We like to close each quarter with news or legal updates impacting franchising on state, federal or industry-wide levels. Critical developments continue to occur, including one that recently took place. Let’s discuss how select updates might affect your franchise.
New Minimum Wage Rates for Certain Delivery Workers
The first minimum pay rate for app-based restaurant delivery workers in the U.S. was announced in New York. This landmark announcement was made on June 11 by New York City Mayor Eric Adams and the New York City Department of Consumer and Worker Protection.
According to the City of New York, more than 60,000 delivery workers currently earn an average of $7.09 per hour. But a new hourly minimum rate will kick in this summer.
Starting with the first pay period on or after July 12, 2023:
- Apps that pay for all the time a worker is connected to the app (i.e., time waiting for trip offers and trip time) must pay at least $17.96 per hour, which is approximately $0.30 per minute, not including tips.
OR
- Apps that only pay for trip time (i.e., time from accepting a delivery offer to dropping off the delivery) must pay at least approximately $0.50 per minute of trip time, not including tips.
The pay rate will increase to $19.96 when it is fully phased-in on April 1, 2025. The rate will also be adjusted annually for inflation. More information is available here.
This new rate will affect all restaurants – including franchises – since the law does not call out any exceptions. Franchisors and franchisees with units in New York City should expect some sort of rate increase with their third-party delivery provider.
This legal development may catch on with other parts of New York or the country. Furthermore, third-party apps may try to pass the new minimum wage costs on to the restaurant owners and franchise unit operators.
Consult a NY franchise lawyer to strategize on any fee changes with service providers.
FTC Deadline Closed For Reporting Unfair Practices
The Federal Trade Commission (FTC) closed its public call for feedback on the state of franchising on June 8. As recently discussed, the deadline had been rescheduled several times, but the FTC has issued no further extensions.
The FTC wanted to know more about how franchisors exert control over franchisees and their workers.
“In particular,” the FTC stated, “the agency is interested in how franchisors disclose certain aspects and contractual terms of the franchise relationship, as well as the scope, application, and effect of those aspects and contractual terms.”
More than 1,000 comments are available to view at Regulations.gov. Many are posted anonymously, but some are submitted by organizations such as the Northern Arizona Lodging Restaurant Association as well as state franchise regulators and individual franchisors and franchisees.
Some comments may provide you with ideas for future calls for feedback and there are plenty of actionable takeaways. Lusthaus Law will continue to monitor how the FTC moves forward with this industry input on unfair practices and keep you updated further.
Contact Lusthaus Law
In addition to the updates listed above, remember that Lusthaus Law’s website is a resource for New York franchisors and franchisees. We have published two downloadable and complimentary e-books and our Insights blog is regularly updated to reflect industry trends and recent achievements in client representation.
Contact us today to learn more about how Lusthaus Law P.C. can help you navigate a clear path for your franchise’s successful future.
