Washington Attorney General, Bob Ferguson negotiated with seven major fast food franchises including; McDonalds, Arby’s, Carl’s Jr., and Jimmy Johns to delete franchise agreements with parent companies which include a no poach clause. The no poach clause provided a way for individual franchisee’s to keep managers from other same brand franchisees from hiring their workers. Two Princeton professors, Krueger and Ashenfelter published a study last year that estimated that no poach clauses affected about 70,000 individual restaurants in the U.S. or about 25 % of all fast food outlets. The professors noted that the clauses were primarily to keep turnover down, limit competition and job mobility with other same brand franchises. As a result workers had limited options to negotiate higher wages, work schedules or conditions.
Turnover in the fast food industry ranges from 60 – 70% in up-scale dining restaurants to over 120 % in fast food franchises. Franchisees are faced with constant pressure to raise wages in a low wage industry but face tight profit margins of 3 %:
Source: The Heritage Foundation – 9/4/14
With only 3 % margin to work with it is difficult for a franchise owner to raise wages. Workers also mention in surveys the need to have more scheduled hours with more notice on the hours they work. With the no poach clauses gone from contracts workers can move to a same brand restaurant and negotiate for better hours and schedules.
We are pleased to see Attorney General Ferguson successfully negotiate with major fast food chains to delete the no poach clause to give workers more negotiating power and flexibility in their job situations. It seems to us that major chains should have figured out that at least keeping the worker in the same chain was a plus, and the deleting the clause may force owners to treat workers better in order to reduce turnover. Better managed franchises would rise to the top and have lower turnover rates. Now on to raising low wages, increasing wages to a livable level is a complex issue that will require all involved; the owners, corporate franchise executives and workers to come up with a plan that will give workers the wages they deserve.