Many companies choose to franchise their businesses to expand their footprint faster, which allows them to better establish their brand and customer base across more markets.Â
A franchisee is a business owner who invests in purchasing the rights to open and operate another company’s business, profiting from its pre-established branding.Â
💰💸 Don’t miss the move: SIGN UP for TheStreet’s FREE Daily newsletter 💰💸
This business model is a win-win for both parties involved since they both profit from it while reducing the risk of failure.Â
Related: Popular restaurant chains preview exciting Spring 2025 menu releases
Although this strategy sounds very lucrative and has many advantages, it also has various downsides that can quickly land a company in muddy waters.Â
Because so many different franchise owners manage one brand name at once, the franchisors become the ones in charge of daily operations. So, if quality control is not handled properly, a wrong move can tarnish a company’s reputation forever.  Â
Image source: Shutterstock
Taco Bell gets sued over unlawful employment practicesÂ
On Feb. 28, the U.S. Equal Employment Opportunity Commission (EEOC) filed a lawsuit against Taco Bell (YUM) and various franchisees who own several units of the fast food chain in Michigan over unlawful employment practices. The suit was filed on behalf of multiple Taco Bell female employees.
In the lawsuit, the EEOC claims that the defendants allowed an area coach to sexually harass several women who were employed at various Taco Bell restaurants in Michigan and retaliated against one of the accusers after she reported the misconduct.
These actions violate Title VII of the Civil Rights Act, prohibiting employment discrimination based on race, color, religion, sex, or national origin.
Related: Taco Bell reveals 30 new menu items launching in 2025
According to the lawsuit, an HR manager interviewed four female employees in June 2022 who confirmed the area coach’s misconduct, yet the HR manager took no action on the matter.
It wasn’t until two months later that the HR manager reported the incident after the area coach was fired for harassing another employee and improperly handling company money.
Additionally, the EEOC claims that acts of retaliation were also committed against a female assistant general manager who was fired by Teamlyders, LLC, one of the franchisees, on the same day that she reported an incident of harassment suffered by her female team members.
The EEOC seeks for a jury trial to take place for the alleged law infringements by the defendants.
Taco Bell has faced similar controversial situations beforeÂ
As alarming as these claims may seem, this isn’t Taco Bell’s first lawsuit regarding sexual harassment in the workplace.
In February of last year, Charter Foods, a Taco Bell franchisee who owns various units in West Virginia, was served with two separate lawsuits from two former Taco Bell female employees claiming they were harassed by their shift supervisor, who was a convicted sex offender when they were teenagers.  Â
More Retail News:
- Popular cereal manufacturer delivers harsh news amid struggles
- Applebee’s announces major change to win back customersÂ
- Taco Bell reveals secret strategy to take over fast food
The lawsuit states that one of the Taco Bell workers had reported the alleged harasser’s misconduct to a manager, who ignored her claims. Nothing was done to penalize the shift supervisor, and the harassment continued to the point where the female worker had to quit her job.Â
According to the lawsuit, the alleged harasser had previously been convicted on two counts of sexual assault against teenage girls in 2011. After finishing his sentence, he was rehired as a shift supervisor to oversee minor workers.
However, despite his troublesome criminal history, the franchisee didn’t conduct a background check or look him up in the sex offender registry. This opens the door for more incidents like this to occur.Â
Related: Veteran fund manager unveils eye-popping S&P 500 forecast
