An Empirical Analysis of Performance Impacts Resulting From Conversion to Franchise Operations

Franchising is an important form of organizational control. Possible benefits of franchising include its ability to reduce agency costs that increase with costly monitoring, and provide incentives for the use of local information by onsite managers. However, these benefits may come at a cost, as franchisees may reduce quality by choosing to free ride. While many studies have investigated the reasons for franchising, few studies have documented the impacts of franchising on unit level operating performance. Using time-series data from a number of lodging properties that were converted to franchisee control from company control, this study documents the performance impacts of franchising. The analysis reveals that conversion results in a modest decline in financial performance and an immediate sharp decline in quality.

It is Time for Something New: A 21st Century Joint-Employer Doctrine for 21st Century Franchising

[Excerpt] The joint-employer doctrine is perhaps the hottest issue in labor and employment law for 2015 and the foreseeable future. In the September 2015 Browning-Ferris ("BFI”) decision, the National Labor Relations Board (the "NLRB" or the "Board"), the administrative agency that enforces the National Labor Relations Act (the "NLRA" or the "Act"), issued what is expected to be the first of two decisions, expanding the joint-employer doctrine. In the BFI decision, the so-called putative employer (e.g., the lessor of employees or a franchisor) is now considered the employer of individuals who had in the past been considered employees of the supplier employer. Like in Browning-Ferris, a number of McDonald's employees and the Service Employees International Union ("SEIU") are arguing that the world's largest franchisor is the joint employer of all its franchisees' employees. At first blush, one might believe that this is another esoteric labor and employment law issue that only lawyers and scholars care about. However, depending on how the Board and courts rule on this issue, the joint-employer doctrine could fundamentally change business in the United States by destroying the franchise model.