Franchise Industry Booms Amid Regulatory Battle Under Obama, Biden

Franchise businesses are booming in America, with nearly a decade of continuous growth. Since 2013, the number of franchise establishments has increased from 697,943 to an estimated 821,589 this year. These franchises cover a wide range of industries, not just limited to fast-food chains but also including hardware stores, hospitality, hair salons, and pet care services.

Despite this remarkable growth, the franchise industry has faced challenges from the Obama and Biden administrations. Both administrations have sought to impose the joint employer rule through the National Labor Relations Board, which would hold franchisers accountable for their franchisees’ labor practices and potentially lead to mass unionization drives. Critics argue that this would hinder the profitability and autonomy of small business owners who operate franchises and burden various industries.

However, the franchise industry has found support in Congress, with a bipartisan majority rejecting the NLRB’s joint employer rule. Furthermore, the Republican-controlled House of Representatives and the Democratic-controlled Senate both voted to disapprove of the new rule. President Biden vetoed the Congressional Review Act resolution, stating that the rule aims to prevent companies from evading their labor obligations. Congress attempted but failed to override the veto, leaving the matter for the courts to resolve.

In March, a U.S. District Court Judge in Texas strongly criticized and vacated the rule, citing its disruptive impact on various industries, including the franchise sector. The judge argued that the rule exceeded the bounds of common law and ran counter to Supreme Court precedent.

Looking ahead, the franchise industry awaits further legal proceedings regarding the joint employer rule. If the rule is ultimately overturned, it would likely bring relief to many in the industry and allow them to focus on their work without the burden of increased liability and regulations.

Written by Staff Reports

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