How Franchise Restaurants Opened the Door to the Gig Economy

**Brian Callaci** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.

**Tracy Alloway** (0:18)
Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

**Joe Weisenthal** (0:22)
And I'm Joe Weisenthal.

**Tracy Alloway** (0:24)
Joe, I will fully admit, I think I have a romanticized view of fast food chains.

**Joe Weisenthal** (0:30)
Yeah, you're the only one.

**Tracy Alloway** (0:31)
Yeah, I know.

**Joe Weisenthal** (0:32)
No, I mean, literally.

**Tracy Alloway** (0:33)
I know.

**Joe Weisenthal** (0:34)
I like fast food chains. I don't have a romanticized view of them.

**Tracy Alloway** (0:37)
I blame Coming to America and the restaurant that was in there, and also my overseas upbringing that probably made American fast food seem a lot more exotic and interesting. Yeah, I get that. It perhaps actually is. But I was thinking the other day about the franchise model. It is really weird once you start digging down to it, because it's like this in Coming to America is you have the small business owner. They want to be all entrepreneurial, so they get this franchise. But then everything is basically dictated to them about how to do the business by the actual corporate franchise owner.

**Joe Weisenthal** (1:12)
Wait, in Coming to America, he didn't open a McDonald's.

**Tracy Alloway** (1:16)
No.

**Brian Callaci** (1:16)
He opened a McDonald's.

**Tracy Alloway** (1:17)
It was, yeah. Right.

**Joe Weisenthal** (1:18)
But no, but that was the whole thing. There was like a legal fight against, you know, because they claimed that like he wanted, but he wanted to do it his own.

**Tracy Alloway** (1:25)
It's a good memory, Joe.

**Joe Weisenthal** (1:26)
I mean, he really just wanted to commit intellectual property theft. I mean, that's really what was going on. I suppose you could tell in optimistic versions, he wanted to go his own way and do his own thing. But he was really just committing. I love, you know, I'm on his side.

**Tracy Alloway** (1:38)
It's a perfect summary of why people are interested in the franchise model, which is like, okay, you're ostensibly supposed to be your own business person, I guess, independent. But you get a leg up because you get that built-in customer base and the existing brand and all of that.

**Joe Weisenthal** (1:54)
But to your point, like the pitch in many franchise-esque relationships, it's like this is your chance to be an entrepreneur, etc. Except when you think about entrepreneurship, you don't think about so many constraints like here's the thing, and here's the price, and here's the thing, you know? And also, in a typical entrepreneurial environment, there is quite a bit of like, you know, people often go into entrepreneurship for like big like right-tail outcomes, you know? So for example...

**Tracy Alloway** (2:22)
Yeah, the big payoff. Yeah.

**Joe Weisenthal** (2:24)
And so like, for example, I remember, you know, in the, I guess you still hear it, but like the glory days of like Uber and stuff like that, or being like an Amazon van driver or something like that, they're talking about start your own business. And on some level, it was like on paper, it's like there was legally a business.
It's not going to be like a high scale, high margin business the way many people hope for when they do, quote, entrepreneurship, unquote, the sort of like parameters of the outcome. It's like, okay, maybe they've taken off some of like the really bad outcomes.

**Tracy Alloway** (2:54)
Yeah.

**Joe Weisenthal** (2:55)
But it's not the sort of like really good right-tail outcomes that many people associate with like the aspirations of the entrepreneur.

**Tracy Alloway** (3:02)
Well, this is the other thing I'm interested in because certainly in the 80s and 90s, you would hear stories about people who became relatively wealthy by running like franchise empires. So I'm curious if that still exists. But the other thing that's really interesting to me is like, okay, you're an independent owner of a franchise. What levers do you actually have to pull to improve the business?

**Brian Callaci** (3:24)
I know.

**Joe Weisenthal** (3:24)
I always think like sometimes you see those stories, again, not to keep picking on McDonald, which we both love.
But you'll see these stories from time to time about a bad product rollout, right? They introduce a new sandwich and nobody likes it or something like that. I always think, man, it would be so annoying to be a franchisee.

**Brian Callaci** (3:41)
Yeah, you have to serve it.

**Joe Weisenthal** (3:42)
To be at the whims of some, like how much do they have to carry the sandwich? Can they change the price?
You're really putting a lot of faith and money on people who make big decisions. Or let's say you run a bad ad, right? Let's say McDonald's corporate runs an ad that tarnishes the whole brand, which could theoretically happen. It's like you've just like totally outsourced some of your future outcomes.