If you own McDonalds or any franchise system stock, ever eat franchise take-out food or if you are one of the many investors who own income-producing property leased or operated by a franchisee, you may want to reach out to one of the state senators in California if you want to question a new law recently passed by the California State House and pending before their senate.
"…[California’s] FAST Act would in the most fundamental way, redefine the long-established relationship between the franchisor and franchisee. Currently, the franchisee is a business owner which employs its own staff, and is liable for its own actions.
‘The bill by its very design would re-categorize independent franchisee business owners as simple representatives of corporate franchisors, and would necessarily restrict franchisees’ ability to engage in meaningful and mutually beneficial relationships with their employees,’ said Lane Fisher, [attorney].
The new Act would seek to create joint-liability between the franchisor and franchisee, creating a completely new, unwanted relationship that makes franchising pointless…"
The US has a myriad of franchise businesses in which the franchisee operates without direct hands-on control by the franchisor. Changing the liability for franchisee-level control and granular decisionmaking will completely alter the business models, cashflows, contingent liabilities, reserves, and dividend distributions of franchise operations doing business in California.
A conversation I had with Ford Motor owner relations, about a misrepresentation by one of their dealers. My point was the misrepresenting dealer represented Ford Motor, so Ford should care. The Ford Motor rep’s reply was “you have to understand, they are independent businesses, we have no control over how they run their business”, ie, Ford didn’t care how scummy it’s dealers were.
The franchiser, and franchisee, have a mutually beneficial relationship that they both profit from. Seems the mutually beneficial relationship should also be mutually liable for the misdeeds of either party.
I got into an interesting conversation with a couple other guys while standing in the line at the post office today. Based on my extensive research, why is it Wendy’s, Arby’s, Tim’s, and even BK all have better food than MCD, but MCD stores are always the busiest? Of course, as discussed here before, Welchian management at MCD is taking that company down the same path as some others: stock buybacks, growing negative equity, growing debt, so management is setting the company up for liquidation anyway.
…I was almost disappointed the line at the post office moved as fast as it did. That was an interesting conversation.