The McDonald’s Labor Dilemma

mcdonalds picWhile most consumers look at McDonald’s as a fast food business, the reality is it’s a franchise business that makes money by offering selected business services and resources to independent business owners for a monthly fee/sales percentage. This arrangement leaves the business owner with the responsibility to deal with working conditions, pay and worker’s rights issues. Now labor unions are challenging this business structure seeking to make McDonald’s a joint employer which would make them responsible and liable for these same issues in their 35,000 stores. This is a big deal!

If the outcome of this case currently before the National Labor Relations Board goes down this road it will change the entire business franchise model as we know it today. From McDonald’s perspective, they would essentially be converting from a franchise business model to an owned/operated chain business model. Many people believe that McDonald’s already exercises huge control over its franchisees and that its current model protects it from these types of issues and liability. From the independent business owner’s perspective, they would loose even more independence and essentially become employees of McDonald’s.

While this ruling could be tied up in the courts for years, you can expect that major foodservice companies like McDonalds’s will continue to accelerate their investment into technology to deal with higher labor costs and liability issues. In addition, new and emerging restaurant chains will need to weigh the benefits of adopting a franchise business model versus an owned/managed chain model.

McDonald’s is suffering from consumer perception and business model problems. Organized labor sees an opportunity to be a bigger part of their next stage. Unfortunately, their strategy of political coercion has never been effective. Just look at Detroit and the UAW.  It’s about business and economic success. Keep an eye on McDonald’s accelerated investment into new technologies that limit the role and cost of labor. This genie is already out of the bottle!

How do you think this will shake up the industry?

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