What Are The New McDonald's Franchise Rules (And Why Aren't Franchisees Entertained)?

Taking a slice of McDonald's considerable financial pie (consisting of more than $23 billion in revenue a year, according to McDonald's) is a very enticing prospect for the company's franchisees — just possibly even more so than the considerable benefits of using an internationally recognized brand and its highly desirable products. However, relations between the fast food giant and its independent franchisees aren't necessarily as good as they could be.

Trouble has arisen after McDonald's introduced stringent rules on how it manages its franchise contracts. Under the changes, franchisees are subject to grading assessments following frequent visits from McDonald's representatives at all of their locations, and will have to show success against revised performance metrics in order to achieve contract renewals.

These rigorous changes have caused upset and alarm among some McDonald's franchisees, who have accused the company of hypocrisy for demanding more control over some restaurant operations but not others (such as labor relations). There's a battle looming over the concept of joint employer, with franchisees basically telling McDonald's that the company can't have its cake and eat it too.

While it may not appear unreasonable for the company to expect its franchisees to prove they are performing well, the counter argument is that McDonald's could be perceived to be cherry picking what control it has of restaurant operations. This has created an internal feud between franchisee groups, with one accusing McDonald's of intimidating franchisees and others declaring that changes need to happen to keep the business model sustainable.

The battle for control of McDonald's franchises centers around the principle of joint employer, which is when a franchisor could hold equal employment responsibilities to its franchisees. McDonald's has been back-and-forth in the courts since 2012, fighting demands for higher employee pay and improved conditions. The company argues that it doesn't have enough control over franchisees to manage these issues, and is therefore not a joint employer — a view upheld in court.

With this legal debate apparently settled, the question from franchisees opposing McDonald's performance changes is obvious: How can McDonald's say it has no control over some aspects of franchise operations while maintaining it does have control over others? A resolution to the complex and spiraling issue of joint employer is clearly some way off.