May 18, 2015 / 3:00 PM / 4 years ago

SEIU to ask FTC to probe alleged abusive practices by franchisors

LOS ANGELES, May 18 (Reuters) - The Service Employees International Union, backer of a three-year campaign to improve the plight of low-wage retail and fast-food workers, on Monday said it would petition the Federal Trade Commission to investigate alleged abusive practices by major franchisors, including McDonald’s Corp and 7-Eleven Inc.

In its petition, reviewed by Reuters and expected to be filed with the FTC on Monday morning, SEIU outlined six U.S. franchisor practices it said appeared endemic and “particularly harmful.”

The union, which has roughly 2 million members, said those practices include incomplete or misleading financial performance representations, unreasonable capital expenditure demands, retaliation against members of independent franchisee organizations, unfair termination, unfair nonrenewal, and interference with transfers or sales.

Among other things, McDonald’s franchisees have complained that the company’s requirements for renovations and kitchen upgrades have burdened them with substantial debt.

Most recently, U.S. franchisees have complained about McDonald’s new “Create Your Taste” customization project. Among other things, they say that it carries a price tag that is too high for a program that does not work in drive-thrus, which account for more than 60 percent of U.S. restaurant sales.

McDonald’s, which is also testing a more modest customization program that is available through drive-thru windows, in the past has said it has a “solid working relationship” with its franchisees.

Separately, franchisor 7-Eleven, owned by Tokyo-based Seven & I Holdings Co, has been hit with lawsuits in which franchisees alleged that it drummed up reasons to take away their convenience stores.

A 7-Eleven spokeswoman previously told Reuters that those allegations were false and that the company ends relationships with the “few franchisees who violate the law or the franchise agreement” to protect other franchisees, employees and customers.

SEIU currently is backing a proposed law in California that would make it more difficult for franchisors to terminate agreements with franchisees.

Last year, California Governor Jerry Brown vetoed a bill that would have helped franchisees recoup some of their business investments when a franchisor wrongly terminates their relationship. At that time, Brown called on opposing sides in the battle over the legislation to make a concerted effort to find a collaborative solution. (Editing by Eric Walsh)

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