DOL Proposes Joint Employer Rule for Wage Compliance

Hardee’s Franchisee Files Bankruptcy; Applebee’s Franchisees Sue over Territory Rights

The Department of Labor’s Wage and Hour Division has proposed a new joint employer rule that could help franchisors and franchisees better understand their responsibilities for federal wage-and-hour compliance.

“When a joint employment relationship exists, those employers are jointly and severally liable for any wages, damages and other relief owed to employees, including paying for all hours the employee worked for all joint employers, and all overtime premiums due for that time,” according to the Department of Labor. Past rules have changed with political winds, sometimes defining franchisors as joint employers along with franchisees. Under the new proposal, the Wage and Hour Division would, in “substantial likelihood,” define a business as a joint employer if it does all of the following: 

• “Hires or fires the employee;
• “Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
• “Determines the employee’s rate and method of payment; and 
• “Maintains the employee’s employment records.”

The proposed rule also downplays the right to control as a factor if it isn’t exercised, per the Fisher Phillips law firm, which represents employers in labor and employment law cases. The revision expressly states that actual control is significantly more relevant than the mere right to control, the firm said.

The International Franchise Association supports the new rule as “a clear and commonsense approach” for franchises, IFA President and CEO Matt Haller said in a news release. The agency will accept comments about the rule through June 22.   

Hardee’s Franchisee Declares Bankruptcy

ARC Burger, which had operated 77 Hardee’s franchises, has filed for bankruptcy, according to court records cited by RestaurantDive.com. ARC closed all of its Hardee’s units last December after the franchisor sued ARC for breaching its franchise agreements.

Because of the bankruptcy filing, a judge stayed Hardee’s lawsuit against ARC, Restaurant Dive reported. ARC sites are located in nine states, the report said. The filing didn’t indicate whether the restaurants would reopen.

Applebee’s Franchisees Sue Franchisor

Apple Texas and Apple Houston, which operate 37 and 21 Applebee’s in the Dallas and Houston areas respectively, have sued the franchisor, alleging that dual-branded Applebee’s-IHOP restaurants are infringing on its exclusive territory, Restaurant Business reported. Applebee’s is owned by Dine Brands Global Inc., which also owns the IHOP and Fuzzy’s Taco Shop franchises.

Apple Texas and Apple Houston are subsidiaries of SSCP Management, which has 79 Applebee’s in Texas, California and Virginia. A co-branded site opened in a suburb west of Dallas in February, the lawsuit said, and at least four additional co-branded stores are planned within the franchisees’ territories.

Applebee’s has countered that the franchisor terminated its development agreements with Apple Texas and Apple Houston because the franchisees allegedly breached their contracts, thus ending the exclusive territory rights. 

Club Pilates Expands 

After obtaining the remaining Club Pilates territories in six states, Riser Fitness has agreed to open 127 fitness studios over the next five years. The studios will be in California, Idaho, Minnesota, Nevada, Oregon and Washington.

Riser Fitness already owns Club Pilates franchises in Mexico City, which is already open, and has a 40-unit development planned in Australia. Club Pilates is one of the boutique fitness brands in the Xponential Fitness franchise family, which also includes StretchLab, YogaSix, Pure Barre and Body Fit Training/BFT.

Restaurant News

Breaking news from quick-service restaurants:

• A Little Caesars unit in Wylie, Texas (near Dallas), uses Flytrex’s Sky2 drone to deliver large orders to customers, the pizza brand said in an April 23 news release. Sky2 can carry as much as 8.8 pounds, about the weight of two large pizzas and beverages. Under the partnership between the pizza franchise and Flytrex, Sky2 communicates with Little Caesars’ point-of-sale system. Its average travel time, from takeoff to delivery, is 4.5 minutes over a maximum 4-mile range.
• Dog Haus is dividing the U.S. into 15 territories of 100 units under a new franchising model. The units will be developed in part by established franchise operators who will become area directors, Nation’s Restaurant News reported on April 23. The 60-unit fast-casual restaurant brand created the model to propel growth with successful multi-unit franchisees from brands such as Dave’s Hot Chicken and Jersey Mike’s, NRN said. The area directors will have an opportunity for an ownership stake in the hot dog franchisor, a voice within the board of directors, and a say in corporate management.
• After more than two decades without child-oriented meal boxes, Whataburger will roll out a Kids Whatameal on May 5. The move was prompted by feedback from franchisees, employees and customers, according to QSR Magazine. The meals, priced at about $5.50 to $6.50, will consist of an entrée, side, drink and treat such as fruit chews, graham crackers or a cookie.
• On April 28, more than 18,000 U.S. Subway restaurants debuted a value menu of 15 items generally costing $5 or less. The menu includes several 6-inch sandwiches and wraps for $3.99 and a Sub of the Day for $4.99, Fox Business said. Customers can add chips and a drink for $2 more. (Subway has cautioned that prices may be higher at some locations.) The sandwich brand joins several other franchises that are enticing customers with low-cost offerings.

Franchise Brands Give Back for Earth Day and Appreciation Weeks

On Earth Day (April 22), Pet Supplies Plus and Wag N’ Wash stores collected and recycled customers’ pet food, treat and litter bag packaging. The program, a partnership with TerraCycle, has resulted in 69 tons of waste being recycled since it began in 2023. The two pet retail brands also have launched an April 30-May 13 trade-in program so pet parents can bring in used collars, leashes and harnesses; in return, they’ll receive 40% off a new replacement item. 

And from May 4-8, to celebrate Teacher Appreciation Week and Nurse Appreciation Week, teachers and nurses may enjoy a complimentary iced tea – no purchase necessary – at McAlister’s Deli, QSR Magazine reported. In a news release, the restaurant described the initiative as a token of appreciation for the positive impact of these professionals.