Vertical Restraints and Labor Markets in Franchised Industries
67 Pages Posted: 19 Jul 2022
Date Written: July 6, 2022
This paper combines 530 digitized franchising contracts at the franchise chain level with employer-identified job ads from Burning Glass Technologies to establish stylized facts about franchising labor markets and their relation to the vertical restraints and contractual provisions that limit the autonomy of franchisees vis a vis their franchisors. We report novel findings about the application of vertical restraints like Resale Price Maintenance, Exclusive Dealing, and No-poaching Clauses, among many others, to a low-wage workforce. A legal regime that favors the franchising business model incentivizes franchisees to profit at the expense of workers and to limit egalitarian tendencies operating in the workplace.
Keywords: franchising, vertical restraints, monopsony
JEL Classification: J01, J41, J42, K21, L2, L42
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