Issues

SEIU Wants to Kill Franchisees with Kindness

Petitions business watchdog for investigation

AP

Franchise businesses are firing back at union powerhouse SEIU after it filed a petition demanding that the federal government investigate franchisors.

The International Franchise Association (IFA) slammed the union for attempting to use the federal government to aid its attempt to undermine the franchise model.

"Service Employees International Union is manufacturing a crisis as part of its increasingly expensive public relations campaign, now estimated to be more than $33 million, to destroy the time-tested franchise model in order to fill its own depleted membership," IFA president Steve Caldeira said in a statement.

Reuters reported on Monday that the SEIU is seeking to file a petition asking the Federal Trade Commission, a consumer and business watchdog, to investigate "abusive" practices at 7-Eleven and McDonalds franchisees.

Scott Courtney, assistant to the president of the SEIU, told reporters in a telephone conference that "the relationship between big corporations like McDonald's and their franchisees can best be described in two words: abusive and predatory," according to Entrepreneur magazine. The SEIU did not respond to an interview request.

The SEIU has long targeted franchise establishments for unionization. However, the business model provides numerous obstacles for organizers: the workforce is often young and mobile and franchisees are generally small businessmen who pay fees to corporate to operate under the corporate brand, forcing unions to organize on a store-by-store basis.

The union has waged a multi-million dollar campaign over the last several years to gin up a workers movement in the fast food industry through its Fight for 15 campaign. The movement claims to represent the interest of workers by demanding a $15 hourly wage.

Critics claim this is an astroturf operation, pointing out the lack of attendance from actual fast food employees, as well as the roughly $20 million the union has invested in workers organizing committees across the country in 2014 alone.

Aloysius Hogan, a labor policy expert at the free-market think tank Competitive Enterprise Institute, said the FTC complaint represents a new direction for the campaign. Rather than trying to turn workers against their employers, it seeks to turn franchisees against their parent companies.

"Today’s set of allegations against franchisors is aimed at weakening the franchise business model—the ability to set the terms of franchise agreements and requirements," Hogan said in a statement. "Already, in another action aimed purely at increasing labor union power, union special interests have pending legal action against franchisors to make them and franchisees jointly liable for employment-related policies. Thousands of small businesses and jobs are at risk."

The FTC did not respond to request for comment.

Caldeira pointed to a recent survey that found the majority of franchisees are happy with their arrangements and questioned whether the union actually had the interests of small business leaders in mind when it filed the petition.

"The SEIU’s petition amounts to nothing more than asking the FTC to develop a solution for a problem that doesn’t exist," Caldeira said. "Franchisees are highly satisfied, they have a high level of trust in their franchisors."

This would not be the first time that unions have used regulators to help advance its agenda. In 2014, a federal judge scolded the Obama administration’s National Labor Relations Board for using an investigation as a pretense to help SEIU.

"The scope and nature of the requests, coupled with the NLRB’s efforts to obtain said documents for, and on behalf of, the SEIU, arguably moves the NLRB from its investigatory function and enforcer of labor law, to serving as the litigation arm of the Union, and a co-participant in the ongoing organization effort of the Union," Judge Arthur Schwab said in his ruling.

The NLRB is currently considering a case that could overturn the existing franchise model by holding parent companies responsible for the employment actions of franchisees. Caldeira said the union would like nothing more than to use an FTC investigation to further damage the credibility of the franchise model.

"The SEIU can claim to be looking out for franchisees, but it is really motivated by its own bottom line, otherwise they wouldn’t be spending over $33 million the past two years," he said.