Last night I watched an HBO produced Bee Gees documentary on CNN. It was littered with ads against AB1288, saying it would prevent franchisees from running their restaurants (and would destroy them).
So I looked it up this morning and found it was all about illegal labor practises, and sharing the franchisor’s liability with franchisees that violated those practises, as well as implementing checks and balances on them. Of course the commercials made no mention of this… just that it attacked independent restaurant owners, preventing them from running their business. Wow! Just wow!
Dunno if this is too political for H.O., and if so please delete this post.
The franchise business model is roughly a trademark and business method license that packages the franchisor’s goodwill as a replacement for the entrepreneur’s ground-up efforts. The franchisee store operator pays royalties for the package and has to follow the franchisor’s published methods and meet its quality standards.
Sometimes the franchisor is the franchisee’s landlord or banker, but the main relationship is transferring business risk from franchisor to franchisee operator who has to raise the capital for the opportunity fee, build out, and operating expenses; hire employees and manage the store. The franchisor has no say or hand in staffing or other local matters; its day to day involvement or support takes the form of marketing research, product development, and mass media advertising. Presumably the power of the franchisor’s brand and R&D is worth the operator’s investment and willingness to bear all local risks such as market demand and complying with local law.
We’d guess that legislators like to stick their nose in the franchisor’s tent, because it is a bigger target than the local store operator. We also guess that if you’re good at operating one franchise location, you’ll usually end up with more than one store, because franchisors value entrepreneurial talent the way sports team general managers like players who deliver wins.
It’s nothing like rocket science to look at a deal and figure out what each side is exchanging and receiving. McDonald’s wants its store operators to succeed, The store operators want the seal of approval from a popular proven winner. No surprise. No surprise either that legislatures know almost nothing about what it takes to succeed in business, small or big alike.
AB 1228 creates “joint employer” liability for franchisors, for the acts of its franchisees.
The model is sort of like if you are a landlord, and rent your property to a tenant, and the tenant murders someone in your property, the police could come and arrest both the tenant and you under the theory of “joint employer” liability codified by 1228. (In the landlord-tenant case, it would probably be called “joint landlord” liability.)
Whether you agree or disagree with the law, it just makes the business environment in CA all that much less owner friendly, as if that was even possible.
AB 1228 sounds economically illiterate. The point of franchising is that the franchisor does not want to be the store operator. Franchisors believe their store operators know better about local conditions and are better equipped to contain those risks. Cripes, next thing you know, the legislatures will take the position, “well, if you hadn’t been born, this all wouldn’t have happened” and make the attending ObGyn liable for your misdeeds . . .