Legal battles won by franchisors in the 1960s-70s weakened antitrust laws against "vertical restraints." This created the legal precedent allowing companies like Uber and Amazon to exert tight control over independent contractors without incurring employer liabilities.
Before the 1970s, antitrust law was used to prevent large corporations from exerting excessive control over small businesses. A franchisor dictating prices or suppliers to a franchisee was considered an illegal restraint of trade, a stark contrast to today's legal landscape.
While a direct no-hire agreement between two franchisees is illegal, a franchisor can impose the same rule "vertically" from headquarters. This legal distinction allows them to create a system-wide cartel that limits worker mobility and suppresses wages across the entire brand.
Franchisors argue they are a single entity to avoid antitrust conspiracy charges. Simultaneously, they claim franchisees are separate businesses to shield themselves from labor laws, unionization, and wage liability, creating a powerful, contradictory legal shield.
Despite marketing franchising as an entrepreneurial opportunity, franchisors actively avoid independent thinkers. The ideal franchisee is someone with grit who follows instructions precisely, effectively acting as a dedicated, risk-bearing manager rather than an innovator.
Technology like broadband-connected POS systems gives modern franchisors a real-time data stream and surveillance capability over their "independent" locations. This allows a degree of centralized control that exceeds what was possible for classically integrated corporations like U.S. Steel.
With prices, products, suppliers, and even staffing levels dictated by the franchisor, franchisees have almost no operational discretion. Their primary path to profitability is suppressing wages and maximizing worker effort, making them risk-bearing middle managers rather than entrepreneurs.
The 1947 Taft-Hartley Act legally restricts strikes to a worker's immediate employer. In a franchise, workers can only target the individual franchisee, who has little power over conditions, effectively shielding the powerful parent corporation from collective bargaining.