on the decline. The rule change is just an attempt to help unions more easily gain members.
“We all know who the union’s political funds support, they support the party of big government so no surprise the party of big government is doing all it can to empower the labor unions,” Puzder noted. “It’s intended to reward the unions both politically and economically.”
Several of the franchise owners on the panel noted they are far less likely to offer contracts to small businesses if they will have to assume the full risk of ownership. At that point it is far more logical for them to outright own the individual small businesses instead of contracting the brand name to them.
“We have a lot of people who are currently franchisees running their own businesses … who started out as crew people in our restaurants, who worked their way up from crew people, to shift leader to general manager and then go off and start your own franchise,” Puzder noted. “It happens repeatedly.”
“We have a lot of very ambitious immigrants who come to this country from India and Pakistan and South and Central America and Europe who come to this country, invest in franchises with our company and are now very, very successful,” Puzder also noted. “You can pull people from all walks of life and it creates incredible opportunities for people, particularly in a time like now when opportunities are so limited.”
“There’s a big push nationally to bring veterans into the franchise community,” Puzder detailed. “They do exceptionally well, we have a number in our company, and we’re very supportive of this effort. They are great people and they know what they’re doing and they don’t always have job opportunities when they get out of the service.”
“It’s very broad based and it’s wonderful to offer these opportunities and you hate to see something this beneficial threatened by government action,” Puzder added.
Thomas Donohue, the president of the Chamber of Commerce, also stressed the argument that the rule change is nothing more than an attempt to benefit unions as the expense of workers and small business owners.
“We want to shine a light, and you’re all helping, on the issue that threatens to undermine a good portion of our economy, to disrupt the way we do our fundamental business relationships and adversely impact companies and therefore harm the workers in our economy,” Donohue noted
“The NLRB’s attempt to rewrite the joint-employer standard is unnecessary, ill advised and politically motivated,” Donohue continued. “The franchising industry is where so many people have made their mark, have come to this country or come out of places around the country.”
The NLRB has defended its decision by stating that many franchisors have too much control over the independent franchisees they contract with for them to be considered their own operations.
“Through its franchise relationship and its use of tools, resources and technology, engages in sufficient control over its franchisees’ operations, beyond protection of the brand, to make it a putative joint employer with its franchisees, sharing liability for violations of our Act,” the NLRB argued.
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