I devour news articles relating to business and customer service – part of my job – and rarely am totally surprised. But, last week in the New York Times, when I read Why Aren’t Paychecks Growing? A Burger-Joint Clause Offers a Clue, I was outraged and disappointed to learn that if you get a job in a fast food restaurant, there are clauses in franchise contracts that prohibit you from both lateral and advancement with another fast food chain location. Unethical and unfair!
These clauses that prevent low wage and hardworking earners job any kind of mobility are not part of the employees’ work agreement. They are included in the contract that the franchisor has with their franchisees. And it’s not only in the restaurant industry. These clauses are found in franchise contracts with companies like Curves, Anytime Fitness and Jiffy Lube. To clarify, a Pizza Hut franchise owner cannot hire an associate who works for a different franchise owner unless given written permission.
According to the article, Professor Alan B. Krueger, an economist at Princeton University and former chairman of the Council of Economic Advisors, reviewed the policies of 40 franchise companies and found that 32 imposed some kind of hiring restriction. McDonald’s recently notified owners it would no longer enforce the rule.
As the article points out, many organizations have non-compete clauses preventing one employee going to competitor and sharing trade secrets. That is standard operating procedure between an employer and employee. However, it is doubtful associates at fast-food restaurants are privy to strategic plans. Those workers have only have one intent – to provide for themselves and their families.
I wrote a blog a few years ago about another article, Paying Employees to Stay, Not to Go. Its focus was that a number of fast-food chains are discovering the advantages of offering employees better wages resulting in less turn over. The article addressed the subject of the minimum wage and how certain restaurants like Shack Shack, owned by well-known and highly respected restaurateur, Danny Meyer, are willing to pay more to retain associates. People like Mr. Meyer understand that there is a relationship between satisfied associates and happy customers.
The current article concludes that non-compete clauses and franchise agreements might explain the U.S. job market. Unemployment has reached a 16-year low and job openings are at an all-time high, yet wage growth has remained surprisingly sluggish.
Most employees at fast-food restaurants probably have no idea that they are prohibited from seeking advancement at another location, regardless of their skill level, because there is a prohibition written in the franchise contracts. Reducing the mobility of low wage earners doesn’t make sense. I think the mission of any good boss is to train your staff to succeed and appreciate and value their good work. Many associates who are in low paying positions are great at delivering service, conscientious and want to better the lives of their families. I don’t think they should be subject to restrictions.
What do you think?
Here’s an important quote from the original piece in the New York Times:
Representatives for Curves and Jiffy Lube did not respond to requests for comment. A spokesman for Anytime Fitness said in an email that employees “frequently move from one gym to another when professional growth opportunities arise and it has not created undue challenges or resentment” among its franchisees.
Thus, it is possible to protect the business interests of franchisees while simultaneously helping employees advance their careers. Franchisors, like Anytime Fitness, accomplish this by fostering cooperation between franchisees and by coaching them to value people over profits.
Hi Mark, thanks for your comment. Thanks too, as the National Media Director for Anytime Fitness, highlighting your company’s policies of allowing associates from one franchise location to take advantage of an opportunity at a different site. I greatly value and appreciation your company’s philosophy towards customers and associates. Richard
Hi Richard: I see two sides to this issue. Though one might be moot, since I question whether the employment restrictions you describe are legally enforceable. My experience has been that when it comes to restricting a person’s ability to earn a living, the onus is on the employer to provide compelling reasons for the policy in court – regardless of what’s written in the contract. Otherwise, I’d establish a 10-year non-compete in all my employee agreements. Clearly, that would never hold up in court, even if the employee signed.
One reason for this restriction could be training costs. If the franchisee contract doesn’t stipulate the responsibilities for the franchise holder to recruit and train entry-level staff, then I see where an annoying pattern could infect the franchise system. The franchise holder five miles from my outlet might choose to invest nothing in training and recruitment, and instead, poach workers trained on my nickle, assuming I went fully on-board with the company program. I’d get tired of that pretty quickly. That might be a reason the policy got established in the first place. If that’s the case, the problem can be mitigated on the corporate level, by creating standard hiring abnd training obligations for all franchisees.
Hi Andrew, as always thanks for your comment. While it might not be enforceable in court as you mentioned, most of these franchise associates would not be able to afford legal advice and therefore if they were told they could not go to another location, they would probably not question it. I know there are reasons for every rule, but I don’t think it is right or fair to restrict these associates. Richard