After Complaints, McDonald’s Franchisee to Sell Restaurants – The Wall Street Journal – 3/14/13

After Complaints, McDonald’s Franchisee to Sell Restaurants
The Wall Street Journal

Julie Jargon
March 14, 2013

The McDonald’s Corp. franchisee who allegedly mistreated students in the U.S. on work-travel visas has agreed to sell his restaurants.

Andy Cheung, the owner of three McDonald’s restaurants in the Harrisburg, Pa., area came under fire last week after 15 international students demonstrated outside one of the restaurants and filed complaints with the State Department and Labor Department saying they were exploited and forced to live in cramped quarters.

The students came to the U.S. under the State Department’s Summer Work Travel Program, which is intended to introduce students to American culture. The students, who each paid $3,000 to participate in the program, were the subject of a Wall Street Journal article on Saturday.

The students said they were forced to share living space with several others in homes owned by Mr. Cheung or his son and that they were either given so few hours that they earned hardly any money after their boss deducted rent from their paychecks, or that they were forced to work shifts as long as 25 hours straight without being paid overtime.

“We take the well-being of the employees working in McDonald’s restaurants seriously. We began investigating the situation in Pennsylvania immediately upon learning of the issues involved,” a McDonald’s spokeswoman said. The franchisee “has agreed to leave the McDonald’s system,” and McDonald’s is working on contacting the workers “to most effectively address this situation,” she said.

Mr. Cheung confirmed that he is in the process of leaving McDonald’s but declined to comment further.

The students applauded Mr. Cheung’s departure from McDonald’s. But a statement issued on their behalf by the National Guestworker Alliance, a labor advocacy group, said, “a change of management at three stores will not protect the guestworkers and U.S. workers at McDonald’s 14,000 other stores in the U.S.”

McDonald’s last week said it didn’t know exactly how many such workers were employed by McDonald’s franchises in the U.S.

McDonald’s is known for keeping close tabs on its franchisees. The franchise agreements that operators sign with the company dictate that franchisees uphold McDonald’s “brand values and reputation,” a spokeswoman said.

How much money Mr. Cheung could gain from selling his restaurants depends on their condition. Richard Adams, a former McDonald’s franchisee and a franchise consultant who primarily deals with McDonald’s operators, said McDonald’s in good locations that have recently been remodeled or rebuilt can fetch $1 million.

The student workers Thursday demonstrated at a New York City McDonald’s in Times Square to demand a meeting with McDonald’s Chief Executive Don Thompson. The students are asking McDonald’s to reimburse them for the wages they say they’re owed, including the money they spent on the visas. They also want McDonald’s to offer full-time work to its U.S. workers who are struggling with limited hours and to reveal all the student workers at its stores.

The students said that if McDonald’s doesn’t meet with them and agree to add protections for McDonald’s workers, they will visit McDonald’s headquarters themselves on March 26, and that if they don’t get a meeting, they will go to Mr. Thompson’s house.

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