Recent studies document pervasive noncompliance with basic labor standards in industries with high concentrations of low-wage workers. The authors examine how franchising, a common form of business organization in low-wage industries, affects compliance. They estimate the effect of franchise ownership on compliance with federal minimum wage and overtime standards in the fast food industry using unique data on Top 20 branded restaurants. Franchised outlets have far higher levels of noncompliance than comparable company-owned establishments. The authors argue that observed differences arise from internal incentives facing franchisees versus franchisors rather than from external enforcement pressures facing the parties.
BeckerGary. 1968. Crime and punishment: An economic approach. Journal of Political Economy76: 169–217.
2.
AnnetteBernhardtBousheyHeatherDresserLauraTillyChris (Eds.). 2008. The Gloves Off Economy: Problems and Possibilities at the Bottom of the Labor Market. Champaign, IL: Labor and Employment Relations Association.
3.
BernhardtAnnetteSpillerMichaelTheodoreNik. 2013. Employers gone rogue: Explaining industry variations in violations of workplace laws. ILR Review66(4): 808–32.
4.
BlairRoger D.KasermanDavid. 1994. A note on incentive incompatibility under franchising. Review of Industrial Organization19(32): 323–30.
5.
BlairRoger D.LafontaineFrancine. 2005. The Economics of Franchising. New York: Cambridge University Press.
6.
BoboKim. 2012. Wage Theft in America: Why Millions of Working Americans Are Not Getting Paid—and What We Can Do about It. New York: New Press.
7.
BrickleyJames A.DarkFrederick H.1987. The choice of organizational form: The case of franchising. Journal of Financial Economics18(2): 401–20.
8.
BrownCharlesHamiltonJayMedoffJames. 1990. Employers Large and Small. Cambridge, MA: Harvard University Press.
9.
CappelliPeterHamoriMonika. 2008. Are franchises bad employers?Industrial and Labor Relations Review61(2): 147–62.
ChangYang-MingEhrlichIsaac. 1985. On the economics of compliance with the minimum wage law. Journal of Political Economy93(1): 84–91.
12.
CliffordStephanie. 2009. Video prank at Domino’s taints brand. New York Times, April15.
13.
DePillisLynda. 2013. Why franchises are such a huge obstacle to higher wages. Washington Post, December6.
14.
EysterJames J.deRoosJan A.2009. The Negotiation and Administration of Hotel Management Contracts, 4th edition.New York: Pearson Custom Publishing.
15.
FennPaulAshbySimon. 2004. Workplace risk, establishment size, and union density. British Journal of Industrial Relations42(3): 461–80.
16.
GreenhouseSteven. 2008. The Big Squeeze: Tough Times for the American Worker. New York: Knopf.
17.
GreenhouseSteven2013. In new wave of walkouts, fast-food workers gain momentum. New York Times, November28.
18.
HiscoxMichael J.SchwartzClaireToffelMichael W.2008. Evaluating the impact of SA 8000 Certification. Harvard Business School Working Paper. Accessed at http://www.hbs.edu/research/pdf/08-097.pdf (September15, 2014).
19.
JayaramanSaru. 2013. Behind the Kitchen Door. Ithaca, NY: Cornell University Press.
20.
JinGingerLesliePhilip. 2009. Reputational incentives for restaurants hygiene. American Economic Journal: Microeconomics1(1): 237–67.
21.
JohnGeorgeWeitzBarton A.1988. Forward integration into distribution: An empirical test of transaction cost analysis. Journal of Law, Economics & Organization4(2): 337–55.
22.
KallebergArne. 2011. Good Jobs/Bad Jobs: The Rise of Polarized and Precarious Employment Systems in the United States, 1970s to 2000s. New York: Russell Sage Foundation.
23.
KalninsArtursLafontaineFrancine. 2004. Multi-unit ownership in franchising: Evidence from the fast-food industry in Texas. RAND Journal of Economics35(4): 747–61.
24.
KaufmannPatrick J.LafontaineFrancine. 1994. Costs of control: The source of economic rents for McDonald’s franchisees. Journal of Law and Economics37(2): 417–53.
25.
KehoeMichael R.1996. Franchising, agency problems, and the cost of capital. Applied Economics28: 1485–93.
26.
KruegerAlan B.1991. Ownership, agency, and wages: An examination of franchising in the fast food industry. Quarterly Journal of Economics106(1): 75–101.
27.
LafontaineFrancine. 1992. Agency theory and franchising: Some empirical results. RAND Journal of Economics23(2): 263–83.
28.
LafontaineFrancine. 1995. Pricing decisions in franchised chains: A look at the fast-food industry. NBER Working Paper No. 5427. Cambridge, MA: National Bureau of Economic Research.
29.
LafontaineFrancineKaufmannPatrick J. 1994. The evolution of ownership patterns in franchise systems. Journal of Retailing70(2): 97–113.
30.
LafontaineFrancineShawKathryn L.1999. The dynamics of franchise contracting: Evidence from panel data. Journal of Political Economy107(5): 1041–80.
31.
LafontaineFrancineShawKathryn L.2005. Targeting managerial control: Evidence from franchising. RAND Journal of Economics36(1): 131–50.
32.
LafontaineFrancineSladeMargaret. 1998. Incentive contracting and the franchise decision. NBER Working Paper No. 6544. Cambridge, MA: National Bureau of Economic Research.
33.
StephanieLuceLuffJenniferMcCartinJosephMilkmanRuth (Eds.). 2014. What Works for Workers? Public Policies and Innovative Strategies for Low-Wage Workers. New York: Russell Sage Foundation.
34.
MathewsonG. FrankWinterRalph A.1985. The economics of franchise contracts. Journal of Law and Economics28(3): 503–26.
35.
MendeloffJohnNelsonChristopherKoKikonHavilandAmelia. 2006. Small Business and Workplace Fatality Risk: An Exploratory Analysis. Los Angeles: RAND Institute for Civil Justice.
36.
NortonSeth W.1988. An empirical look at franchising as an organizational form. Journal of Business61(2): 197–218.
37.
OstermanPaulShulmanBeth. 2011. Good Jobs America: Making Work Better for Everyone. New York: Russell Sage Foundation.
38.
PricewaterhouseCoopers. 2010. 2010 franchise business economic outlook. Report to the International Franchise Association Education Foundation. London: PricewaterhouseCoopers.
39.
QSR. 2004. The QSR 50: Top 50 chains by system-wide sales. Quick Service Restaurant Magazine.
40.
RubinPaul H.1978. The theory of the firm and the structure of the franchise contract. Journal of Law and Economics21(1): 223–33.
41.
U.S. Bureau of Labor Statistics. 2006. Occupational Employment and Wage Estimates. NAICS 722211, Limited Service Restaurants, May.
42.
U.S. Department of Commerce, Bureau of the Census. 2002. Economic Census: Food Services and Drinking Places. Washington, DC: Government Printing Office.
43.
U.S. Department of Commerce, Bureau of the Census. 2004. County Business Patterns: USA. Washington, DC: Government Printing Office.
44.
[WHISARD] Wage and Hour Investigative Support and Reporting Database. 2001–2005. Washington, DC: Wage and Hour Division.
45.
WeilDavid. 2014. The Fissured Workplace: How Work Became So Bad for So Many and What Can Be Done to Improve It. Cambridge, MA: Harvard University Press.
46.
WinterHarold. 2008. The Economics of Crime: An Introduction to Rational Crime Analysis. London and New York: Routledge.
47.
YeapClarissa A.2006. Residual claims and incentives in restaurant chains. Unpublished manuscript, University of Minnesota.
