How does a franchise work?
While working on this season of “The Uncertain Hour,” we heard a lot of words and phrases that sounded weird to our ears. So each week we’re going to explain a bit of jargon. To get a new “Uncertain Term” in your inbox, subscribe to our newsletter! To go with our second episode, this week’s Uncertain Terms are “servant” and “artisan.”
Here’s a pretty basic explanation of how a franchise works: A company licenses its brand name and its methods of doing business (think: menu of services, staffing roles, recipes, etc.) to a person or group, aka the franchisee. The parties sign a contract that lays out the rules the franchisee has to follow, the controls the company can exert, as well as the tools and support it’ll provide (think: training, marketing, quality control and other advising).
But a lot of those contracts have been coming under more scrutiny lately. You wouldn’t think of franchisees as employees of a franchisor (the main company). Franchisees license the brand and operate on their own, right? Well, not always. With some businesses — like Jan-Pro — the extent to which those franchisees really do operate on their own is the question of major legal battles.
One recent U.S. Circuit Court decision suggested that franchisees of another cleaning company, Jani-King, may have been incorrectly classified — that the relationship between the company and its franchisees was more like that of an employer to its employees. The finding meant those janitorial workers were entitled to additional wages and other protections. Jani-King settled the case in 2019 for $3.7 million.
To get a new “Uncertain Term” in your inbox, subscribe to our newsletter! And for more on this thing we used to call employment, check out the latest season of “The Uncertain Hour“! Subscribe wherever you get podcasts.
We’re here to help you navigate this changed world and economy.
Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.
In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.
Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.