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09-17-2004, 12:41 AM
  #44
David A. Rainer
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Quote:
Originally Posted by I in the Eye
One of them is called a franchisee... I remember that...
No sweat. it took a very expensive education to get it straight for me. hehehehehe


Quote:
So, are you saying that McDonald's does not dictate the costs associated with their products to the franchisees (I assume that this is the proper use of the word)? Are you saying that the individual franchisees have different product-related costs? Are you saying that a franchise owner can pay his son (a burger flipper) 3 times more than his burger flipping peers?
No, McDonalds cannot dictate the costs to its member franchises. It can suggest them (as in a manufacturer's suggested retail price). That's why every time you hear a commercial, it says "prices may vary". Because if they did not, the feds would be all over them for anti-trust violations resulting from price fixing. Mandating the price to all its franchisees is price fixing. The benefit of being a frachisee is not necessarily price certainty as it is free advertising, the use of a recognized logo, and inexpensive supplies - but NOT fixed prices.

Quote:
I was always under the impression that expenses in a franchise-based business were standardized (for resource expenses directly related to the product - including employee salaries for those who help develop/deliver the product)... I was always under the impression that McDonald's kept ultra-strict control over their products - and product-related costs... I always assumed that burger flippers all got paid the same - regardless of the franchise (as dictated from head office)... Hmm... go figure... Learn something new every day
The price is standardized to some degree. The franchisor can sell their produce for a single price they determine (just like any single business selling widgets for a price they determine). And this provides cost certainty to the franchisee. But the franchisor cannot dictate to the franchisee the amount that the franchisee will re-sell the product to their customers for. That is left to supply and demand and if they tried to dictate, it is called price fixing. Often, the prices are very similar (or even the same), but that is becuase the supply and demand does not vary the price of burgers that much. But if they were dictated by the franchisor, it would be price fixing.

Quote:
My underlining thinking was that in the NHL franchise business, the players are an important ingredient of the product... IMO, the players are like the burger patties in a Big Mac (speaking figuratively)... I assume that McDonald's head office controls the costs for burger patties (to maintain price for big macs regardless of franchise (I assumed that McDonald's directs and controls all decisions that directly relate to the image of the brand)... Obviously, the players have to be treated far better than a piece of meat... But I didn't realize it was illegal for the franchisor to control the salaries of the franchisee's employees...

Interesting...
Yep, it is illegal unless they pass the restriction through the collective bargaining process. That is what this whole mess is about. You can go to any of your local burger franchises and ask the manager if the franchisor (McDonalds Corp, etc) sets the wages or the individual owner of the particular store sets the wages. It will be the individual owner. The owners want to add some restrictions to suppress wages and they cannot do it unilaterally. They must collectively bargain for it. If it is included in a CBA, the restriction is perfectly fine.

I hope this is making sense.

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Last edited by David A. Rainer: 09-17-2004 at 02:04 AM.
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