Franchise Model Clouded by NLRB Ruling

The 'business in a box' premise offers franchisees support and independence.

SPONSOREDUpdated 3:15PM • 09/22/15

The recent federal ruling that determined franchise employees could negotiate directly with a parent company raises the question of franchisee independence.

For new small business owners, like Liz Szabo who is bringing the Smoothie King brand to the Pittsburgh market for the first time, the ruling could change the amount of autonomy she has with her business in the coming years.

At least 80 industries, covering a variety of specialties, have franchises in the Pittsburgh market according to John Tubridy, a FranNet consultant who helps local residents discover franchise opportunities.

“It’s a business in a box,” Turbidy told the Pittsburgh Post-Gazette. “It’s a way for them to accelerate going into small business ownership because it gives them everything they want. ... It gives them the independence and also all kinds of support provided by the franchisor.”

Until now, federal regulators have considered individual franchisees as independent from their parent company. The ruling made by the National Labor Relations Board in a vote on Aug. 27, 2015 determined that Browning-Ferris Industries, a waste management company, should be considered a “joint employer” along with a staffing agency that provided employees.

The decision has changed the standard for all companies of this kind, including franchises, to be considered joint employers. Turbidy told the Pittsburgh Post-Gazette that the ruling “clouded” the franchise model which could make franchising less attractive.

“I would view it as support versus control,” he said. While franchisors issue guidelines for operation of franchise businesses, “the franchisor in my opinion doesn’t really have control over the business.”

Szabo said she isn’t sure how the NLRB ruling would impact Smoothie King.

“The franchise model isn’t for everyone, but it was perfect for me,” she told the Pittsburgh Post-Gazette. “We’re no different than any other small business.

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