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McDonald’s franchisee says the company told her “just pay your employees less”

First Person: Meet the franchise owner taking on McDonald's

The fast-food industry has become the face of the minimum wage battle. At McDonald’s, that struggle has become even complicated. Franchisees, too, often feel that following all the company’s rules and paying all its fees leaves little leftover for them, let alone their employees.

Kathryn Slater-Carter, who owns a McDonalds in Daly City, Calif., with her husband, is one of the few to have spoken up publicly — and spearheaded legislation now before the California Assembly, which is also backed by the Service Employees International Union, that would give franchisees more rights. Here’s her story, lightly edited for clarity and length.

“Three years ago, what started us working on [California bill] SB 610 was McDonald’s would not renew our franchise inside the Serramonte mall. And we went to our attorney, and he said we have no rights.

So we started this bill. I got called into McDonald’s and told I can’t give away corporate secrets. And I said, ‘What can I talk about?’ and I got dead silence. And in our most recent Assembly hearing, I spoke about what I had been told by a McDonald’s representative, which is that ‘You guys can make more money if you pay your employees less.’

They decided not to renew our franchise at all, and they kept telling us ‘Yeah you’ll be able to sell it,’ we knew the lease was up but McDonald’s kept assuring us that they intended to renew it. In January, we were negotiating, and they decided not to renew the the lease at the mall. So a $2 million-a-year business is now gone. My husband and daughter and her fiancee went in and removed everything from it, hoods and everything. So now our sole source of income is a single McDonald’s restaurant. If they come after us with that, we have nothing.

When I was a kid, my dad started working with [early McDonalds’s exec] Ray Kroc, as his realtor for Santa Barbara through southern Oregon. Ray Kroc came and played bridge in our living room. I just remember him as being just a nice man, and I read his books and I felt positively about it.

My husband and I moved to the Bay Area out of college, he got a job with a bank and I decided I didn’t want to stay with the field I had been in, which was education. My dad said, ‘try McDonalds, you’ll either love it or you’ll hate it, and you’ll know within 6 months.’ That was in 1982. I read the franchise agreement I had to sign, and I didn’t want to. I said ‘dad, this is crazy.’ And he said, ‘just sign it, it’s going to be ok.’ And it was ok, for a very very long time.

But then Ray Kroc died, and the old founding member of McDonalds were dying off or retiring, and things changed. Maybe 20 years ago, things just started getting really weird. They had always tried to blame the operators when a program didn’t succeed, but then the corporations got  very serious about every time there was a mistake, it was the operators not implementing it correctly.

And then it became clear that they were trying to get rid of small franchisees. Now there are  franchisees with 50, 60 restaurants. The way that McDonald’s works is, you pay them rent for the building and the land, and it’s a triple net lease. Plus you pay them for advertising and promotion and PR. Then you pay the bills and what’s left at the bottom is what the owner operator gets.

This is not just a McDonald’s problem. The way franchisees is treated by franchisors is a standard thing in the industry.

We’re fighting the International Franchise Association. The IFA was created to keep franchisees from getting any kind of legal rights. They use unsubstantiated FUD — fear uncertainty and doubt — to scare legislators. They say for example, that it will destroy franchising. They have an ad right now saying it will put 28,050 jobs at risk. I don’t know which orifice of their body they pulled that out of. There’s no facts to back it up, they just pulled this number out. In fact, 610 will ensure that small business owners have the ability to grow their business and keep people employed and pay a fair wage.

We try and accommodate our workers, but there’s several issues. The way McDonalds does it, they work to bring customers into the stores with their very low prices. So the difference for us between a  dollar hamburger and a $3 hamburger is huge. So that was why I was telling McDonalds that you have to get away from these low value sandwiches years ago, and they said, ‘just pay your employees less.’ McDonald’s’ success is in good quality low-priced food. And we have a customer who comes into our store with his autistic son. And he’s in our stores at least once a day, sometimes twice a day to eat. and if all our hamburgers were $5-6, they couldn’t afford it. This is true for seniors, young families, a working folks.

So it’s this circle, essentially, but instead of sticking with low-price stuff at one level and giving people an opportunity to go up if they wanted a bigger drink to pay more, now we’ve got all size drinks are a dollar. So McDonalds has gotten itself in a trap. And as an owner operator, and if you don’t do their dollar sandwiches or other discounts, you get punished.

To be able to offer health insurance we would have had to raise prices significantly. And that’s on low-income people. Part of the problem is, and this is what I told the McDonald’s folks when they wanted us to lower our wages, the cost of living here is too high. We can’t do that. We start at minimum, because you’ve got to train people. But we move them up fairly fast.

[If McDonald’s workers unionized], I think the biggest negative effect would be that corporations, the big guys, couldn’t suck as much money off the top. I have mixed emotions on unions, and I told SEIU this. Sometimes I think the union benefits are a little over the top. But by the same token, in this stagnant economy that we’ve got, the little people are getting screwed. So I’m sure you know of the lawsuits for wage theft from the employees against McDonald’s operators in California. Wage theft is wrong, and it comes a point at which people do need to protect themselves and their interests. If they’re working, they deserve to be paid.”