Under AB 257, the fast-food industry would become the latest target of California’s campaign to punish franchisors for their franchisees’ alleged labor violations. This would have the likely consequence of forcing the Chop Stop’s and California Pizza Kitchen’s of the world to exert far more control over their franchisees’ operations. Overzealous control would negate most of the practical advantages created by the franchise model, consigning business owners to cogs in the corporate wheel.
Under the status-quo, large corporations have been willing to cede control of everyday operations to local owners. While some things (e.g., logos and menus) must stay the same between franchise locations, local owners have the flexibility of setting workers’ compensation policies and organizing and executing standard operating procedures. Franchisees are given the freedom and responsibility to experiment with things like digitization and incentivizing outstanding work, and don’t have to constantly answer to corporate for everything.
Shifting this model to a more rigid “joint employment” standard would mean less business innovation and fewer jobs. Thanks to the incentive structure created by the franchise model, franchise-related employment gains far outpace job gains in more conventionally organized businesses. Historic employment gains in the franchise sector would slow to a trickle if AB 257 becomes the law of the land.