Last week, fast-foods franchise owners and other opponents of Assembly Bill (AB) 1228 suffered a setback when the State Assembly approved a bill that would grant national franchise corporations more control over their businesses.
The bill has been forwarded to the Senate for review.
The Fast Food Franchisor Responsibility Act, authored by Assembly Chris Holden (D-Pasadena), passed off the Assembly floor with 42 votes in favor of the legislation while 22 members of the Assembly voted against the bill.
“We’ve heard fast-food workers experience of wage theft, violence at work, sexual harassment and assaults, denied sick days, intense heat, poor work-place safety practices, and retaliation for speaking out,” said Holden before his colleagues voted on the bill.
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“Well, this does not imply that all fast-food franchisees mistreat their workers. It is clear that we must ensure that our fast-food workers are able to thrive in their workplace and in their communities,” he added.
According to the Employment Policies Institute, which reviewed wage claims from the California Department of Industrial Relations for the period of 2017 – 2022, the quick-service restaurant industry accounted for 1.6% of wage claims despite representing 3.2% of California’s workforce.
Holden, Mia Bonta (D-Alameda), Kevin McCarty (D-Sacramento), Issac Bryan (D-Los Angeles), Mike Gipson (D-Carson), Reggie Jones Sawyer (D-Los Angeles), (D-Los Angeles), Tina McKinnor (D-Inglewood), and Akilah Weber (D-La Mesa) – all members of the California Legislature Black Caucus – voted in favor of AB 1228.
Some opponents of AB 1228 say the bill was introduced to send a message to the fast-food industry.
“What is the bill really about? I looked at this bill closely in the Judiciary Committee and I didn’t see evidence that there are more labor violations in the fast-food industry than in other sectors,” said Assemblymember Bill Essayi (R-Corona) before the vote.
“Well, I think what this bill is about is retaliation. It’s retaliation against an industry that dares to stand up to this body and to pass or qualify a referendum to undo a really bad law that’s going to drive up food costs for every Americans,” he continued.
In the weeks leading up to the vote, a coalition of franchise fast food restaurant owners across California launched a voter-education campaign against AB 1228.
The Stop the Attack on Local Restaurants was buttressed by a public outreach with 30-second ads. The ads featured diverse California franchise restaurant owners sharing their concerns about ways AB 1228 would infringe on their rights to manage their small businesses.
“AB 1228 would destroy franchise businesses like mine,” said Mat. A., a Black restaurant owner in Lake Elsinore who appears in one of the ads the group released.
Last month, over 100 local franchise restaurant owners rallied at the State Capitol in Sacramento to push back against AB 1228. They argue that the bill would cut off one of the best pathways to business ownership for minority entrepreneurs. The owners were joined by social justice advocates, other small businesses owners, ethnic business leaders, and several representatives from restaurant brands and trade associations.
“It would destroy our business. We’ve worked hard to build a legacy for our family to take care of our employees and take care of our customers,” businessman Percy Johnson told California Black Media at the Citizen Hotel in downtown Sacramento, where the franchisees held a news conference.
Johnson owns eight McDonald’s restaurants in the Sacramento area that he operates with members of his family. He’s been a franchisee for approximately 26 years and his restaurants employ at least 300 people.
“Make no mistake about it, these are our customers, and these are our employees. These are not corporate employees or corporate customers,” Johnson added.
In addition to running a successful chain of restaurants, Johnson said he participates in community activities, gives back money to support humanitarian causes, and supports other small businesses.
AB 1228, authored by Chris Holden (D-Pasadena), would void any agreement between a franchise restaurant and its corporate parent that waives liability for violations against the franchisor.
Making the case for AB 1228, Holden explains that some franchisees violate employee rights at a far higher rate than establishments owned and operated by the franchisor.
“I believe many franchisees want to do right by the people that work for them but may not see it as possible under their franchisor’s terms and conditions. This can help to provide some relief while protecting employees and businesses,” said Holden in a statement.
Owners argue that without specialized agreements between franchisors and franchisees, they would be constrained by broad corporate restrictions which often force them to choose between profitability and following standards.
However, supporters of AB 1228 say franchisees would have the opportunity to file action against their corporate parents if abiding by the franchisor’s terms infringes on their ability to comply with employment laws.
Jai Coward and his wife Kayla Coward are the owners of a Dog Haus franchise in Santa Clara they opened in 2010. Their franchise has grown to 55 locations, including eight restaurants in Texas. When the Cowards were first granted a franchise license, they immediately started planning to expand – acting on a dream they had since college.
Now, the Cowards are hoping that AB 1228 will not kill their dreams.
“The whole reason why we went into business is to do business for ourselves. I am here doing this for us and our community. I don’t want to be a manager. I can go get a corporate job,” Jai Coward said. “Honestly, for us, I think we’re looking outside of California (if AB 1228 becomes law). Our brand, Dog Haus, we’re franchising nationwide now. For us, it might be us looking at other states and other opportunities as well.”
California is home to more than 15,000 franchised quick-service restaurants in every region of the state. The overwhelming majority of franchised restaurants are locally-run and operated by small business owners – many of whom are people of color, women, immigrants and veterans.
According to a study by Oxford Economics, nearly 50% of McDonald’s owners and operators in California are people of color.
Marisol Sanchez and her family own three McDonald’s franchises that she says are employee-friendly, profitable and connected to the community. Some of Sanchez’s employees have worked for the family for 30 years.
The business helps employees achieve the American dream, she said.
“We provide our employees with more than just a paycheck. We’ve helped dozens of our crew members pursue citizenship, become homeowners with down payment assistance, and apply for college for tuition assistance,” Sanchez said. “It’s unimaginable why anyone would want to take the decisions out of my hands and instead put out-of-state corporations in charge of my business and crew members.”
