Franchises Are Fighting Back

The Takeaway

WNYC and PRX

Politics, Wnyc, Daily News, Radio, Takeaway, National, News, News Commentary

4.6 • 716 Ratings

🗓️ 27 April 2023

⏱️ 17 minutes

🔗️ Recording | iTunes | RSS

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Summary

In recent months, franchisees of companies from the Hilton Inn to Subway have been pushing back against their corporate franchisors, claiming they are being squeezed out of profits. And a new study from the Government Accountability office found that franchisees tend to lack basic control over the operational side of their local storefronts, which can make turning a profit difficult. Yet despite these problems, many franchisees forgo reporting the deceptive and unfair practices of their franchisors. We speak to Lydia DePillis, an economics reporter at the New York Times, to discuss the relationship between franchisees and their franchisors and the ongoing hurdles for regulatory franchise legislation. We also speak to Dr. Marcia Chatelain, Professor of history and African American studies at Georgetown University and author of the Pulitzer Prize-winning book Franchise: The Golden Arches in Black America, about how the struggle for civil rights and the growth of the fast-food industry in America have shaped one another.

Transcript

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0:00.0	This is the takeaway. I'm Melissa Harris-Perry.
0:03.0	Five-five-dollar foot long.
0:10.1	Oh, yeah, before inflation came for the sandwich, customers could get Subway's iconic $5-foot-long anywhere in the country,
0:19.3	whether it be an airport in California or a strip
0:21.6	mall in Florida. And like many popular meal deals, that iconic sandwich is the product,
0:27.5	the franchise business model, where individual business owners pay a licensing fee to a larger
0:33.2	company to operate a franchise location. But the franchise model comes with its critics.
0:39.6	Recently, some franchisees have resisted demands of corporate owners, citing smaller profits
0:45.3	and higher operating fees. Joining us now is Lydia DePillis, an economics reporter at the New York
0:52.2	Times. Lydia, thanks for being with us on the
0:54.4	takeaway.
0:55.4	Hello, Melissa.
0:56.3	All right. So you've been reporting on this. What are the critiques of the franchisees?
1:02.3	What are we seeing?
1:03.4	So first I'll just say that these critiques aren't totally new. There's been tensions for the last
1:08.0	couple of decades. You might remember some news around Quiznos, for example, where franchisees felt like there was too much control over their
1:15.1	menus and pricing and that they couldn't make money. And eventually that chain went through
1:19.8	some real contraction. But I think it's been heightened in the last few months or years by a few
1:25.8	things. One is the introduction of private equity buyers who often
1:30.0	want a quicker return. So they try to make changes that franchisees find onerous or not great
1:37.1	for their bottom lines. And what it comes down to is this is an agreement, right, between the
1:42.1	franchisor and the franchisee. And it's supposed to work out well for everybody.
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