the next time you pull up to the drive-thru you may not know it but you're part of a business model that's fraught with turmoil the model's called franchising and it's spreading maybe you've heard the phrase fast food franchise but do you really know what it means or how it works you might be surprised by how franchising is affecting your community and the whole economy we're talking way more than Burgers and [Music] Fries on one side a company besides it has a good thing going it wants to expand but it doesn't want to run all the new locations it's just not familiar enough with those places it might be short on money for the expansion and it doesn't want to employ a bunch of local workers and the company wants the person in charge of each location to be someone special someone with skin in the [Music] game on the other side is that special person she wants to start a business she knows the local market she has some money to invest or can qualify for a loan but not enough to buy property fix it up and buy all her equipment and maybe not enough for much marketing she might not know the industry very well and would rather not go it alone so the sides make a deal the company gives its new franchisee what she needs to hit the ground running she takes the company's training course and pays an initial fee for the franchise [Music] the franchise model depends on a good brand that means more than anything consistency if it's fast food you'll see the same thing at every drive-through window cashiers wearing the same logo menus offering the same food all prepared in the same way the customers remain loyal to the brand no matter where they go what protects the brand is is the franchise agreement the rules for a franchisee might cover everything from operating hours to where she buys supplies the agreement also requires the franchisee to pay royalties typically 5 to 10% of the location sales but there's no guarantee the franchise will flourish franchisees go belly up about as often as unfranchised owners still many franchisees manage to hang on some do well even open other locations [Music] the company and its franchisees don't always see I to eye the company might impose a higher royalty it might limit any flexibility in finding supplies and setting prices the franchise can start to feel overburdened but if she doesn't sign on and follow the rules the company might take over the franchise she might lose her business for the company's part it has reasons to write rules and enforce them making all franchisees buy from the same supplier can help bring down cost and higher fees can fund more advertising the company also wants its franchisees to follow standard rules freeloading on the brand is not [Music] allowed franchise employees the folks who work behind the cash register let's say they're not known for earning big bucks but economists disagree about why some blame the wages and work conditions on the industries where franchising has taken off where competition is Cutthroat and the jobs are low skilled other economists blame low wages on the franchise model [Music] itself when a company franchises they point out it's adding extra owners that means more people taking slices of the pie so there's more pressure to cut costs like wages and this leaves less money for the workers there's another debate about franchising how it affects the economy one side claims the model has proven itself more efficient that can mean lower prices for consumers and more consumption so more production and more jobs the other side claims that franchising leaves the workers with less money for buying stuff and that means less consumption less production and fewer jobs we'll let the experts keep fighting about that one thing is clear though this way of doing business the franchise model it's spreading gas stations car dealerships restaurants convenience stores hotels eyewear retailers Tax Services child care centers Legal Services news media janitorial services Home Health Care dry cleaners salons house painting it support carpet cleaning Pet Supplies Hardware store tutoring gyms real estate printing long hair embroidery Services play places sign stores battery stores laundry mats coffee shops garage door repair computer repair cell phone repair ice cream shops sharing Services massage services car rental Leak Detection window cleaning plumbers Home Inspection HVAC repair travel agencies marketing