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The Future of Fast Food Governance

The Fast Food Forward movement has swelled into one of the largest protests by low‐wage workers in U.S. history, animating efforts at all levels of government to raise and enforce workplace standards. One such strategy is to hold fast food franchisors accountable as joint employers of their franchisees’ employees. In what may be a watershed moment, New York Attorney General Eric Schneiderman (NYAG) recently filed suit against Domino’s Pizza, the franchisor, for wage‐and‐hour‐law violations in its franchisees’ stores across New York State.

Fast food store employees report widespread wage‐and‐hour law violations, and the NYAG’s Domino’s lawsuit appears to confirm this trend within one of the largest fast food brands in the United States. The NYAG’s suit is similar to successful nonfranchisor–franchisee wage‐and‐hour litigation, where courts have assigned liability to lead firms because their subcontractors’ employees economically depend on them. But courts presented with similar evidence in the franchisor–franchisee context have been reluctant to consider franchisors to be joint employers.6 What accounts for this difference?

The purpose of this Essay is to provide one answer to this question. This Essay argues that the franchise relationship is often misunderstood by the judiciary as an arms‐length relationship when, in fact, it is frequently characterized by ongoing dependence. This is an important misapprehension because dependence lies at the heart of how courts evaluate franchisor liability under wage‐and‐hour and franchise laws. It leads many courts to assume that the franchise agreement reflects an independent relationship between franchisors and franchisees and to disregard the supervisory controls that franchisors write into franchise agreements as routine quality standards.

The difference in judicial interpretations of the franchise relationship relative to other contracting arrangements suggests that improving fast food franchise store compliance with wage‐and‐hour law requires a reexamination of the franchise relationship. The Essay explores the regulation of franchising under wage‐and‐hour law and franchise law, finding that both legal regimes create perverse incentives for franchisees to violate wage‐and‐hour law. This Essay argues that improving wage‐and‐hour law compliance in franchise stores will require a reconfiguration of the franchise relationship to incentivize franchisor monitoring of franchisee pay practices, notwithstanding the franchisor’s joint‐employer status. franchisor monitoring of franchisee pay practices, notwithstanding the franchisor’s joint‐employer status.