Selling franchise rights is tricky. On the one hand, it’s an opportunity for both parties to expand and grow their businesses in a mutually beneficial way. On the other hand, because they’re both operating under the same brand, they both bear some responsibility for the way the business under the franchise is run. This is why franchisors include training in their franchise agreements: to make sure the franchisee runs the business in ways that are consistent with the brand.
After a recent decision by a California federal judge, companies may want to include education on employment laws and regulations in the training they provide for their franchisees.
The lawsuit involved a class of employees who worked at five different McDonald’s locations in the San Francisco Bay Area. The plaintiffs allege they were denied the proper compensation when they worked overtime, the wages they did receive did not include all the hours they spent working, and they were not compensated for the time and money they spent on maintaining the uniforms they were required to wear to work. They also alleged they were denied meal and rest breaks, both of which are required by California labor law, but the judge dismissed those charges.
The McDonald’s locations in question were owned and operated by The Edward J. Smith and Valerie S. Smith Family Limited Partnership and that company settled with the class of plaintiffs for $700,000. Continue reading