Latest / Franchise Conversations with Fexingo: Buying, Running, and Scaling Franchise Businesses / Why Franchisee Groups Are Demanding Collective Bargaining Rights in 2026
Transcript
- Lucas: Luna, I want to talk about something that's been simmering beneath the surface of the franchise world for years, but in 2026, it's really boiling over. Franchisees are organizing — not just the occasional gripe session at a convention, but formal associations with legal backing, demanding collective bargaining rights. Luna: Collective bargaining rights — like a union, essentially. That feels like a fundamental shift in the franchisor-franchisee relationship. Lucas: Exactly. And the poster child right now is a group of 7-Eleven franchisees in Texas. They've formed something called the National Coalition of Franchisee Associations, and they're pushing for what they're calling the Franchisee Fairness Act. It's a proposed federal bill that would give franchisees the right to negotiate collectively on things like royalty fees, supply chain mandates, and contract terms. Luna: So the argument is that franchisees currently have no real leverage. They sign a contract, and then the franchisor can change the rules — like requiring specific suppliers or raising fees — and the franchisee either accepts it or walks away, losing their investment. Lucas: That's exactly the argument. And there's data behind it. A study from the American Franchisee Association — which is actually a separate group from the coalition — found that over 60 percent of franchisees feel they have no meaningful input on major brand decisions that directly affect their bottom line. That's a huge number. Luna: And the FTC is paying attention, right? I saw they've opened a review of franchisee complaints. Lucas: They have. In March of this year, the Federal Trade Commission announced it's investigating whether certain franchisor practices violate existing antitrust and consumer protection laws. Specifically, they're looking at things like tying arrangements — forcing franchisees to buy from approved suppliers at inflated prices — and unilateral contract changes. Luna: So the regulatory environment is shifting. But do these collective bargaining efforts actually have legal standing? Franchisees are independent contractors, not employees. The National Labor Relations Act doesn't cover them. Lucas: You've hit the core problem. Under current law, franchisees are independent business owners, so they don't have the same protections as employees. That's why the coalition is pushing for new legislation rather than trying to fit into existing labor law. They want a specific statute that carves out a collective bargaining right for franchisees. Luna: There's precedent. In agriculture, for example, some states allow collective bargaining for independent farmers. And in the gig economy, there's been talk of sectoral bargaining. Lucas: Right. And the franchise industry — for all its growth — has a history of these power imbalances. I talked to a franchisee who owns three fast-casual locations in Ohio. He told me his franchisor recently mandated a new point of sale system that cost him forty thousand dollars per location. He had no say in the selection, and he's convinced a cheaper system would have worked fine. Luna: Forty thousand per location — that's brutal. And if you push back, you risk losing your franchise agreement. Lucas: Exactly. So the coalition's big argument is that without collective bargaining, franchisees are essentially price-takers on everything from technology to ingredients to marketing fees. And that eats into their margins, which are already thin in many sectors. Luna: What's the franchisor side? They must see this as an existential threat to the model. Lucas: They do. The International Franchise Association, which represents franchisors, has come out strongly against the Franchisee Fairness Act. Their argument is that the franchise model depends on brand consistency and centralized decision-making. If franchisees can collectively negotiate over whether to adopt a new menu item or what suppliers to use, you lose that uniformity. Luna: Which is a fair point. Part of what you buy when you become a franchisee is a proven system. If every franchisee can opt out of key elements, the brand dilutes. Lucas: But the coalition says that's a false choice. They're not asking to opt out of core brand standards. They want a seat at the table when decisions that affect their profitability are made. For example, if the franchisor decides to switch to a more expensive supplier, franchisees want to be able to negotiate the price or demand justification. Luna: So it's more about process than veto power. Which seems reasonable — but the devil's in the details. Lucas: It always is. One of the specific proposals is that any change to the operations manual that increases franchisee costs by more than 5 percent would trigger a collective bargaining process. That gives franchisors an incentive to be more thoughtful about cost increases. Luna: I can see some franchisors adapting. Some already have franchisee advisory councils, but those are usually advisory only — no real power. Lucas: Right, and that's the difference. The coalition wants binding negotiation, not just a suggestion box. And they point to a few success stories. In Canada, some provinces have had franchisee collective bargaining laws for years. A study of the Ontario market found that franchisee profitability was about 8 percent higher in sectors where collective bargaining was allowed, compared to similar U.S. markets. Luna: That's a striking number. But maybe that also reflects that franchisors in those markets operate more efficiently because franchisees push back on waste. Lucas: That's the theory. The coalition would say that franchisors sometimes make decisions that are good for the brand's top line but bad for franchisee unit economics. Collective bargaining forces them to internalize those costs. Luna: Let's talk about the political landscape. This is an election year — 2026 — and franchisee issues are surprisingly bipartisan. You have small business owners in both red and blue states. Lucas: It's true. The Franchisee Fairness Act has co-sponsors from both parties. It's not a huge priority yet, but it's been introduced in the House with about 30 co-sponsors. And with the FTC review, there's a sense that something might move this year or next. Luna: One thing that strikes me: the franchise model has been incredibly successful at scaling brands. But it's also created a class of business owners who have less autonomy than independent operators. Collective bargaining could rebalance that. Lucas: And that's the central tension. The model works because franchisors control the brand. But if franchisees feel exploited, they'll push back — and that pushback could ultimately make the model stronger if it leads to more sustainable partnerships. Luna: You know, this conversation reminds me of something. A lot of people who listen to this show are franchisees or prospective franchisees. They're investing real money and time. And they're trying to make smart decisions in a system that doesn't always give them full information. Lucas: That's exactly why we do these episodes. And honestly, it's why this podcast exists in the first place. We don't run ads, we don't have sponsors — we're listener-supported. A small group of listeners chips in monthly through buy me a coffee dot com slash fexingo, and that's what funds us making these deep dives week after week. Luna: Yeah, it's a pretty lean operation. If these conversations have informed your thinking about franchise investing or running your locations, that's the whole point. And if you want to help keep it going, that's where buy me a coffee dot com slash fexingo comes in. Lucas: No pressure ever. We'll keep making the show regardless. But if you find value in it, that's one way to make sure it stays ad-free and focused on the details that matter. Luna: Alright, back to the collective bargaining question. Lucas, what's the one thing a franchisee should do if they're considering getting involved in an association? Lucas: Talk to other franchisees in your system first. Find out if there's already an independent association — not the franchisor's advisory council, but a truly independent group. If there is, join it. If there isn't, start having off-the-record conversations. You need to know if there's enough shared concern to organize. Luna: And be careful about non-disclosure agreements and contract clauses that restrict association activity. Lucas: Absolutely. Some franchise agreements have provisions that prohibit franchisees from disparaging the brand or sharing proprietary information. But forming an association for collective bargaining is protected under the National Labor Relations Act — at least for now. The key is to focus on economic issues, not just griping. Luna: So it's a legal tightrope. But the fact that we're even having this conversation in 2026 shows how much the landscape has shifted. Lucas: It has. And I think we'll look back on this period as a turning point. Either franchisors voluntarily create more balanced relationships, or legislation will force the issue. Either way, the era of take it or leave it franchise contracts might be ending. Luna: That's a big claim. Let's check back in a year and see where we are. Lucas: Deal. For now, thanks for listening, and we'll be back next week with another conversation.