Franchise governance and labor classification challenges test McDonald’s global legal strategy

McDonald’s Corporation is navigating a complex legal and regulatory environment as franchise law evolves in key jurisdictions, including the U.S., EU, and Australia. Legal professionals advising the fast-food giant and its network of over 40,000 restaurants are bracing for potential disruptions to the franchising model amid labor classification changes, joint employer risks, and regulatory enforcement.

U.S. Joint Employer Rule Reversal May Increase Liability

In a high-profile development, the U.S. National Labor Relations Board (NLRB) is expected to finalize a narrowed “joint employer” rule by Q3 2025 after federal courts rejected its broader 2024 version. The reversal could reduce McDonald’s direct exposure to employment claims across franchised locations but also renews uncertainty for compliance frameworks designed under the prior rule.

“Franchisors like McDonald’s have spent years designing distance into their employment practices,” said Hannah Lee, a labor attorney advising restaurant brands. “But the revolving door of joint employer standards creates legal ambiguity and heightens the importance of airtight franchise agreements.”

EU Competition Law and ESG Compliance Under Spotlight

In Europe, the European Commission is reassessing vertical block exemption regulations (VBER) as they apply to fast-food franchising, particularly around territorial restrictions, data use, and sustainability-linked obligations.

New guidance encourages competition authorities to assess franchise systems for greenwashing and ESG non-compliance, potentially triggering antitrust scrutiny where sustainability marketing and supplier mandates intersect.

Franchise counsel must now navigate a dual compliance landscape: traditional competition law constraints and evolving ESG reporting requirements.

Australia’s Fair Work Legislation Sparks Contract Review

Meanwhile, McDonald’s Australia is reviewing its franchise documentation following new industrial relations reforms passed by the Albanese government. The “Closing Loopholes” legislation expands the definition of employer responsibility under the Fair Work Act, increasing franchisor exposure to underpayment and workplace safety liabilities.

“This is part of a broader global trend where regulators are probing whether franchisors exert ‘functional control’ over employment terms,” said Rachel Douglass, partner at a Sydney-based firm advising QSR brands.

Franchise Agreements: Key Legal Focus Areas in 2025

Legal teams advising McDonald’s and similar chains are focusing on the following contractual elements:

Operational Autonomy Clauses: Ensuring franchisees retain sufficient independence to avoid joint employment findings.

Audit and Oversight Provisions: Calibrating compliance monitoring without assuming de facto employer status.

Brand Standards vs. ESG Mandates: Reconciling reputational control with anti-competitive risk in sustainability-linked supply chains.

Termination Clauses: Adjusting exit mechanisms to reflect heightened regulatory enforcement and reputational concerns.

Looking Forward: Multi-Jurisdictional Coordination Required

As legal risks rise across labor, competition, and ESG domains, cross-border alignment is becoming critical for McDonald’s legal departments and external counsel. Multinational franchisors are under growing pressure to harmonize policies while remaining compliant with divergent local laws.

Franchise law specialists are advising clients to conduct holistic legal risk audits, refresh training programs for field consultants, and review contractual frameworks for defensibility in each target jurisdiction.

“With global brand visibility comes global scrutiny,” said Douglass. “Franchisors who fail to adapt to this new legal normal may find themselves litigating across borders—and across legal doctrines.”

For further updates on franchise law developments impacting QSRs and global brand owners, visit the Thomson Reuters Practical Law Franchising Resource Centre.