How Franchise Restaurants Opened the Door to the Gig Economy

When the fast food industry began booming in the 1950s, it did so via a new business model known as the franchise. This model allowed independent operators to license trademarks from a business like McDonald's or Dunkin Donuts, and it soon spread across the country, with huge consequences for how Americans are employed. Legal battles fought by franchises eventually opened the door to what's now known as the gig economy, allowing Uber drivers to be treated in much the same way as the operator of a local Chick-fil-A. To better understand the history of the franchise model, we speak with Brian Callaci, chief economist of the Open Markets Institute, and author of the book Chains of Command: The Rise and Cruel Reign of the Franchise Economy. Callaci helps break down how the franchise model works, how franchise contracts are structured to precisely dictate how franchisees are supposed to run their businesses, the relationship between the franchise model and gig work, as well as how franchises pioneered worker surveillance. Read more: Taco Bell Traffic Sinks After Lettuce Tied to Parasite Cases https://www.bloomberg.com/news/articles/2026-07-20/taco-bell-traffic-sinks-after-lettuce-tied-to-parasite-outbreak?srnd=homepage-americas?utm_medium=referral&utm_source=podcast&utm_campaign=odd_lots&utm_content=article Chicken Back on Menu as Cyber-Hit Nichirei Restores Operations https://www.bloomberg.com/news/articles/2026-07-22/chicken-back-on-menu-as-cyber-hit-nichirei-restores-operations?utm_medium=referral&utm_source=podcast&utm_campaign=odd_lots&utm_content=article Only http://Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlots https://www.bloomberg.com/subscriptions/oddlots?in_source=oddlotspodcast Subscribe to the Odd Lots Newsletter http://bloomberg.com/subscriptions/oddlots Join the conversation: discord.gg/oddlots https://discord.gg/oddlots See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Joe Weisenthal?

  There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and research get you up to speed on what matters and what to watch next. About the time it takes to grab a coffee. So, search Barclays Brief wherever you get your podcasts.

• 0:24Speaker 01

  Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So, all the source materials, briefs and scattered information that you have to grind through to turn into something useful, can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at chatgpt.com by selecting Work Mode, available on Plus and Pro Plans.

• 1:06Speaker 02

  If you listen to financial news, you know a lot of time is spent thinking about what's next. The next opportunity, the next investment, the next move. But sometimes what matters most is being ready for what you never saw coming. For more than 75 years, Cincinnati Insurance has worked with independent agents to help protect businesses, homes, valuables, and more. Because planning for the future isn't only about knowing what's next, it's about making sure you're ready for what you can't predict. Let Cincinnati Insurance make your bad day better. Find an independent agent at C I N F I N dot com.

• 1:46Speaker 03

  Bloomberg Audio Studios, podcasts, radio, news.

• 2:02Tracy Alloway?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

• 2:06Joe Weisenthal?

  And I'm Joe Weisenthal.

• 2:07Tracy Alloway?

  Joe, I will fully admit, I think I have a romanticized view of fast food chains.

• 2:14Joe Weisenthal?

  Yeah, you're the only one.

• 2:15Tracy Alloway?

  Yeah, I know.

• 2:15Joe Weisenthal?

  No, I mean, literally.

• 2:16Tracy Alloway?

  I know. I blame.

• 2:18Joe Weisenthal?

  I like fast food chains. I don't have a romanticized view of them.

• 2:20Tracy Alloway?

  I blame Coming to America.

• 2:22Joe Weisenthal?

  Uh huh.

• 2:22Tracy Alloway?

  And the restaurant that was in there, and also my overseas upbringing that probably made American fast food seem a lot more exotic and interesting than it perhaps actually is. But I was thinking the other day about the franchise model. It is really weird. Once you start digging down to it, because it's like this in Coming to America is you have the small business owner. They want to be all entrepreneurial, so they get this franchise. But then everything is basically dictated to them about how to do the business by the actual corporate franchise owner.

• 2:56Joe Weisenthal?

  Wait, in Coming to America, he didn't open a McDonald's.

• 2:59Tracy Alloway?

  No.

• 2:59Joe Weisenthal?

  He opened a McDowell's.

• 3:01Tracy Alloway?

  It was, yeah.

• 3:01Joe Weisenthal?

  Right. But no, but there was the whole thing. There was like a legal fight against, you know, because they claimed that like he want, but he want, but he wanted to do it his own.

• 3:09Tracy Alloway?

  It's a good memory, Joe.

• 3:10Joe Weisenthal?

  I mean, he really just wanted to commit intellectual property theft. I mean, that's really what was going on. I suppose you could tell an optimistic version, he wanted to go his own way and do his own thing, but he was really just committing. I love, you know, I'm on his side.

• 3:22Tracy Alloway?

  It's a perfect summary of why people are interested in the franchise model, which is like, okay, you're ostensibly supposed to be your own business person, I guess, independent. But you get a leg up because you get that like built in customer base and the existing brand and all of that.

• 3:37Joe Weisenthal?

  But to your point, like the pitch in many franchise-esque relationships, it's like this is your chance to be an entrepreneur, et cetera. Except when you think about entrepreneurship, you don't think about like so many constraints, like here's the thing and here's the price and here's the thing, you know? And also, in a typical entrepreneurial environment, there is quite a bit of like, you know, people often go into entrepreneurship for like big like right tail outcomes, you know? So, for example.

• 4:06Tracy Alloway?

  The big payoff, right?

• 4:07Joe Weisenthal?

  Yeah. And so like, for example, I remember, you know, in the, I guess you still hear it, but in like the glory days of like Uber and stuff like that, or being like an Amazon van driver or something like that, they talk about start your own business. And on some level, it was like on paper, it's like there was legally a business. It's not going to be like a high scale, high margin business, the way many people hope for when they do quote entrepreneurship, unquote. The sort of like parameters of the outcome, it's like, okay, maybe they've taken off some of like the really bad outcomes.

• 4:38Tracy Alloway?

  Yeah.

• 4:38Joe Weisenthal?

  But it's not the sort of like really good right tail outcomes that many people associate with like the aspirations of the entrepreneur.

• 4:46Tracy Alloway?

  Well, this is the other thing I'm interested in because certainly in, in the eighties and nineties, you would hear stories about people who became relatively wealthy by running like franchise empires. So, I'm curious if that still exists. But the other thing that's really interesting to me is like, okay, you're an independent owner of a franchise. What levers do you actually have to pull to improve the business?

• 5:07Joe Weisenthal?

  I know. I always think like, sometimes you see those stories, again, not to keep picking on McDonald's, which we both love. But like you'll see these stories from time to time about like a bad product rollout, right? They introduce a new sandwich and nobody likes it or something like that. And I always think, man, that would be so annoying to be a franchisee.

• 5:25Tracy Alloway?

  Yeah, you have to surface.

• 5:26Joe Weisenthal?

  The whims of some, like, how much do they have to carry the sandwich? Can they change the price? Like, you know, you're really putting a lot of faith and money on people who like make big decisions that are, or you're like, let's say you run a bad ad, right? Let's say you run an ad that McDonald's corporate runs an ad that tarnishes the whole brand, which could theoretically happen. And it's like, you've just like totally outsourced some of your future outcomes.

• 5:51Tracy Alloway?

  A CEO seems reluctant to eat their own meal product.

• 5:54Joe Weisenthal?

  Oh, yeah.

• 5:54Tracy Alloway?

  Remember that? Okay. Well, we should talk about, I guess, the franchise model and the franchise economy, because it is really interesting.

• 6:01Joe Weisenthal?

  Yeah, we've never done a franchise episode.

• 6:03Tracy Alloway?

  So, I am happy to say we have the perfect guest. We're going to be speaking with Brian Colachi. He is the Chief Economist at the Open Markets Institute and author of the book Chains of Command: The Rise and Cruel Reign of the Franchise Economy. So, Brian, thank you so much for coming on Odd Lots.

• 6:20Speaker 05

  Yeah, thanks for having me.

• 6:21Tracy Alloway?

  Can you maybe just give us an overview, like the actual legal and corporate structure of a franchise? What does it look like and how does it differ from, I guess, either like?

• 6:33Joe Weisenthal?

  McDowell's.

• 6:33Tracy Alloway?

  McDowell's. Yeah, there we go.

• 6:35Speaker 05

  Yeah. So, the legally, it's a very simple structure. It's really an artifact of trademark law. So, you know, you've got a brand owner, a McDonald's, let's say, and they license, you know, ostensibly, we can get into how independent they really are, but an independent business owner to run a McDonald's restaurant and use a McDonald's trademark. And in exchange, the franchisee, both the one, the operator called the franchisee, kicks a percentage of their sales and royalties, usually between six or, you know, 20%. And so McDonald's takes that revenue stream and in return also the franchisee, this is the key sticking point, agrees to follow all of their instructions. And it is quite minute. I mean, everything from the, you know, in many cases, even the prices, hours of operation, product mix,

• 7:18Speaker 05

  and even things like, you know, how long does your employee have, you know, to serve as a customer in the drive through? What words do they use to greet the customer? There's very little left to discretion of the franchisee. They're basically a middle manager for a large corporation, but with a little bit more risk and a little more skin in the game because of that, the way that the structure of it works.

• 7:34Joe Weisenthal?

  They even like constrain the equipment you can use to repair ice cream machines, right?

• 7:38Speaker 05

  That is a famous example of, yeah, franchisees, as I'm an avid consumer of fast food. I love it. As a consumer, I love it. But yeah, that's, that's a joke among us McDonald's fans is their ice cream machines are always broken.

• 7:51Joe Weisenthal?

  Do you remember we did that episode a couple of years ago? And the guy who we're talking to was bullish on that company that makes the ice cream gear. But he was very straightforward, which I respected. It was like, they have the monopoly, their equipment breaks a lot and only they can repair it. And so that's a lot of, I mean, that's how investors should be thinking.

• 8:10Tracy Alloway?

  A popular business model, especially in the tech world where we see companies create problems that only they can solve. Anyway, okay. So, you mentioned skin in the game there. Give us the sort of origin story of the franchise model, because my understanding is part of this was about incentives, right? So, you, you tell people, oh, you're not just going to be like a person working for us. You're actually going to have ownership in this particular restaurant and the revenue that it's throwing off. You want to incentivize people to, I guess, work harder for you.

• 8:44Speaker 05

  Yeah, so it solves, you know, what we economists call the principal Asian problem, where you have the local manager more incentivized to exert effort to put in work than a salaried employee would be because their life savings depend on it. They invested their family's money in that restaurant or whatever kind of business it is. But the other reason why franchising was so appealing to these franchisors is that the fact that they were a separate business, they were not employees of the chain, meant that they were covered by overtime or minimum wage, or if the McDonald's workers wanted to join a union or something like that, they weren't able to do so. They had no rights against McDonald's. All of their rights are only against this franchisee who really doesn't have the money. The money's all sort of coming to the top. So that acts as a legal barrier to exclude workers from

• 9:27Speaker 05

  those rents. And the other aspect, I would say, again, back to those incentives, is that, you know, what are these franchisees incentivized to do? As I was researching the book, I met someone, I'm from New England, so Dunkin' Donuts is our big chain, and someone who had worked at a Dunkin' Donuts said, yeah, my franchisee was obsessed with bananas. Why bananas? And so, well, because all the other ingredients were controlled by Dunkin' Donuts, but bananas, you could send us around to look at the Stop and Shop for the cheapest banana. So there was that aspect of it. So they're highly incentivized because nothing else is under their control. Pretty much what they do outside of bananas is they extract effort and push down wages for their franchised employees. So it's a high-stress, a high,

• 10:09Speaker 05

  if you've ever been to one, you know, very high-motivated workforce. The phrase that workers at these restaurants use is their managers always tell them, if you can lean, you can clean. You always got to be doing something.

• 10:19Joe Weisenthal?

  Yeah. All right. So that explains the sort of corporate logic. What is like the history of it? Who are the real innovators? We've just mentioned Dunkin' and McDonald's, but who were like the early players? What did they realize? What were the conditions, et cetera? Tell us about that period.

• 10:34Speaker 05

  Yeah. So the initial legal structure comes out of, you know, auto dealers, like these manufacturing companies in the 19th and early 20th century. But the fast food and modern franchising as we know it, where you have that, you're licensing like an entire business package to a small entrepreneur, that really dates to the post-war period, 1950s, 1960s. And the innovators who invented this business model, they are fascinating. It was a joy to research the book. Very colorful people. Colonel Sanders was a real guy. Ray Kroc does a movie about him. It's fantastic.

• 11:03Joe Weisenthal?

  His autobiography is very good.

• 11:04Speaker 05

  Yeah, that's also excellent. Yeah. A lot of quotes from there in my book, because yeah, he's such a verbose guy. But I'm an economist, and so I just started looking, I just wanted to know a little bit of the background so I could run my regressions. But as I got deep into the history, like I decided I really wanted to write a book about how it was founded. It's very fascinating because, you know, these guys had a great idea, but they also, they said this openly, there was no secret to on earth. They said pretty clearly, what we're doing isn't really legal. We need to change the laws to make it legal. Let's form an association, a trade association, International Franchise Association, to make this business model legal. And the body of law that actually they went up against, it's kind of hard to believe now, but it was antitrust. Antitrust law protected these small business owners from that kind of control.

• 11:48Joe Weisenthal?

  So would the issue be that under a prior regime, a McDonald's or a franchisor would be the monopoly seller of McDonald's IP and so forth to all their, like, how did this run up against franchise or antitrust law?

• 12:06Speaker 05

  Yeah. So a lot of the case law actually comes from the petroleum industry, petroleum refiners, who had branded stations, like a Shell station or a Chevron. And they came up with a way to get around chain store taxes and also antitrust to control the independent dealers, make sure they're only selling Shell Oil, and also only selling approved brands of batteries and tires and other accessories. But they also did this to avoid, when the Fair Labor Standards was passed in 1938. And Ray Kroc and Colonel Sanders and all these founders of the franchise, oh, we should do that in service industries, not just product distribution. But the antitrust body of law was, it's sort of like 19th century anti-monopoly idea of, you know, there's like meaning to being like owning a business, owning your own farm. Or, you know, employment is like, you can't have a democratic society where

• 12:51Speaker 05

  people are taking commands from someone else. So the antitrust courts through the mid-1970s are still enforcing that. Not in every case, but for example, if McDonald's wanted to set the price of a Big Mac, that was against the law. If they wanted to tell franchisees what territories they could operate, that was against the law. And so, for example, there's a great moment that I've now talked about so many times, that I've basically memorized a quote, is there's a series of hearings in front of the Senate Antitrust Committee. There's a bunch of them in 1963, and then a more robust set in 1965, where you have the Chair of the Senate Anti-Monopoly Committee, a guy named Jerry S. Cohen. He's interviewing or questioning the President of the International Franchise Association, a guy named Monty Pendleton. And he can't really believe his ears that franchisors are trying to get away

• 13:36Speaker 05

  with this. You know, he tells him, wait a minute, the argument that you're giving us for why we should allow this business model under antitrust is that, you know, it creates all these opportunities for independent business owners. It allows an independent man, and so it's a very gendered thing here, but an independent man to be independent. But if he's told what products he has to sell, what price he has to charge, what operation he has to operate in, well, he's not really independent, is he? He's part of an integrated franchisor's operation. And franchisors themselves say repeatedly throughout this period, we're trying to get vertical integration by other means. We don't want to own the assets. We don't want to employ the workers. Those are risks. We'd rather do without. We want the benefits of that control, but we really don't want to be held liable for it.

• 14:15Tracy Alloway?

  So somehow the franchisors are able to successfully argue that they should be, I guess, treated like single entities when it comes to antitrust law. But at the same time, they should be exempt from, I guess, the obligations and liabilities that would normally come with that.

• 14:32Speaker 05

  Yeah, absolutely. So there's another, a few years before the hearing I just mentioned, the Teamsters Union was trying to organize gas station attendance. And they sent their guy to testify, and he complained about this. He called it double-barrel immunity. So when you're going to antitrust courts, you tell them that you are a single entity. You're all just one company. So it's logically impossible for you to violate the antitrust laws, because that requires a conspiracy. You know, two people have to agree. But at the same time, when we try to organize your workers, you say, no, the labor laws don't apply. They're a totally separate company. They have nothing to do with us. And that was the 60s. The same thing happened in franchising, is happening in franchising. You know, people remember the Fight for Fifteen whole thing a few years ago. But they've been able to win this. So

• 15:15Speaker 05

  far, they can just sort of have those two worlds stay separate. And it's interesting that they've been able to do that for so long.

• 15:36Joe Weisenthal?

  There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and Research get you up to speed on what matters and what to watch next. About the time it takes to grab a coffee. So search Barclays Brief wherever you get your podcasts.

• 16:00Speaker 01

  Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at chatgpt.com by selecting Work Mode, available on Plus and Pro Plans.

• 16:43Speaker 06

  The world of business is constantly evolving. Every day, new challenges, new opportunities, new ways of working. Comcast Business keeps you totally in step with secure AI-backed networking built to power the way modern business gets things done today in more than 100 countries around the world. That's some serious muscle. And get this, Comcast Business powers over 90% of the Fortune 500 and millions of small businesses. Behind it all, network engineers, cybersecurity specialists, support teams, thousands of experts answering your call at 2:00 a.m. like it's 2:00 p.m. Always on, always ready.

• 17:23Speaker 06

  That's a lot of coffee. One partner powering how business gets done for companies of every size, all around the globe. When you add it all up, no one does business like Comcast Business.

• 17:36Joe Weisenthal?

  So, okay, I see it in one version of it. The parent company or the franchisor has taken a lot of risk off the table. They don't have to make as many capital investments. They don't have to worry about their employees going on strike. On the other hand, any franchisee enters into this voluntarily, right? Like, no one has to, like, open a McDonald's until they're, like, can see the risk rewards. The McDonald's will ensure, I believe, or the franchisor will ensure that, say, like, another one isn't going to open up on the same block, which is a risk if an independent business, right? I open up, like, my own independent pizza shop. Someone opens one in the next door, suddenly, like, they undercut me, et cetera.

• 18:19Joe Weisenthal?

  So it's like, I don't have, like, the risk of, like, another McDonald's undercutting me.

• 18:24Tracy Alloway?

  You could still have a McDowell's.

• 18:25Joe Weisenthal?

  You could have a McDowell's. But, you know, like, since we're talking about brands, like, there is McDonald's brand affinity in a way that many independent burger shops have, like, you know, either have yet to or never have achieved. So, like, at least some of these sort of, like, classical business risks are taken off the table for the franchisee. And also, it's my understanding, like, generally McDonald's franchisees have done very well and they're consistently quite profitable.

• 18:51Speaker 05

  Mm-hmm.

• 18:51Joe Weisenthal?

  Is this all, is this an all fair characterization?

• 18:54Speaker 05

  Yeah, well, a lot of that is fair, yeah. Particularly if you got in with McDonald's, like, at the beginning. If you're on the ground floor with these, I think it's fair to say, yeah, Ray Kroc, he allowed his franchisees to get rich before he did. You know, that's a brag that the company does, it's kind of true. So there definitely was that, there was that dynamic. On the other hand, there are some chains that don't give that protection, for example.

• 19:13Joe Weisenthal?

  Okay.

• 19:13Speaker 05

  Subway is an example of one, where they will open one up, up across the street from you. Or if there was some litigation in the past with, let's say, Church's Chicken merges with Popeyes, well, you know, the contract might protect the Church's, but they could put a Popeyes across the street from you. So there, there is still some of that risk. But, you know, if you have any, you know, like, more, you know, Marxist inclined listeners, you know, there's this, you know, everyone.

• 19:33Joe Weisenthal?

  There's a few.

• 19:34Speaker 05

  Who's a worker? You know, it's someone who doesn't have access to the means of production, so they have to, you know, sell their labor, you know, to a capitalist. But, you know, franchising has this whole other layer of, these are people who can afford to open a restaurant, they have some capital.

• 19:45Joe Weisenthal?

  Yeah.

• 19:45Speaker 05

  They supply capital as well as labor, they're investors, but they don't have the means of marketing at the scale that, they don't have a brand. And so another thing you see in the whole history of franchising is franchisees saying, yeah, you know, I kind of wanted to be an entrepreneur, or I used to own, like, my own donut shop, but, you know, once Dunkin' Donuts, or at that time, there was another chain called Mr. Donut, you know, came to town, I really couldn't compete, I had to sell out, you know, and join their chain. And that brand is very powerful. So there's, this is even in the film, you know, Ray Kroc famously, you know, he stole all the, or they agreed to sell their whole business, basically, the McDonald brothers, the guys who created McDonald's, to him. And he, but after he controlled the McDonald's name and the trademark, they thought that could keep operating, you know, and doing, and he just opened a McDonald's right across the street from their original place and, and put them out of business.

• 20:30Speaker 05

  And so that's something that you see, that, that brand is very powerful, but it also gives the franchisor power for the franchisee to do what they say.

• 20:36Joe Weisenthal?

  You know, I'm not surprised that McDonald's did this. Probably the only fact that really sticks out at me from Ray Kroc's autobiography, where he's, like, talking about his personal life, and he was, like, in love with some woman, and in, like, one sentence is, like, oh, she was married at the time and I took her away from her husband, or it's, like, one paragraph. So I was like, oh, he's very forthright about that. So I can't say I'm surprised that he opened up a McDonald's across the street from a...

• 21:02Tracy Alloway?

  A normal aside, but actually...

• 21:03Joe Weisenthal?

  A goal pursuing individual.

• 21:05Speaker 05

  Yes.

• 21:05Tracy Alloway?

  Related to this, one thing I was very surprised to learn from your book is that there are no poaching agreements between McDonald's. So if I'm a worker at a particular McDonald's franchise and I want to go work for another one, I have to get the permission of my current franchise owner in order to do that.

• 21:24Speaker 05

  Mm-hmm. Yeah, and they may have since dropped those, but they, they had them and a lot of chains did for a very long time. And that sort of gets at this, this weird niche that they've been able to occupy in antitrust and labor law. So this is the, I think I would characterize it, I think fairly, as the absurdity of antitrust law, where there is this, what, you know, it's called the vertical horizontal distinction. And what that means is that, you know, for two McDonald's, you know, across town, to pick up the phone and say, hey, don't hire any of my workers, I won't hire any of yours, that's a horizontal agreement. That is so, so illegal, you're going to face, you might go to jail for doing that. But if McDonald's from above tells them unilaterally, don't hire each other's workers, it's not per se illegal, it gets put under what's called the rule of reason, which just means that now you have, it keeps people in my profession employed, but you have competing

• 22:09Speaker 05

  econometric reports, you know, it's, it's very difficult for a plaintiff, for a worker to challenge these kinds of, I know, poach agreements, though they have tried, because, yeah, it's very difficult to, to win, because that, once it's vertical, now McDonald's can enter evidence that says, yeah, we know, maybe, you know, it, it has a bad effect on our wages, but, you know, it helps us sell more hamburgers, because, again, we're a single entity.

• 22:29Tracy Alloway?

  Yeah.

• 22:30Speaker 05

  You know, we should have, this just makes it more efficient. And in that sense, low wages can be more efficient.

• 22:34Joe Weisenthal?

  I think I'm just going to accept that, we're just going to use McDonald's as, like, a standard for franchising. Let's say we're talking about McDonald's, some do very well, some maybe less so. Is there anything that the franchisee actually has discretion on that could either improve or lessen their odds of success?

• 22:53Tracy Alloway?

  Other than bananas at Dunkin' Donuts.

• 22:55Speaker 05

  How hard they work. And I think the key to that is looking at, what are they then incentivized to exert that effort towards? And it is, because the one thing that McDonald's doesn't directly touch is, besides bananas, is their labor cost. So how big is your crew? Actually, the staffing requirements are even required. So how hard are they working? How low are their wages? And making sure everyone's, you know...

• 23:13Joe Weisenthal?

  The owner doesn't have any discretion about the staffing levels?

• 23:17Speaker 05

  No, staffing levels are mandated in the operations manual, which is incorporated into the contract and can be unilaterally changed by, at any time, by McDonald's. So it's, it's a very one-sided contract. You know, to be fair, the pro argument for that is that, you know, again, willing, consenting buyers and sellers, and it incentivizes those franchisees to follow the system and to work as hard as they possibly can.

• 23:38Tracy Alloway?

  Sorry, just to make this very clear, the major lever that franchisees have to be a better business, to produce more money, is to basically squeeze wage costs.

• 23:48Speaker 05

  Yeah.

• 23:49Tracy Alloway?

  Wow.

• 23:50Speaker 05

  And, and you can see, you know, in the, and this is something, again, franchises are very open about, I think there's a quote in the book that's from another book called Franchise Dreams, but, you know, a franchisor just, look, an entrepreneur makes the worst franchisee. You don't want someone who's an independent thinker, who has their own business ideas. Similarly, you know, Ray Kroc said, you know, it doesn't take any particular aptitude or intellect to make it one of our restaurants, you know, it just takes grit and, and hard work. He wanted workers. As a matter of fact, he sought out people who really needed this. You know, his first investors in McDonald's were his friends from, like, the country club. Oh, yeah, it's a nice investment opportunity, you know, yeah, I'll put in some money and sure, I'll, I'll manage the restaurant in my spare time. Didn't work out, they didn't put in the work. And so he found people who were a little, a little more scrappy, you know, yeah, immigrants,

• 24:35Speaker 05

  you know, yeah.

• 24:36Joe Weisenthal?

  There are constraints, or are there not? Like, let's say I wanted to open a McDonald's, but I didn't want to work hard, I just wanted an investment. Am I allowed to, like, front someone else's capital to do that? How does that work? I don't know, you never hear very much about, like, say, I don't know, PE or finance, like, backing, like, a thousand new franchisees. Is that allowed?

• 24:57Speaker 05

  Uh, yes, a lot of the franchise contracts, I, my other work outside the book, a lot of this work joint with Marshall Steinbaum and Sergio Pinto, we actually coded, we read hundreds of franchise contracts. Those guys have since, like, digitized and, you know, they have thousands of contracts. And one key contract clause in across most chains is a personal obligation to work. So you are not allowed to be a passive investor. And you also have, you also, there's no corporate shield. If you mess up, they, they can come for your house and your car and your savings and all that stuff. That said, there has, you know, I wouldn't, I wouldn't want to hide this, there, there has been a move in recent years to more of a different kind of franchise operator. Some of them are incorporated now, some of them own multiple, even hundreds of locations, some of them even own locations across multiple chains.

• 25:41Speaker 05

  And since then, also, there's been a migration, private equity used to only own the franchise brands.

• 25:46Joe Weisenthal?

  Yeah.

• 25:46Speaker 05

  And that's a great business. Like Burger King famously has flipped, you know, from private equity owners, all you got to do is get those royalties, someone else already built the brand, you know, just all it is is cash. But since then, there's been private equity franchise operators. So it's a very different dynamic. It's no longer, obviously, a private equity firm is a legal entity, not a person. They can, they can't exert effort. They can hire people that, that do that. But there is a new breed of, of franchisee that, in some chains, that's a little bit different than the old model.

• 26:13Tracy Alloway?

  Hmm. Again, I hate to bring up AI in every single conversation that we do nowadays, but I think it's kind of unavoidable. We have all this new technology, and Joe and I have done plenty of trucking episodes where we talk about, you know, tech that monitors whether people's eyes are open and things like that. Does that new technology play a role in, I guess, exerting more control over some of these franchises?

• 26:38Speaker 05

  It absolutely does, and it started in the 1990s with broadband internet and is accelerating now with AI for sure. So think about the 1960s, right? You want to have this legal structure where this independent operator is operating the restaurant. They kick me back a royalty. I try to control everything they do, but how can you really control it? You can, there's fax machines, there's telephones, you can send secret shoppers, but there's only so much you can really do. By the 1990s, particularly with broadband internet connected to the cash registers through, you know, point of sale systems, there's a steady data stream now going back to headquarters where they have an intense amount of control. And I think one of the interesting things about that technological changes, first of all, in terms of, you know, the motivation for these kinds of outsourced industrial structures, it's usually technology is the story, but they started doing this way before the technology.

• 27:23Speaker 05

  But now that technology exists, it allows, I'm just thinking about like a truly vertically integrated corporation like US Steel or General Motors in 1950. The control they have over all of their plants is less than McDonald's that they own and they employ, you know, those hundreds of thousands of industrial workers. McDonald's now hardly employs anybody, but they have way more control because they're able to get that stream of data. And now the AI has made that surveillance of workers themselves. And by the way, you don't have to fire them if they're too slow at the register. You just send a note to the franchisee, hey, so and so, they even know the names of the employees, you know, is a little too slow, do something about that, you know?

• 27:59Joe Weisenthal?

  So wait, can you say, just talking more about like, I guess this is theory of the firm type stuff, explain this notion that like a US Steel, it's not intuitive to most people, is like, would be a more distributed type of entity than McDonald's. Why is that? What are you talking, when you say that, what do you mean?

• 28:18Speaker 05

  Yeah, so I think, you know, so the theory of the firm, I think, you know, no matter your political proclivities, I, you know, like for, you know, Marx called it the firm, the hidden boat of production. What happens there is that there's an entity that owns assets and there's someone who works and you put them together and it happens inside a firm. Coats, you know, the great Chicago conservative economist had a similar notion where what the nature of the firm is, is command. You know, a workman doesn't go from department Y to department X because of a change in relative prices, but because his order to do so. So that was sort of the reason why, that's the classical economic reason why firms exist. And then there's, you know, of course, you know, Chandler with his, you know, visible hand book, which is, you know, the foundation for most business history of this is why do we have these big corporations?

• 28:59Speaker 05

  And his answer was the economics of high throughput and the efficiencies of, you know, if you want to make steel, you can't really rely on the uncertainties of those, of those prices. You kind of want to have everything under control and have managers, you know, sort of running it. What they're trying to do with franchising is get sort of that same type of control, but without having the legal risks and liabilities. And I would say just one more thing is that the legal door that franchisors opened in the 1960s and 1970s has since been, you know, it started as a little loophole. Now it's just a huge, you know, bay door that, you know, an Uber or Amazon can walk through. So, you know, Amazon's fascinated because they are very much like a US Steel in that they found a need to totally reorganize distribution in the United States. They didn't want to rely on USPS, they didn't rely on UPS or FedEx.

• 29:45Speaker 05

  They brought it all back in-house in economic terms and the fact that they controlled it, but they did not bring it in-house in terms of legal liabilities because those trucks, you know, driving around your neighborhood are independent contractors and they are able to control them because of this litigation and legislation battles that, that franchisors fought in the 60s and 70s to legalize those kinds of controls.

• 30:05Tracy Alloway?

  What exactly is, I guess, the concrete lineage between the franchise model and the gig economy and the independent contractors?

• 30:12Speaker 05

  Yeah, so franchisors in the 1960s and 1970s, you know, don't like the antitrust jurisprudence that says you can't control independent businesses through, I don't know if I've used this term yet, but vertical restraints is like the term of art in antitrust for that. So they go about filing cases to, you know, a very concerted, very smart strategic effort to change the law. They ended up having a huge, very important ally in the University of Chicago Economics Department and Law School who are, have the same ideas that, you know, we shouldn't be judging, you know, what is this, you know, horrid old idea of the independent entrepreneur? Like efficiency, that's all we care about. So they won those battles in the courts. And then after that, they also were able to head off any, any, you know, after they win those, get in this control, you start seeing the Department of Labor, the National

• 30:55Speaker 05

  Labor Relations Board and litigants say, well, wait a minute, all that control, you probably should be responsible, you know, for the underpayment of wages. Or let's say, you know, for example, Domino's, you've got this 30 minute delivery rule, your, your driver's speeding to make that delivery, he hits somebody, that's kind of your fault, you know, that's not the franchisee's fault or even the drivers. So they win all these, so they are able to say, well, no, that doesn't really apply to us, you know, we, they're still, so they're able to have their cake and eat it too. And so that's just that, there's not only there's any explicit coordination, but once you start getting companies that try to do this with, you know, rather than explicit contractual vertical restraints, it's algorithmic, you know, here's the route you're going to drive, here's the price you're going to charge. They're able to do it that way. And that would not have been, or that would have raised some judicial eyebrows if they had tried to do Uber in the 1960s.

• 31:40Speaker 05

  So, you know, obviously the technology is highly important, but there's the other story I think is important too, is that the fact that these things are legally permissible is, is the result of this, of franchisors efforts.

• 32:06Speaker 01

  Some people treat ChatGPT like some kind of smart search engine and some use it to get work done. ChatGPT work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at chatgpt.com by selecting work mode, available on plus and pro plans.

• 32:48Speaker 06

  The world of business is constantly evolving. Every day, new challenges, new opportunities, new ways of working. Comcast Business keeps you totally in step with secure AI-backed networking built to power the way modern business gets things done today in more than 100 countries around the world. That's some serious muscle. And get this, Comcast Business powers over 90% of the Fortune 500 and millions of small businesses. Behind it all, network engineers, cybersecurity specialists, support teams, thousands of experts answering your call at 2:00 AM like it's 2:00 PM. Always on, always ready. That's a lot of coffee.

• 33:30Speaker 06

  One partner powering how business gets done for companies of every size all around the globe. When you add it all up, no one does business like Comcast Business.

• 33:41Speaker 07

  This is Robert Smith from Business History. If you're listening to this, there's a good chance you're a small business owner. And like every small business owner, you started with a dream to do what you love and watch it grow. What you probably didn't dream about, keeping up with cyber threats. That's where Mastercard can help with access to tools that help identify cyber threats to better protect your business. Building your dream business, priceless. For cybersecurity in a changing world, there's Mastercard.

• 34:07Speaker 07

  Learn more at mastercard.com/smallbusiness.

• 34:12Joe Weisenthal?

  Amazon, Uber, do they still use that, like, be your own boss and start your own business rhetoric when they're trying to look for new drivers or little local carriers?

• 34:21Speaker 05

  Yeah, they do, but with the Amazon models even closer to franchising Uber because, you know, Uber and Lyft, it's each driver is, you know, treated as sort of like an independent entrepreneur, you know, they own their own business.

• 34:30Joe Weisenthal?

  Yeah, yeah.

• 34:31Speaker 05

  Where, yeah, be your own boss. And that's why it's a powerful thing, you know, I want to be my own boss. I mean, no, no, it is, I guess, an American, like a very, that's how you, you know, get your nest egg and take care of yourself and your family. But the Amazon, it's called their delivery service partner or DSP model, is much closer to a franchise in that every driver is not an independent entrepreneur. It's the contractor company.

• 34:51Joe Weisenthal?

  Right, so they might have like 30 or whatever, some, yeah, 30 trucks or whatever.

• 34:55Speaker 05

  Yeah, so it's a small, it's a relatively small business, you know, Amazon, I think, even front some of the capital, but it's a legally distinct entity, even though it's painted with the Amazon logo, you know, and tightly controlled.

• 35:04Tracy Alloway?

  Since you're an economist and you mentioned regressions before, do you have any empirical research about the relationship between the growth of the franchise model?

• 35:14Tracy Alloway?

  And wages in the US because again, like if we're talking about the primary lever that an independent franchise owner can actually pull to improve the business, it's all wages.

• 35:24Speaker 05

  Yeah, so I don't have that time series of the growth of franchising and the growth of wages, but there are, you know, my work and other work, we do know a couple of things about franchising. One is that if you're a wage worker now, there's work from Kruger back in the 1990s. There's David Weil, who's, I shouldn't have mentioned him before, he's like the economist on this stuff. He wrote a book called The Fisher Workplace, where we do know that even within the same chain, you want to be at the company-owned one, not at the franchised one, because your wages will be higher, you'll have a higher tenure wage profile, meaning you're going to get promoted and your wage is going to go up more over time. And also franchised establishments violate their workers' safety and other rights at a much higher rate than ones that are company-owned. So we do know that stuff.

• 36:06Speaker 05

  And then we have my work, we have one, we were able to take advantage of a really nice natural experiment where Washington State entered a consent decree with McDonald's and a bunch of other chains to get rid of those no poach agreements I mentioned earlier. And we found, I mean, maybe not surprising, but there's a causal effect. Once they got rid of those no poach agreements, wages went up. And then, you know, again, because it's very hard, you don't want to be careful as an economist, you know, it's hard to get those natural experiments. So we don't have that for like specific contract terms. But in work again with Marshall Steinbaum and Sergio, we found, you know, correlations with with lower wages. And then they have a new paper where they look at franchise contracts over time and find that they have gotten more restrictive, even over the past 20 years.

• 36:46Tracy Alloway?

  Wait, how do they actually measure that? Now I'm really interested because if we're talking about, well, I guess I'm interested in how the actual like franchisor communicates a lot of the restrictions to the actual business. Like, how do they do that? And then how do you tally that up in an empirical way?

• 37:02Speaker 05

  Yeah, so studying franchising, I was very fortunate because these contracts are sort of public records. So there's, there's a requirement from a 1979 Federal Trade Commission rule that requires franchisors to furnish to a franchisee a, what's called a franchise disclosure document, which in sort of plain English lays out key contract terms, what the royalty is going to be. And basically, it's meant to, you know, inform the franchisee, the idea being franchisees are getting swindled into, you know, entering these incredibly one-sided contracts. They should know what they're getting into. Let's make a law to disclose that. So that there's this franchise disclosure document. And then usually, the franchisor will file a, as an attachment, the entire franchise contract. So we have the contracts and they're not filed with the FTC, but some states require them to be filed.

• 37:46Speaker 05

  So you just go to Wisconsin or California, anyone who wants to do a study on this, you can get the contracts. Back in, when I was doing this 10 years ago, I had to read the contracts and hand code them. It took me like 18 months, but you know, I got through 530 contracts, hundreds of contract terms. So we got a pretty good, but it's only a cross-section. But what my colleagues have been able to do since then is, I mean, just, you know, text recognition software and your text scraping abilities and, you know, AI. In an afternoon, you know, you could program a computer to just scrape thousands of these contracts and you can get them over time, which I wasn't able to do. But yes, these are, these are public records. So anyone could do this.

• 38:22Joe Weisenthal?

  You mentioned treatment of workers and wages at franchise locate McDonald's franchise locations versus the McDonald's owned and operated locations. What about franchise locations versus just pure independent restaurants? Because it seems like one of these things that people don't want to talk about that much, that when we talk about like wages, when we talk about wage theft and some of these other things, we all like to glorify small businesses, but there's a lot of, like, these pathologies seem to be fairly prevalent or more prevalent, I think, at small businesses than say like large corporations. Is that, is that accurate?

• 39:04Speaker 05

  You know, I haven't looked at that comparison between independent restaurants and between fast food restaurants.

• 39:09Joe Weisenthal?

  Yeah, not, yeah.

• 39:10Speaker 05

  But yeah, but I think that's, that's a fair case. And I think what franchisers are trying to do is capture that small business labor model and then graft it to a large corporation, but make sure that all the rents go up, you know, to the shareholders and the, and the top corporation rather, and not, not be shared with the workers. Where if you're at a Starbucks or a Chipotle, which is totally corporate-owned, not saying they have great working conditions, but some of those rents do appear to be shared because wages are higher at Chipotle than Taco Bell and they're higher at Starbucks than at Dunkin' Donuts. And also Starbucks workers even, they don't have a contract yet, but they were able to at least, you know, vote for a union in a way that has never happened in fast food.

• 39:46Joe Weisenthal?

  Can you explain the logic either like why companies aren't all franchisees? So first of all, like, why would a Chipotle, why did they not go down the franchise route? But why does McDonald's actually have a pretty significant number of owned and operated restaurants?

• 40:01Speaker 05

  Yeah, you know, so I think there's, there could be a few reasons for that. You know, one is owning the assets and employing the managers is, there is a little bit more control that you get there than if, than, than if it's franchised. And particularly if you're not, if you don't have the McDonald's model. Or McDonald's, and Ray Kroc talks about this in his book, he really has a hammer over those franchisees in that if they lose that trademark, he can evict them from their own, you know, business because McDonald's owns the land. But if you're, you're starting a chain now, you probably don't have the money to actually own all that real estate. So there is, there, yeah, there are those, those elements of it. But yeah, I think there's, and there's also there, the, you know, the Chipotles or the Starbucks are a little bit more high-end, you know, like, like a few cents more, it's not quite the same quality ingredients.

• 40:44Speaker 05

  It's just a little, little bit of a different model than the, you know, churn out, high throughput, as low wages as possible model of a franchised fast food restaurant.

• 40:52Tracy Alloway?

  You mentioned unions just then, and one of the interesting things in your book, I think it's maybe in the preface or something like that, but you talk about like the legal structure of a franchise, even if you wanted to unionize or negotiate with the franchisor, it's not entirely legally clear that you can do that because of the corporate structure. Is that right?

• 41:15Speaker 05

  Yeah, that's absolutely correct. So yeah, so the, and this is something again, that the franchisers were, they were clear, this is what they wanted to achieve with their business model. I mean, they, they didn't want to deal with unions. Up until, you know, the 20 teens and the 515, no one really thought that there was a way for workers who wanted to form a union to negotiate with McDonald's. By the way, McDonald's could willingly do this at any point, but you know, they, they choose not to. There's something called the Taft-Hartley Act, which is an anti-labor law from 1947 that makes it illegal for workers, you can't go on strike, you can't picket, you can't target McDonald's Corporation, you can only target your immediate employer. So that creates enormous incentives, you know, franchising not coincidentally takes off after the Taft-Hartley Act. But there had, you know, during the Obama administration, they enacted something called a joint employer rule, which did make it possible for, or made it easier for workers

• 42:00Speaker 05

  to say, you know, I really can't, you know, I do look at the realities of the situation, the economic realities, if I'm to get a raise or I'm going to get better working conditions, we need to bargain with McDonald's because they control the staffing levels, they control the supplies, they control how, what hours we operate and all that stuff. So that have, under Obama, of course, it was overturned during Trump, it flipped back during Biden, now it's flipped back. So it's just, no one really knows what their rights are. It's not, yeah, it's a whole other issue that we could get into. But yeah, so there has, have been attempts to sort of fix that problem, but we have not fixed it yet.

• 42:31Joe Weisenthal?

  From a sort of like broader public policy standpoint, I mean, my doorbell rings a lot or too much because it's a random like grocery deliveries and stuff like that. But like clearly, the Amazon distribution logistics system that they built out, it's clearly more like rapid than the US Postal Service, more flexible, I think, than UPS. How should we think about the sort of like, the public benefit of this model that like has made it, you can order all kinds of stuff and frequently have it delivered in an hour, which seems pretty nice.

• 43:06Tracy Alloway?

  Plus, we do have McDonald's, which.

• 43:08Joe Weisenthal?

  Which is also great, which we also love, yeah.

• 43:11Speaker 05

  Yeah, so first of all, there are benefits to the Amazon distribution model, and I think, yeah, we should acknowledge those for what they are. There are also costs and, you know, we should, we should make sure those are counted too. You know, whether it's pollution in neighborhoods where those distribution centers are or delivery centers, I should call them. There's the, the cost to workers, you know, famously peeing in bottle stories.

• 43:29Joe Weisenthal?

  Can you just quickly say, you distinguish between distribution centers and delivery centers? So the distribution centers are owned, those are, those are owned by Amazon.

• 43:39Speaker 05

  Yeah, so Amazon.

• 43:40Joe Weisenthal?

  But then they go to a delivery center before they go to your house. They don't, okay.

• 43:44Speaker 05

  Right, and that's where the, yeah.

• 43:46Joe Weisenthal?

  And the delivery center is not owned by Amazon.

• 43:50Speaker 05

  The, the center is, but the trucking companies, they all, so they all go, so if you're, if you're a driver for these companies, you show up at an, at an Amazon facility, you put on an Amazon uniform, you drive an Amazon truck, but your employer is one of these contractors. So yeah, I think we should, first of all, you got it, we have to account for the cost on workers and other communities and all that kind of stuff. But also, I mean, my, my proposition for policy here is pretty simple, is that the problem is not that there's innovation, that there's control. That's what a firm is, that's what a corporation is, is, you know, markets shouldn't do everything. Sometimes having a little central planner, you know, a mini central planner, you know, coordinating activity is a great thing for, you know, getting more efficient and innovating. So we should have that. The problem is then you can't avoid the obligations and liabilities and risks that go with owning assets and employing workers.

• 44:35Speaker 05

  And we used to have, you know, our whole legal architecture for regulating and holding these companies accountable was based on that like archetype, you know, we pretty much only, our wave of regulation, you know, was like 1935, you know, to the mid 1960s. And we know what a company is. It's a, it has a smokestack, it employs a bunch of workers, it owns a factory. Like, that's what, that's what a company is. Now with all of these, you know, and partly due to franchises creating this loophole, it's no longer so clear what an employer is. And all I, all I'd propose we do is, well, hey, if you want to direct to control the work of these drivers, well, look, you're their employer. And if you're not paying them the, you know, the legal wages, or if they want to bargain with you for a union, or if, you know, because of you, because of your algorithm, they ran a red light and hit someone, that's, those are, all those things you caused, you should

• 45:20Speaker 05

  be held responsible for those.

• 45:21Tracy Alloway?

  All right, Brian Colacci, we're going to have to leave it there. Thank you so much for coming on All Pots.

• 45:26Speaker 05

  Thank you, I had a great time.

• 45:40Tracy Alloway?

  So Joe, that was a fascinating

• 45:42Joe Weisenthal?

  Yeah.

• 45:42Tracy Alloway?

  conversation. And I'm really glad we ended up doing a franchise model because Brian truly was the perfect guest. But it's so interesting to hear. I mean, it just kind of blows my mind, the have your cake and you get two aspect of all of this, right?

• 45:59Joe Weisenthal?

  No, totally. I mean, look, again, no one has to enter that, like, right? Like, to me, that's like, one of the main things. I did think it was interesting that it really is literally about the intellectual property. Like, that is literally what Coming to America is about, is about a guy who, you know, commits intellectual property theft by making something that looks like McDonald's. But that is the core thing.

• 46:22Tracy Alloway?

  That's it.

• 46:23Joe Weisenthal?

  You know, most people aren't going to be able to manufacture that, etc. So being able to plug into that. No, I thought it was like, really interesting, the history. I am not surprised at all. The Ray Kroc book is so good. He's so forthright. He's so unselfconscious about everything that he done, did in life. It's just like a very, like, weird and fun read for that purpose alone.

• 46:44Tracy Alloway?

  I'm gonna have to read it.

• 46:45Joe Weisenthal?

  Yeah.

• 46:45Tracy Alloway?

  But I kind of want to read the Colonel Sanders one first.

• 46:47Joe Weisenthal?

  It's so funny to hear Colonel Sanders, and it's like Ray Kroc and Colonel Sanders, like, wait, that's a, it still feels like that's just like a made up character.

• 46:54Tracy Alloway?

  Really?

• 46:54Joe Weisenthal?

  Yeah, to me, it does. I mean, I knew who was real, but it still feels like that's a, a real person.

• 46:59Tracy Alloway?

  Do you know about the whole KFC Christmas thing in Japan?

• 47:04Joe Weisenthal?

  I, oh, I've, yeah, they're really into it, but other than that?

• 47:07Tracy Alloway?

  Yeah, because I think it's because Colonel Sanders, like, kind of looked a little bit like Santa.

• 47:13Joe Weisenthal?

  Oh, interesting.

• 47:14Tracy Alloway?

  So a lot of the Japanese KFCs, at least when I was there, they used to have, like, big statues of Colonel Sanders out. And it was kind of like, you know.

• 47:23Joe Weisenthal?

  That's great.

• 47:24Tracy Alloway?

  Very American, very Western.

• 47:26Joe Weisenthal?

  That's a great avatar of American, you know, both cultural and business traditions of Colonel Sanders. I do think, like, you know, I always found it weird when the marketing for being an Uber driver, or like, starting a fan line, was like, either like, be your own boss, or like, start your own business. It's like, maybe like, the math, look, the left tail is reduced, and the right tail is reduced. So there's maybe, you know, and clearly people have done well entering franchise, but they do not look anything like what we typically think of as, like, quote, entrepreneurship, as business ownership. It's like, a very, it's clearly a very different thing.

• 48:03Tracy Alloway?

  No, that tension is also remarkable, the idea that, like, you're an entrepreneur, you're independent, but also the franchiser is going to dictate basically everything to you.

• 48:12Joe Weisenthal?

  I also just think, I like the-

• 48:14Tracy Alloway?

  Except wage cost.

• 48:15Joe Weisenthal?

  Except wage cost. I like that Brian brought up, like, you know, even the most, like, New Chicago schooled economists is like, no, it's really good, and there are a lot of efficiency gains, when you do a lot of activity under a centrally planned umbrella, such as a large corporation, and the sort of like, thing that hardly anyone talks about, which is like, how much of the economy is literally under central planning? We just don't call it central planning because it's corporate.

• 48:42Tracy Alloway?

  Yeah. I mean, yes, there are clearly some benefits to it.

• 48:46Joe Weisenthal?

  Yeah, yeah.

• 48:46Tracy Alloway?

  Both you and I, it's, I think you use Amazon Prime, do you?

• 48:50Joe Weisenthal?

  I do, yes.

• 48:50Tracy Alloway?

  Yeah, so do I. And McDonald's, of course. Okay, shall we leave it there?

• 48:54Joe Weisenthal?

  Let's leave it there.

• 48:55Tracy Alloway?

  This has been another episode of the Odd Lots Podcast. I'm Tracy Alockway. You can follow me at Tracy Alockway.

• 49:00Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at TheStooler. Follow our guest, Brian Colachi. He's at Brian underscore Colachi. Follow our producers, Kermit Rodriguez at Kermit Armadas, or Bennett at Dashbot, Kale Brooks at Kale Brooks, and Kevin Lozano at Kevin Lloyd Lozano. And for more Odd Lots content, go to Bloomberg dot com slash Odd Lots. We have a daily newsletter and all of our episodes. You can chat about all of these topics 24/7 in our Discord, discord dot GG slash Odd Lots.

• 49:25Tracy Alloway?

  And if you enjoyed this conversation, if you like it when we talk about how IP underpins the franchise fast food model, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

• 50:19Speaker 08

  This episode sponsored by Homebase. Homebase is built for small businesses trying to do it all. The neighborhood coffee shop, the local gym, the family run restaurant. With Homebase, you can schedule your team, track time, run payroll, and manage hiring from one easy app. So you can spend less time chasing timesheets and more time running the business your customers love. More than 150,000 small businesses already use Homebase to keep their teams on track. Start free at joinhomebase.com. Homebase, built for small businesses that do it all.

• 50:57Speaker 06

  If you enjoy Bloomberg podcasts, you'll love listening to Bloomberg 991 FM in the DMV. Hi, this is Nathan Hager. Here in the district, the story is always changing. From the White House and Capitol Hill, to K Street, Wall Street, and the Fed, Bloomberg 991 keeps you connected to the news that's driving decisions in the nation's capital and around the globe. Check us out at 991 FM, or stream us anytime on the Bloomberg Business app.