Theory and Evidence of Employer Collusion in the Franchise Sector

Published online ahead of print October 13, 2021, doi: 10.3368 / jhr.monopsony.1019-10483

Commentary

This study investigated the role of contracts in franchise agreements that restrict the recruitment and hiring of employees from other units within the franchise chain.

Based on an analysis of 2016 franchise disclosure documents, 58 percent of major franchisors' contracts included "undisclosed worker contracts," including McDonald's, Burger King, Jiffy Lube, and H&R Block.

The impact of these no-poaching agreements on Oligopsony's model is also explained, with the idea that no-poaching agreements are more prevalent in franchises in industries with low wages and high turnover.