Franchising and the Extraction of Surplus Value: Excavating the Legal Boundary Between Franchisees and Employees

Abstract

Nearly one in ten Canadians in the private sector works in the franchised sector of the economy. For the most part, franchisors operate as rentiers, extracting value from franchisees for the use of their brand. Research has demonstrated that this arrangement puts additional pressure on franchisees to extract surplus value from their employees that tend toward substandard and unlawful working conditions. In this scenario, franchisors benefit from but are only indirectly involved in the extract of surplus value. In some cases, however, the vertical controls exercised by “franchisors” over “franchisees” are so extensive, and the financial contribution of “franchisees” is so limited, that the franchisor becomes involved in directly extracting surplus value from franchisees. We explore this latter phenomenon through an excavation of the history of the legal distinction in Canadian business-format franchising in Canada and detailed studies of two recent Canadian cases in which “franchisees” successfully claimed employment status.