The Independent Contractor Hoax in Franchising

Apparently, when franchising was pushed by the government and the "powers that be" and the "special interests" over 30 years ago, after the Federal Trade Commission regulated the sale of franchises to the public, the laws surrounding "independent contractors" would provide all of the aces in the deck to the franchisor, the independent contractor, who would control the franchisee, the not-so-independent contractor, by means of a non-negotiable, take-it-or-leave-it -contract for the sale for the intangibles, the brand name or logo, and the intellectual property involved in the format or plan of the franchised business format offered for sale.

Of course, 30 years ago, more Americans worked for large corporations than do today and the targets of franchisors were new and wealthy immigrants and the newly laid-off Americans and all individuals or groups of individuals with the financial resources who would invest in "hot" concepts coming into the marketplace as new franchises. It was about this time that the term "entrepreneur" was starting to be used and, of course, the great success of McDonald's was the incentive for both franchisors and franchisees, and both did very well in terms of return on their investments. Copy cats also did well. The multi-unit franchisees in the fast food industry and the restaurant industry made money and multiplied in the American marketplace and the franchisors expanded internationally. Now! franchise concepts are everywhere today and now veterans and their family members are targets of franchisors because of the subsidy of the SBA Patriot Express Loan Initiative passed in 2007. Now! only one quarter or less of Americans work for big corporations who have perhaps shipped the GNP out of the country (I think Galbreath suggested this) and the other three-quarters of Americans find work where they can.

Franchising is really BIG Business today in the free world and the investment market for intangibles and intellectual property has been established and is protected by law and regulation and accounting rules now on the books. Who has the money to sponsor our football games and sporting events? Look around! The Franchisors have taken over everthing in the retail sector of the economy and the service sector, as well. Billions of dollars have been borrowed by franchisors in new schemes called "whole business securitizations" to enable franchisos to expand internationally. ( The franchise agreement, the binding contract of sale, which is so often the result of inadequate, ineffective, and unfair presale disclosure of the risk of the transaction because of the unfair FTC Rule governing franchising, is the BASIS and collateral for these securitizations, but this is another story that nobody wants to tell.)

But! has franchising grown too much? Aren't most of the little jobs that were once performed on Main Street by little truly independent business people now taken over by BIG Franchising where so often the only profits of these little so-called independent franchise contractors are captured under the terms of adhesive and unfair contracts, and sucked up to the top of the financial pyramids, the franchise systems. Isn't this harmful to the social and economic fabric of our democracy when more and more lousy jobs are produced and are used by the politicians to push even more franchising to the public under the guise that these jobs will help to save our economy?

Franchising has invaded every aspect of our lives and sometimes the consumer pays higher prices because of this ugly and exploitive business model called "franchising" that thrives on the cheap labor and cheap venture capital of those on the bottom of the financial pyramid. Franchise jobs on the bottom of the pyramid are not good jobs with benefits and good pay and a future but those who work for the franchisors and the corporate systems enjoy all of the benefits of employment under US laws and lush perks as well, in many cases, because the franchisors escape the legal obligations and expenses of their "employer franchisees" who, as an independent contractors, do assume the expense and risk to provide the gross sales for the franchise systems who always profit no matter what the costs of producing the gross sales.

The franchisors have taken over or are trying to take over plumbing and electric work and handyman work and landscaping and real estate and haircuts and exercise gyms and hair removal and child care and senior care, dry cleaning and health care and pharmacy services and yard work and fast food and dog walking and dog poop removal, local moving and storage, florists and flowers, and almost any service concept you can think of. Have funeral homes been franchised? Even Proctor and Gamble, the big and famous corporation, is going to franchise a car wash operation, if I have read the newspaper correctly.

At least the courts are looking at the Janitorial Franchisors and some state laws governing independent contractors suggest that these Janitorial Franchisors are using the 'independent contractor laws" to circumvent the responsibility and expense of being a employers, perhaps in violation of State laws. Maybe this will lead to more examination of franchisors whose franchisees have to wear uniforms and comply with "hours open" and "no closing" rules and design of the physical space and who are not, under the terms of the franchise contract, allowed to use their "tangible assets" except in the service of the contractor.

We have to hope our courts and truly independent judges will take a closer look at this business model but in the meantime, the Great Franchising Robbery will continue.