Fast Food Nation: Ch 4 Questions

What legal issues have been involved with fast food franchises?

The fact that franchisees don't always follow the rules established by the franchisor has led to legal issues. This leads to a legal battle for power in which the franchisor almost always wins. Such battles constantly revolve around the franchisees anger at the fast food restaurant's encroachment. Other problems include: inflated prices charged by suppliers, bankruptcies and terminations that seem unfair. McDonald's, however has created a safety net for itself for avoiding such battles. Instead of demanding large royalties from the franchisees McDonald's leases the land in which the restaurant resides to the franchisor. This enables it to evict franchisors who violate the terms of the lease and avoid lawsuits since it has legal documentation of the rules the franchisees were supposed to follow.

 In what particular legal action has the Subway fast food franchise been involved? (100-102)

Subway has been involved in many unusual legal actions. For example, instead of recruiting franchisees the way most fast food restaurants do, Subways relies on "development agents". Because these "agents" are technically considered independent contractors their salary is dependent on how many Subways open within their region. As compensation for their work they receive a portion of the money that is paid by the franchisees, plus annual royalties. However, when the agents fail to meet their monthly quotas they are forced to pay the company for their shortfall. This keeps them under constant pressure to open new restaurants, regardless of how close they are to each other. Subway also takes practice in making many of the new franchisees, (most of who are immigrants) work 50 to 60 hours a week in order to earn a decent living.