Franchise Operations

Franchisees, Employees, and the Law

A former McDonald’s franchise employee, Natalie Gunshannon, is suing a franchisee for paying workers with a precharged debit card — and failing to offer any alternative. It seems like a convenience for the workers, but the card has fees associated with normal activities like withdrawing money, checking the balance, and making purchases, so some employees were unhappy with it. One employee was unhappy enough to sue.

This story has turned into a national PR disaster for the franchisee, who has since agreed to give other options to employees.. Unfortunately, the business’s reputation has already been damaged, regardless of the outcome of the case.

Paperless payroll can be a great option for reducing payroll costs. Payroll debit cards can also be a help for low income workers who don’t have bank accounts. Fast food franchise restaurants often employ students, for example, who may not have a local bank  However, there are also legal issues involved, according to Lauren Saunders, the managing attorney for the National Consumer Law Center. Other options must be offered to the workers, for example, and in this case, that didn’t happen. McDonald’s didn’t set it up that way — the franchisee did.

Did the franchisee know about these legal issues? Perhaps not. Unfortunately, that won’t prevent the consequences of the transgression.

Just as you should consult an attorney to help protect yourself when signing your Franchise Agreement, it’s important to get professional advice if you decide to make changes to the way you handle certain aspects of your business.

Payroll is one of the aspects of business that can be very complex, from a legal standpoint. Your franchise probably has a system designed to cover hiring and payroll issues, and that system should be solid enough to keep you from dealing with any legal issues. If you decide to step outside the system, though, you can no longer assume that you’re covered.

When you’re looking into franchise business opportunities, pay enough attention to the operations side of things to be sure you understand how systems like payroll work. Ask why systems were set up as they are, and make sure you understand the thinking behind the franchise’s systems.

If you feel that the system the franchisor offers needs tweaking, you’d be wise to speak with an attorney before making any decisions. If you find yourself thinking, “I could just do this part differently,” bring that idea up with the franchisor to discover whether they’ve already considered the idea you have in mind. They might have tried and rejected it — maybe for legal reasons.

Ask other franchisees what problems they’ve run into and what support they gained from the franchisors, too. We assume that the franchisee in the news story did not approach McDonald’s before they decided to limit payroll options to the debit card. If they had, they might not have ended up in the newspapers. Make sure that your franchisors are able to provide the support you need before you commit to their business opportunity — but remember, too, that you are responsible for your actions as an employer.

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