McDonald’s Corporation (MCD) Facing Difficulties with Franchising Model?


National Labor Relations Board (NLRB) issued a brief statement recently according to which, 43 charges of unfair labor practices taken place at McDonald’s Corporation (NYSE:MCD)’s franchises could be perused as legal charges against the Franchisee and the Franchisor, McDonald’s Corporation (NYSE:MCD). This announcement is a huge change in the labor law because this makes McDonald’s Corporation (NYSE:MCD) a joint party in any form of labor law abuse that takes place in its franchise. Discussing this issue in a program, Bloomberg’s expert Megan McArdle said that the latest announcement by NLRB can change the dynamics of labor laws in the country.

She doubted the approval of this law and said that such a law can affect hundreds of businesses and there is a very scarce possibility that the court will approve this law. She also rejected the idea that McDonald’s Corporation (NYSE:MCD) will soon leave the Franchising model and said that Franchising is the best suited business model for McDonald’s Corporation (NYSE:MCD) because it helps it make a lot of profit with less burden.

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“[…] It turns out that Franchising gives people skin in the game, an owner of a fast food enterprise can make a lot of money, especially McDonald’s Corporation (NYSE:MCD), most franchises are not like a license to print money but McDonald’s Corporation (NYSE:MCD)’s franchises are very profitable. So, what happens is that these guys, end up going in and cleaning the bathrooms themselves, manning drive-thrus themselves, running employees, and the reason that they do that is that they have skin in the game, they are out there every day in the trenches, making sure that everything in their store is perfect, because that’s their personal asset, that either gets more valuable or less valuable, depending upon how many customers they have, you can’t buy that from a manager […],” said McArdle.

McArdle said that the franchise owners have developed a sense of ownership of a small business and McDonald’s Corporation (NYSE:MCD) gave too much freedom to the franchises and now it is facing a lot of resistance.

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