Union weighs in on McDonald's refranchising plan

by Erica Shaffer
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WASHINGTON – The Service Employees International Union (SEIU), which supports the Fight For $15 campaign to raise the minimum wage of service industry workers, sent a letter to potential buyers of McDonald’s Corp.’s 3,000 restaurants in Asia warning of financial risks posed by the company’s “master licensee” model.

McDonald’s is seeking local owners to act as franchisees for the company’s restaurants in Hong Kong, South Korea and China.

The six-page letter cites cases from Latin America to India to Eastern Europe where, according to SEIU, similar franchising agreements resulted in McDonald’s shifting significant costs and liabilities to master franchisees, allowing the company to reap financial gains while avoiding financial liabilities. To make its point, SEIU sent the letter in English, Korean, Japanese and Chinese. Scott Courtney, SEIU executive vice president, signed the letter.

“We believe McDonald’s past practices pose risks for its future licensees, those firms’ investors, McDonald’s franchisees in Asia and the workers employed at McDonald’s stores,” the letter states. “A bad deal for the buyer of McDonald’s business in any one of its major markets could negatively impact these stakeholders for years to come.”

For example, the letter pointed to Arcos Dorados which pays 5 percent of sales in royalties to McDonald’s. “…Onerous provisions in the master franchising agreement allow McDonald’s to prohibit Arcos from closing unprofitable stores,” SEIU said in the letter. “The company also transfers currency risks to Arcos by requiring all royalty payments in US dollars.” 

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