Thanks to my American Bar Association-Forum on Franchising colleagues (via our List-Serv), I was treated to a robust discussion last week about whether Uber (the ride-sharing concept) is a "franchise." Its competitor, Lyft, was also mentioned. Interesting ... but the consensus was that they are not, due to the technical definition of a "franchise" under federal and state laws; reportedly, the drivers pay no initial fee to Uber or Lyft.
But, the discussion comment that struck a cord came from Attorney Kat Tidd of Dallas Texas: "I think the definition of franchising is going to be truly challenged by technology." And, I think Kat is right.
In fact, in my second post on this blog (you probably missed it), I addressed technology's impact on franchising - Is Franchising Under Attack? And, I even mentioned Uber! Revisiting this topic is worthwhile.
Uber and Lyft and some other "sharing" concepts seem to have fallen into a regulatory void. That is, it seems difficult to classify what they are.
Not only has the "franchise" question been raised but, even more vigorously, the question of whether these systems are EMPLOYERS of their driver-partners rather than the "independent contractors" that Uber and Lyft call them. Suits have been commenced over this IC-classification because ICs do not enjoy all the protections of an employee (tax withholding, workers comp, unemployment benefits, etc.). But, this would not be the first group of ICs to challenge the status.
And, coming back to franchising, do "share-drivers" need the protections of the franchise and business opportunity laws? In other words, is there a lot of financial risk that the "share-drivers" face when entering into the Uber-Lyft relationships? Maybe, maybe not. (They do need to invest in a car, gas and insurance) Further, are there other public policy issues that regulators should be concerned about? Maybe they should not be regulated? Maybe they should be.
I am pretty good at raising the issues ... but lousy at answering them. But we can count on one thing: as new technologies emerge, new business models will follow.
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