Applebee’s, joint employer regulations and Top 500 franchise brands

Dine Brands’ plan to open more co-branded Applebee’s-IHOP restaurants has drawn a lawsuit. A Texas-based Applebee’s franchisee is suing the franchisor, alleging that it is infringing on its exclusive turf by opening co-branded locations in the area. It says the stores violate its franchise agreement and are diverting customers and sales from existing restaurants. Co-branding is a key part of Dine’s development plans. There are 30 such locations open now and another 50 are expected this year.

It’s tough to be a franchise brand in this market. That, at least, is according to data from the Technomic Top 500. Median sales among company-owned brands grew 4.8% last year. That was more than the 3% total sales growth for the Top 500 last year. By contrast, companies with at least some franchised locations grew just 1.4%. What’s more, those companies were more heavily reliant on new restaurants to achieve growth, compared with company-only restaurant chains. Franchises can get rapid growth when things are going well. But they can have a tough time breaking out of a sales slump.

The U.S. Department of Labor last week proposed a new rule that would create a national standard for what qualifies as a joint employer.

The rule attempts to address what has been years of shifting definitions and differences in court opinions across the country about who is ultimately responsible for compliance with wage-and-hour issues and other labor laws impacting workers. The International Franchise Association and the National Restaurant Association support the new proposed rule, which would establish a specific test to determine joint-employer status. Both associations said the rule would give employers greater clarity.

The public comment period for the proposal ends on June 22.