MR Live w/ guest Brian Callaci

Added: 2026-05-12

[00:00:50]Heat. Heat.

[00:01:14]Heat.

[00:01:31]Heat.

[00:01:37]Heat.

[00:01:52]Heat.

[00:02:10]touch.

[00:02:22]Hey Touch you.

[00:03:54]Oh Hey folks, how's it going?

[00:04:03]Oh, all right.

[00:04:07]you know, um I got up at 5:30 this morning and uh it was not my plan, but I did because my cat decided it's time for you to wake up, Sam. And this is like the double-edged sword of finding a cat food that your cat absolutely loves is that they'll wake you up at 5:30 in the morning uh to go do it uh to go get uh fed. I think part of the reason actually he's he seems to have adjusted to um what do you call it? Uh uh spring forward the daylight savings time for like a weekend there. I I think he he was confused as to like what time he was supposed to eat. But um but I'm very happy that I found a cat food for my cat that uh my cat loves and is incredibly healthy. And what am I talking about?

[00:04:59]I'm talking about Smalls.

[00:05:03]Smalls is fresh, gently uh cooked food.

[00:05:08]It is made without preservatives.

[00:05:10]Um provides like a balanced diet for your cat. Less shedding, fewer hair balls, and more silky shine. Uh the nutrients and smalls are digestible, so less junk comes out the other end, if you know what I'm saying. Decidedly less stinky poops. I've said it.

[00:05:32]Um, Smalls cat food leads to high protein and improved hydration. The big thing for me with Smalls is uh the food is great and they also have some great uh snacks, but my cat goes ballistic for this broth and it doesn't matter. Like I'll give it to him straight. I'll give it to him um as a treat with the food.

[00:05:55]Um on and on and he loves it. And sometimes I will even and I will cop to this, pour a little bit on my hand and he licks it right off my hand because I have a theory that he will get attached to my smell and I'm going to train him.

[00:06:12]I have all sorts of dreams for my cat.

[00:06:15]But uh the good news is he loves his food. And right now, um, if you want to invest in your cat's health, Smalls is giving you a 60% off your cat's first order, plus free shipping and free treats for life when you go to smalls.com/majority.

[00:06:33]If your cat doesn't like it, Smalls will refund 100% of your your order. Trust me, your cat's going to love the taste of Smalls, and you're going to love that your house no longer smells like a litter box all the time. That's 60% off plus free shipping and free treats for life when you go to smalls.com/mmajority.

[00:06:55]We'll put that um info in the podcast and YouTube descriptions and at majority.fm. And now time for the show, >> the Majority Report with Sam Cedar. The destiny of America is always safer in the hands of the people than in the conference rooms of any elite.

[00:07:17]>> Sam Cedar, >> they are unanimous in their hate for me, and I welcome their hatred.

[00:07:24]>> We must guard against the acquisition of unwarranted influence, whether sought or unsought by the military industrial complex.

[00:07:31]>> The Majority Report with Sam Cedar.

[00:07:36]>> Ever get the feeling YOU'VE BEEN CHEATED?

[00:07:44]IT IS MONDAY, May 11th, 2026.

[00:07:51]My name is Sam Cedar. This is the fivetime award-winning majority report.

[00:07:56]We are broadcasting live steps from the industrially ravaged Gowanas Canal in the heartland of America, downtown Brooklyn, USA. On the program today, Ryan Kalachi, chief economist at Open Markets, author of the new book Chain of Command: The Rise and Cruel Reign of the Franchise Economy.

[00:08:22]Also on the program today, Trump and Netanyahu say the Iran war is not over after Iran basically says the Iran war is not over.

[00:08:37]Also, >> we should leave. We've lost.

[00:08:44]>> Israel, meanwhile, continues to bomb Lebanon despite the supposed peace uh ceasefire there.

[00:08:51]and oil prices surge on the Iranians clearly ready to continue this war.

[00:09:01]In wake of the Republicanappointed Virginia Supreme Court ruling, which negated redistricting referendum, Democrats consider following the Republican pack the court playbook.

[00:09:18]Meanwhile, Alabama next up to ask the Supreme Court to disenfranchise more black voters.

[00:09:27]>> Kier Starmick in a panic across the pond, as they say.

[00:09:32]This in wake of uh a ton of labor local labor losses, vows to sort of brenter, get closer to the EU. I I don't know. I came up with that. It didn't It's Monday. The Department of Educish.

[00:09:56]It's not totally uh the Department of Education now on a hiring spree after firing over half its staff over the past year and a half. Because competence is job one, >> thousand. Tennessee signs a law forcing doctors to provide data on the trans care they provide. All this and more on today's Majority Report.

[00:10:28]Welcome ladies and gentlemen. It is Monday. Thanks so much for joining us.

[00:10:31]Emma Vigland out today supposedly sick, but I mean I'm sort of she look I mean somebody I'm not going to I'm not going to cast dispersions, but Thursday night it sound like uh there's a lot of partying going on.

[00:10:49]>> Was there a big win for her team yesterday?

[00:10:51]>> Oh, that's weird.

[00:10:53]>> I'm sure that had nothing to do with it.

[00:10:55]I don't What was that? Uh the football game or >> I forget >> what What sport is it? I forget what those animals call it.

[00:11:02]>> I can't remember.

[00:11:03]>> Sports.

[00:11:04]>> Yeah, I don't >> I was reading.

[00:11:06]>> Yeah, sorry. I was uh writing poetry and I decided I I didn't follow the sports games of the weekend. Uh thanks for joining us. uh folks um you know the the big story you keep seeing over and over again at least I do is there is a certain um I know percentage of economists and oil traders and uh financial types who are coming out and saying we're headed to a global recession.

[00:11:48]And then there's uh like I would say 50% of what I note on that are stories about why isn't the stock market responding to the fact that it looks like there's going to be a global recession but maybe there isn't.

[00:12:05]And then there's I would say another 20% which brings us to about 95%. those 20 uh remaining 20% are like well I've figured out how to uh find opportunities in this and then there's 5% really closer to 1% who are like Kevin Hasset and he is the National Economic Council director and I don't know maybe he thinks he's going to get fired by Trump and desperately wants to keep his job you understand that's all it is now.

[00:12:41]They're all just coming out and figuring out what will keep them in their jobs.

[00:12:48]And more often than not, it's because they've got some type of side scam going, whether it was Christy Gnome or uh Sean Duffy, who was able to find time in his very busy schedule as transportation director of the country.

[00:13:08]You remember all the planes crashing?

[00:13:10]You remember the fuel shortages?

[00:13:13]>> And he's been in that job for, I would say, probably 12 months now, maybe less.

[00:13:17]I mean, he was confirmed. I don't know when, but it couldn't have been too much earlier than uh in May of uh 2025.

[00:13:26]And this is important. He was able to find seven months time to shoot a TV show, but with his family. That's the point. Family is first. But Kevin Hasset, uh, getting back to him, here he is on CNBC, and you could call this bootlicking, but I actually think, um, the licking is more comprehensive, >> in between the toes.

[00:13:50]>> Exactly.

[00:13:52]>> We've seen over time is that earning surprises are positively correlated. So, if you have a couple of quarters in a row of earning surprises, that people tend to not jack up their earnings forecast as much and you get another one. And so I think that Ed's forecast while the White House doesn't have an official, you know, S&P forecast, it it seems consistent with the trajectory of earnings, I could say, at the very least. And that's all happening because of AI and because of the Trump tax cuts and so on. I think that one of the things that's happening is that that the world is changing so fast right now that President Trump has sort of taken every problem on Earth and got 100% at fixing it. And I think that that's can be stressful for people to see so much change going on. But the bottom line is that in the end when we look at what happens for elections that people >> pause for one second I wanna I want to go back because I didn't set this up exactly. He's explaining why despite the fact that he's out here smiling so hard why consumer uh confidence is at its lowest eb in like decades >> and we have rising uh credit card debt.

[00:14:57]People are starting to stress out about work and um and of course oil prices are through the roof. Fill up a gas tank like a my Subaru is like uh it's like a small investment in uh it's like a semester of college at this point to fill up your gas tank.

[00:15:18]He's explaining why consumer sentiment is down and his aside from saying like we've had so many surprise earnings bumps that like people are factoring in and that's why we see earnings expectations lower.

[00:15:33]But here go back and you'll you'll hear him explain why consumer sentiment is down. It's because they're so like agitated by all the winning.

[00:15:46]>> What's happening is that that the world is changing. so fast right now that President Trump has sort of taken every problem on earth and got 100% at fixing it. And I think that that's can be stressful for people to see so much change going on. But the bottom line is that in the end when we look at what happens for elections that people look at their wallets, they see how they're doing. You know, the economy is growing very strong. Uh incomes are growing. Uh and you know, Rayfair, you're you and I have talked about Rayfair for 20 years.

[00:16:13]Ray Farah of Yale says that GDP in the second quarter is the thing that tells you what's going to happen in the election. And so I think that right now Republicans should should feel very very good about the trajectory of the economy.

[00:16:25]>> You know what they say, more money, more problems.

[00:16:27]>> Yeah.

[00:16:27]>> Yeah. Well, I mean that's the thing is that you're folks are so um uh are just so their head spinning with so many so many world problems being solved that they're making them nervous about the economy.

[00:16:41]The problem is when a guy like Hasset says people vote with their pocketbooks, they think of their pocketbooks as like what their investments are doing.

[00:16:49]>> Yeah.

[00:16:49]>> And normal people look at actually this is what I have to do to pay my rent and actual expenses for this month.

[00:16:55]>> Wages are up by something like three and a half%.

[00:17:00]Um the problem is inflation's up by 4%.

[00:17:04]>> And so you don't have to be a math wiz.

[00:17:07]I I off the top of my head can say I mean I because I am a math wiz that it's a h you're losing a half a percentage of uh of your real spending power in that scenario. But you don't even have to be a math wiz like myself.

[00:17:26]You don't have to know specifically. You just have to know you're losing >> to the extent that your wages are going up. You're paying for stuff. It buys less anyways.

[00:17:37]And it is quite clear that an increasing number of economists and just sort of world observers think that we are headed into something that is going to be far more uh problematic.

[00:17:53]Um put up this oil reserves. You recall uh last week uh Rory Robertson, was that his name?

[00:18:00]>> Johnson um was on the program talking about oil reserves. This is the first one. Um and he said once the oil reserves runs out, that's when we're going to start to see uh prices rise exponentially and perhaps shortages.

[00:18:22]And here's the world oil reserves.

[00:18:27]You will notice that um now we only have data here for the past five years.

[00:18:35]But it seems rather dramatic.

[00:18:39]Operational floor level is the minimum level required to keep pipelines functioning in refineries operating.

[00:18:50]>> And it's suggested by September we're going to reach that. Uh by June of 2026 we're going to be at operational stress level.

[00:19:02]This is according to those hippies over at JP Morgan Commodities. So, >> is Trump doing degrowth?

[00:19:08]>> Exactly.

[00:19:10]But the amazing thing is is that while he's doing this, he's also effectively unilaterally banned wind energy in the country.

[00:19:23]>> Yeah. like literally not we're not going to have any more growth in wind power. Rolling back existing wind power and wind power that was in, forgive the pun, the pipelines seems kind of like a I don't know, hurting ourselves a little.

[00:19:51]>> Yeah. Well, here's the problem with that. formulation is like it's unclear who's on team ourselves.

[00:19:57]>> Yeah.

[00:19:59]>> Like this is a mistake that I think like um many people still operate under is that they're judging success or failure based upon an assumption as to what the agenda is. Mhm.

[00:20:17]>> And it's quite clear the Trump administration has a very different agenda than um we're going to make our country great again >> by in whatever means, you know, I there may be some positives that you see in there. Uh I'm not sure what they would be, but um but we'll talk more about agendas and um intent and uh the value of that uh later in the program. start to talk about Marjgerie Taylor Green. In a moment, uh we're going to be talking to Brian Khichi, uh chief economist at Open Markets and author of a new book, Chain of Command: The Rise and Cruel Reign of the Franchise Economy. First, a word from our sponsors.

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[00:23:56]Also, um you know, uh I used to uh I used to have a wallet that I had forever. It looked shredded. It looked ugly. It was uh fat.

[00:24:08]I'm like a front wallet uh guy because it's the best place to put it because you don't get back problems. You don't get uh doesn't seem as bulky. It's just I my >> hard to pickpocket too.

[00:24:22]>> And it's harder to pickpocket. Um but uh I realized at one point like I didn't want to be like my father and walk around with a wallet that was like completely over stuffed and uh was you know 50 years old. Um Father's Day is coming up folks and you can do a favor for your dad.

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[00:25:16]It's like a little >> Don't show your cards.

[00:25:19]>> No, I didn't show the cards. Um it's great. And uh in fact, the other day I was at a um uh like a hotel lobby bar thing and um guy comes up um paying my tab, take the wallet out. He goes, "I have the same wallet." And he pulls out his ridge and he's like, "I put it in my when I get on the subway, I put it in my front pocket. Uh and it's protected.

[00:25:46]It's RFID protected, so nobody's coming along with an RFID sweeper. And I know those are real things because Saul has one. And he uses it he uses it he uses it to try and change uh the TV uh channels on people's TV thing, but you can also like he can clone fobs and stuff like that.

[00:26:07]And it's super easy. The guy's 13 and he's using it. So, >> um, but, uh, Ridge has got, uh, great wallets. And this is a key. This is Oh, well, literally. Um, I keep my keys in this. It basically looks like um I don't know. It It's so It keeps the keys uh together like this. I use a color-coded system uh with You don't need to do that. Um the Ridge um it's all part of a kit that they call their daily driver kit. Um they got all sorts of different styles that are um really crazy. Hot rod, lone wolf, Thunderbird. Bridge wallets are made from aluminum, titanium, and carbon filter. They have over 50 colors and styles to choose from. They are unique, they are slim, and they are modern. And they hold up to 12 cards plus cash.

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[00:27:47]They're going to ask you where you heard about them. Say uh tell them that you heard him at the majority report. Uh check it out. We'll put the link in the podcast and YouTube description and then be a quick break and be right back with Brian Khichi. Heat. Heat.

[00:29:10]We are back. Sam Cedar on the Majority Report. Emma Vigland is out today. Want to welcome to the program Brian Kalachi, chief economist at Open Markets, author of the new book Chain of Command. chains of command, I should say, the rise and cruel reign of the franchise economy.

[00:29:28]Brian, uh, welcome to the program. Um you came to this by this topic of of franchises and their um the relationship between um corporations, franchises and their employers um from organizing um uh what was 101 15 years ago the fight for 15. Let's start there and then work uh uh sort of swing back around to this history of the franchise and what it was developed for.

[00:30:04]>> Sure thing. Yeah. Um so you know I wouldn't exaggerate my role on the fight for 15. I was you know a mid-level uh staff person. I was assigned to do some research um you know at that time uh just to sort of figure out you know the franchising structure um which you know is not that far a field from other you know lowwage industries. You know, the economist David Why has this wonderful term, the Fissered Workplace, to describe these kinds of industries, you know, whether it's temp agencies or whether it's, you know, the way Uber mclassifies, you know, drivers as independent contractors. You just have these layers, you know, where uh workers cannot access, uh, you know, uh, cannot exercise any power or hold accountable the corporation that really controls their working conditions. Uh and then so franchising is an example of us but also sort of the extreme version beyond anything uh any of us had encountered before because it's not you know like a house a hospital outsourcing you know as janitorial services. I mean franchising is the whole thing is outsourced. So you McDonald's uh franchises almost all of their restaurants and they're run by these nominally you know independent franchises who really have no discretion over uh pretty much anything in the business. um every you know prices are controlled, supplies are controlled uh the precise way the cashier has to greet the customer is controlled centrally but that but yet you know they they they declare that these workers are not their own employees they're they belong to these independent franchises um and so yeah I you know when I uh became an economist I went to grad school I had no intention of working on franchising but you know once I saw what the economics literature said about franchising uh yeah they mostly oh no this is just efficient to do it this way and it seemed to me and kind of obvious and it seems obvious to anyone one has worked in in fast food and other franchise industries that a big part of this is the legal the advantages of that legal structure to sort of deny both franchises of small business you know employers and workers from having any access to recourse accountability or their rights that are supposed to be guaranteed under other bodies of law.

[00:31:57]>> Yeah. You know what occurred to me as as I was reading through your stuff was the um that that what you were saying earlier that there is this sort of broader dynamic where the capitalist class and it works both from like like an employment standpoint where like you say with like Uber and um uh uh in in employing temp agencies this dynamic of control but no uh accountability You also see that in the context of like landlords like they want to distance themselves as much as possible from everything except for where the check goes. uh and and so there are layers and layers and that there is you know controlling things from far a field and creating legal obstacles to that and we see this across the board whether it's you know like frankly the Supreme Court cutting off access uh to to workers and consumers and citizens to um uh get some type of redress against corporations. that that dynamic permeates all this stuff. And that's what I one of the things I found most fascinating about this. But let's talk about the history of the development of franchises because they um they start it it seems like it the idea sort of like is developed as a way of control and then the lack of liability comes in as a as an innovation almost.

[00:33:33]Uh so let's start with that. Um uh the the the the early franchise is it was a Dunk of Donuts uh which I was also excited to see.

[00:33:44]>> Yeah. Yeah. Fellow New Englander there.

[00:33:46]Um yeah. So yeah, the the way that um and I was surprised to see as I started researching the book um none of this happened. This wasn't a secret conspiracy. um to the benefit of the book uh the actors involved who were trying to create this business model with again all the control, none of the liability were pretty open about what they were trying to do. They said that that was the goal. We want the control, we don't want the liability. Um so, uh you know, the the the time period that we're talking about when this really takes off is, you know, post World War II, really starting in the early 1950s, people like, you know, the famous Ray Croc of McDonald's, William Rosenberg of of Dunkin Donuts, and other entrepreneurs, uh Glenn Bell of Taco Bell creating these business models. And at that time, you know, uh, we had just gotten through the New Deal. So, we had, you know, this whole body of regulatory structures that, oh, we know how to hold people accountable. We know how to hold corporations accountable for their actions. Uh, it's because we know what a corporation is. They own assets and they employ workers. They have big factories like GM, US Steel. Uh, that's how you get a union. You know, you go get go against this big corporation that owns things and employs people. Uh and so what the franchiseors started talking about at that time sort of this early version of what we would now call you know move fast and break things is well we don't want that how can we get the same kind of you know corporate empire but without all that liability and they figured out they could do it by licensing their trademark you know so you want rather than own rather than expanding by building a bunch of McDonald's restaurants and having them you know have employees uh they decide well we're going to do this by licensing independent business owners to operate the McDonald's and then we'll just tell them exactly everything they have to do But if anything goes wrong, if their employees, you know, try to get a wage increase or, you know, if if they try to form a union or if there's uh, you know, some kind of a product safety issue or what have you, well, that'll be their problem. But the problem was, and they were again very open about this as well, is that that wasn't really legal. And what surprised me to learn, uh, initially um, is that this was not this was actually an antitrust issue, not so much a labor issue. Now, antitrust, this is the mid, you know, 20th century, it's the waring court. Antitrust courts and legislators look very uh they don't they frown upon this idea of a large corporation dominating and controlling an independent entrepreneur as if they are an employee. Now this seems very commonplace to us. This is how Uber andyft and Door Dash do it. Uh but Uber andyft were built on this sort of legal architecture that the franchise franchising community developed in the 1960s and 1970s by filing a bunch of antitrust cases by um you know doing sort of public propaganda to uh basically overturn the idea that there's any meaning to this idea of being an independent business owner. uh that all we should care about when it comes to these kinds of contractual controls that substitute, you know, for um ownership and and and owning things uh will treat that um as a uh will liberalize their treatment of that under the HRS laws.

[00:36:28]And they won that. There was no legislation passed. They didn't have to persuade any uh Congress to do anything.

[00:36:33]Just the the judiciary uh you know, as part of um as part of this lobbying effort and considered part of, you know, the so-called Chicago school revolutionary antitrust just did it for him.

[00:36:43]>> Yeah. I want to I want to talk about I I want to talk about that because um it is it it's it's almost as if like just one side showed up to a fight and they were able to um you know the official is there going like you're the only one punching so um you win. Um and that's basically what happened there. I want just before we get to that because I want to talk about uh um uh uh Continental uh Sylvania uh case which which is like sort of like one of the turning points. But what what was it? Was there something in particular or maybe did each sort of like franchiseor have their own um thing they wanted to avoid? But was it I mean was it unions?

[00:37:35]Was it labor costs? Was there increasing liability? Because it feels like liability wasn't quite like product liability wasn't then what it was going to be starting in like the 70s, 80s, maybe 90s. Um was it just like labor costs or was it also just sort of the headaches of because the franchiseor is doing most of the um sourcing and negotiating of inputs, right?

[00:38:04]Like McDonald's says, "We're going to need as much hamburger as you have and um you know, we're going to farm it out to a logistics company to say like the burgers go there, the burgers go there, but we buy it all and we just resell it to you." So it's not like that's what they're trying to avoid.

[00:38:24]Was it labor specifically?

[00:38:27]>> Yeah. So it labor was a was a big one.

[00:38:29]And and I to say because it's particularly because in the early decades of franchising a lot of these were um you know single unit uh you know owner operators and some chains particularly Subway still operate very much this way. It really is a genuine mom and pop. So they were concerned particularly about their franchises the small business operators being considered employees under a variety of different kinds of laws. Franchises for example tried to form you know franchisee associations. They still do.

[00:38:54]um but they don't have collective bargaining rights as a union would because they're not they're not employees in the same sense. So I would just say you know one of the um parts of the book I've basically memorized is there this moment in a congressional hearing before the uh Senate Antitrust uh uh anti- monopoly committee uh where the um the the the franchiser association basically tells Congress look we should be able to control our franchises to the to the same extent as if they were our employees. Uh and that the general counsel guy named Jerry S.

[00:39:22]Cohen for the subcommittee responds, he's sort of incredulous. Well, how can that be? You know, the argument you're giving us is that franchising is this way to save, you know, the small business, save the small entrepreneur.

[00:39:32]Uh, but if if these franchises are told exactly what product they have to buy, what price they have to charge, you know, exactly how they how they have to operate, well, they're not really an independent business person at all.

[00:39:41]They're really part of your operation.

[00:39:43]So, like that's sort of the um the legal structure that um legal struggle that's uh that that's going on. Um yeah, so >> and that seems obvious, right? Like I mean if if I own a McDonald's and I can't say you know what >> I want to do shamrock shakes all the time and so I'm putting green dye in my in my vanilla shakes >> and McDonald's uh corporate says you can't do that.

[00:40:06]>> Yeah. You can only have shamrock shakes until March 23rd. That's it. No more after that. Um like what how can you say I'm an independent businessman? I can't even decide to slightly change my shakes. You tell me the price I got to pay. You tell my employees what they have to say when somebody walks up to the count. I mean, like there's no independence whatsoever. So, that takes us to uh the Sylvania case because this is where franchiseors start to franchiseors start to get their cake and eat it too.

[00:40:41]>> Yeah, absolutely. So, yeah. And that's this is also a fascinating aspect what I found researching the book is that so that if you know in like antitrust land for antitrust lawyers for economists this is the case that transforms you know antitrust law in sort of a more procorporate uh you know defendant friendly you know corporate defendant friendly direction uh and and it's um yeah it's a Supreme Court case basically it's it's a it's a a franchiser of um of TVs and they try to restrict the territories in which you know the dealers the franchises can sell sell the TVs. It was very similar to a case 10 years before that where the court had ruled that the the independent business owner had a just a fundamental right to to dis dispose of their you know their products as they saw fit. Um and the uh Continental TV versus GT Sennsylvania was uh decided by Lewis Powell, the author of the famous Powell memo.

[00:41:34]>> Well, this okay, we should say this is 1977. Lewis Powell wrote a memo before he became Supreme Court justice appointed by Nixon which was basically used as the blueprint to to build the heritage foundation. It was largely in response to sort of like fears of what was happening in the 60s particularly around the environmental stuff. Um and the like corporate America has to re-engage in this has to unify and fight back against what's happening you know all these takings that are happening.

[00:42:04]And uh Nixon was so impressed he put him on the Supreme Court. And so 1977 we get this uh uh Sylvania case.

[00:42:12]>> Yeah. And the the case is uh the franchiseors win. They overturned the previous uh uh precedents that had protected small business owners. Um and it's interesting. Uh so yes considered the most important case in antitrust.

[00:42:24]They were the birth of this so-called Chicago school that we're still grappling with um in in in antitrust. Uh but there there was a there was the a concurring opinion from Justice White who just pointed out to the to the justice. Oh, and the key thing about the case is that it completely removed all of these concerns with, you know, the autonomy or independence of an independent business person of an entrepreneur. Um and instead all we care about is efficiency. Um and I'm going to bracket for a second. I don't think when they say efficiency they mean real efficiency, but that's a whole another conversation. But you know, basically the economic if if the price goes down, the output goes up, that's all we care about. we don't care about this, you know, uh, sentimental stuff about independent business owners. But what that allowed the franchiseors to do subsequently was just that creates the loophole where you can get all of your they legalize these kinds of controlling contracts. Uh, but then um, so right after Sylvania, you start to see some of the smarter people in the franchising community say, "Wait a minute, we just won this pretty profound right to control these, you know, independent independent contractors." Sooner or later, some judge is going to look at that control and say, "You look like an employer." Or, you know, for example, you remember a few years ago, Domino's had that 30 minute, you know, 30 minutes or less or your pizza's free. Guess what the delivery drivers are going to do when you when you make that a requirement? They're going to go through red lights. They're going to speed. So that so the franch, oh, we might be on the hook for, you know, if they hit and kill someone that might we might be because it's our rule that's causing the accident. So that there's so they spend the next uh you know, what is it now? 40 years after Slovenia or Slovenia um trying to well we don't want that to that control to come with any consequences and that's sort of where we are today. They sort of been able to have it both ways and other companies like Door Dash and all these gig, you know, so-called gig employers have done the same thing. But it all comes back to this legal effort of very smart lawyers, very smart lobbyists, uh, building this business model in the 1960s and 1970s.

[00:44:14]>> Okay? And so, u, and I want to get to the sort of the second part where it's like, oh, we succeeded in getting control and now how do we shed the liability that's often that that's almost always associated with that type of control? Um but let's talk about Bourke because uh we have on this program for years in um interviewing people uh about uh antitrust um talked about how without any laws changing um the Borian view of antitrust um became ascendant particularly in the um Reagan era but was obviously percolating out of University of Chicago in particular and largely again because there was no I'm sure legal scholars would have a better sense of this but but at least once you cross a threshold of what a lay person knows there was no movement in the law to push back on this insurgent sort of University of Chicago legal um movement to make antitrust less about the questions of democracy, less about the questions of concentrated wealth and power, uh both economic and political, and more just about what will presumably benefit the consumer. um in a very narrow narrow sense very often doesn't but that's just a question of like you know of fact as opposed to principle um there was no legal push back there so how does like that insurgent legal movement influence the Supreme Court is it just simply because there's no real cohesive legal movement to push back and retain what we had already and and and express it in I guess like that era's modern uh perspective on on democracy. I mean once you have democracy it's very easy or or at least um that type of antitrust probably pretty easy at one point to start to take it for granted and not appreciate what it was like before.

[00:46:38]>> Yeah, absolutely. So um yeah the the the Borian view I mean so partly yeah the Chicago they were very wellunded very disciplined and very well organized and it did take them you know several decades this stuff you know intellectually sort of get started in the late 1950s 1960s >> all coming out of Milton Friedman and that type of stuff. Yeah, exactly. And Aaron Director and Pner uh so Stigler, so they're all working on this stuff. Um and and they they have a plan uh and they have a lot of money behind them.

[00:47:06]But I think one thing that um they had an an easier task in the sense that by the 1960s 1970s unfortunately antitrust is already becoming very technocratic.

[00:47:17]Um you lot lot I'm I'm an economist. I love being an economist. I think we have a lot to add to society. But um you know economists came much more became much more prominent uh in in antitrust cases.

[00:47:27]It became much more technical and removed from these fundamental questions of democracy, power, citizenship um those kinds of things. And it became this narrow game of you know did the did the price wiggle up or down by you know so much percent or um and uh or did output go up? And they're very slippery by the way these consumer welfare folks about what they really mean when they say consumer welfare. It doesn't mean as we would in common sense consider you know the the welfare of the consumer as a person. Um but yeah, I think people other groups just didn't weren't focused on antitrust as an issue of political economy. You know, the uh labor movement was focused on the National Labor Relations Board and the Department of Labor. I don't think they foresaw that this this loophole being opened by Slovenia would decades later not just encompass franchising, but a lot of other industries, you know, that have low wage workers. So I think that yeah a lot of the groups you would you would have expected to be pushing back. The franchises themselves at some times uh have been very well organized at other times not so much. Um so that was that was also you know they were never able to mount the same kind of effective opposition or they were but only in certain places and times. Um so yeah it was just uh you know you have a very concerted uh disciplined organized group of powerful and wealthy people pushing especially when you do it through the courts as opposed to having to actually persuade people to legislative action.

[00:48:41]Um yeah. Yeah. And also by the the best thing I'll say about Chicago doctrine is that it's very administrable. It's very simple. A judge, you know, who has no training in economics or, you know, can just sort of or antitrust can just sort of, oh, I I think I know what to do. I know what to do here. You know, this isn't that complicated. Uh yeah. So, it gives it gives it's a very it was a very powerful set of set of tools.

[00:49:01]>> Um okay. So, uh they established control over their uh franchise uh ease. Um, and when are they able to really shed their liability? Like what just uh what's the is there a Sylvania moment when it comes to shedding liability in the courts or does that just sort of come administer you bit by bit?

[00:49:28]>> That comes sort of bit by bit. Um and yeah and again in a way that people don't necessarily people who should be paying attention uh or you know in retrospect no one knew how this was going to shake out you know in the 1960s I would say as early as 1965. So here's the example I think the first time that uh franchisors were sort of able to get this um we can have it both ways uh uh issue is actually not with labor reliability at all was with the small business administration. So the SBA you know was formed in the 1950s to support small business uh and they initially um you know through the mid1 1960s they do not give loans to franchisers and the the logic is that this is I have you know the SBA administrator Eugene Foley saying this this looks like not financing or you know extending credit to a a small business a small independent business. This looks like we're financing the distribution outlets of McDonald's or you know or or Dunkin Donuts. We don't want to finance Dunkin Donuts. We want to finance independent small business owners and these contracts, franchises have to submit their contracts and they're they're so full of these controls that there's no way that we can we can within our mission as SBA uh extend extend this credit. Um the franchiseors mount mounted a lobbying effort uh and they were able to persuade the SBA and by the way SBA never talked to franchises. They only talked to franchisers and they they revised their lending standards. So now that McDonald so now McDonald's can access these loans. Um and the uh the the guy who ran these hearings for the SBA uh shortly thereafter became the Washington Council for the International Franchise Association.

[00:50:56]>> For the next 40 years. Yes.

[00:50:58]>> Oh.

[00:50:58]>> All right. Well, he landed softly for for a lifetime uh landing of softness. I I mean it is sort of ironic that the Small Business Association um ends up meeting only with these massive corporations to determine whether they're going to give their small business loans to these massive corporations essentially uh or to their benefit anyways. Um okay. And so, um, then let's jump ahead to the, um, fight for 15 because that's when the Obama, uh, um, National Labor Relations Board makes a determination that really flips stuff.

[00:51:48]Yeah. So um yeah by that time uh you know the control has gotten so intense and particularly you know in the 1990s uh you know with the internet. So you know even in the 1970s 1980s uh you know franchise who want to control their franchises you're still relying on in-person store visits phone facts um you know uh you know like like uh postalmiled computer reports uh but once you get the internet um the surveillance gets really intense. I mean, you know, they McDonald's corp corporate is able to monitor individual employees at a McDonald's restaurant. You know, how long does it take you to move >> in real time practically? Probably >> time. Yeah. Through those cash registers. I mean, it it Yeah, it is an intense level of control. So now it there the even the you know the sort of uh the fiction which was already uh pretty ludicrous in the 1970s about these being independent businesses is now I mean come on uh you know it's just it looks a little bit like a joke. Uh so by yeah by the by the 2010s uh but also it hasn't been tested at all in in any kind of court. So um in uh in the 2010s uh with the with the fight for 15 you know that was the big union effort uh is the big union effort uh to organize fast food. Um they finally called the question um and immediately you know the the the workers and the union and allied organizations don't bother with this franchise or franchisee distinction.

[00:53:05]They say right away no no no these only McDonald's can finance these wage increases. only McDonald's has the ability to alter, you know, the working conditions at the at the franchise restaurant. The franchisee has no power to do any of this. Um yeah, so that so that that was when that was that was uh when it finally I was with help some with some people like um particularly at the Department of Labor, David while um you know who who uh spearheaded a lot of the drawing attention to franchising these similar business models. Yeah, that's that's really the first time it seems like people really woke up like wow this is we've really unleashed this Pandora's box of how can we let companies have these control without responsibility business models >> and so wait so uh was it the labor department I guess yes I'm sorry it was the labor department who then rules essentially that there is um joint ownership or um what uh >> employment >> joint employment and um and So what just walk us through like >> at that point then were um uh there was able to be pressure put upon the corporations and then of course Trump is in office but then Biden's back in office and then of course Trump is back in office. Uh well, that saga ends in February of 2026 essentially uh or at least for the time being, but just walk us through those um uh those those different points as it goes back and forth.

[00:54:32]>> Yeah, sure. Yeah. So, um yeah, for the first time uh in the 201s, the the workers in the 515, you know, presented, you know, sort of new facts to both the Department of Labor, which does wage and hour laws and overtime and that kind of thing, and the National Labor Relations Board, which is the body that governs union rights. Um and so they're moving sort of in parallel tracks. The Department of Labor makes a new rule that finds basic this idea of joint employer where it's not just the franchisee who's on the hook for overtime violations under the you know under the Department of Labor and it's not just the franchisee who has to bargain with workers under the National Labor Relations Act. McDonald's has to come to the table too. Uh so that's what joint employment sort of that's that's what that doctrine and you know it's a little more complicated but in a nutshell that's what it means. Uh so yeah the first time that question really been called was with the FIFA 15 in in the 201s. So there's two things that happen particularly at the national national labor relations board. There's a case called Browning Ferris that is not franchising but establishes this new doctrine for uh when uh you know when when employers are joint employers which is um rather than you know sort of you know direct and immediate control over you know I'm going to fire this guy. I'm going to cut this one's hours. more indirect means of control like uh you know a recommendation to a franchisee uh you know so and so you know didn't is not moving the customers through the drive-through fast enough you should do something about that and then the franchisee does the firing right it's a similar it's the same thing but there's different mechanisms so that that's Brown and Ferris and then the the the national labor relations board files a suit against McDonald's holding not just the franchises for numerous uh labor law violations but also McDonald's um and that stuff is still sort of working its way you know through the NLRB process when Trump's elected the first time they abandon the case they settle it without any finding a joy employer things you know so then so things are just kind of dead you know through the Trump years then Biden comes in new NLRB new do I get things just go back to the way they were under the under the Obama years and guess what you know now we have another problem with Trump for the second time so it's been a sort of frustrating back and forth um since uh since the initial Obama era uh ruling of joint employment >> all right so uh wrapping up here.

[00:56:39]>> Yeah.

[00:56:40]>> In the event that Democrats um and it's not a guarantee with Democrats, but it's certainly a guarantee that it's not going to happen with Republicans get uh uh back into office and control. It sounds like we need legislation that defines this.

[00:56:59]>> Yeah, we do. So, yeah, that and that's that's yeah, it's a tough um Yeah, it's a tough environment to pass legislation in, but yeah, we need to stash it. We certainly need a statutory fix um you know at some point soon so we don't have this swinging back and also employers need some certainty about what they're what is an employee. It can't just keep swinging back and forth you know administration to administration. But the second thing is you know the other area where the Biden administration made a lot of progress was they also started to revisit some of these Chicago school antitrust doctrines. Uh so they were doing things like under under Lena Khan's FDC Commissioner Alvaro Bedoya gave a a fantastic speech where he just laid out like well if you're using these kinds of contractual controls under antitrust they're called vertical restraints in technical terms to mclassify independent contractors as employee oh sorry m classify employees as independent contractors that's also an antitrust issue that should be addressed by the FDC section 5 authority which is unfair methods of competition.

[00:57:56]uh they did a they did some similar things to sort of you know maybe not pass new rules but to address this idea of control without responsibility. So I think you know to to wrap it up you know the way franchiseors have been able to have their cake and eat it too if we come at them from both sides on the antitrust and the labor side and the you know liability side uh I guess three sides uh that sort of narrows their then they won't have to make a choice do you want the control or do you want to be accountable but you can't have it both ways >> I this may be a little bit outside your portfolio uh but on that antitrust side there it really felt over the past couple years I mean the the antitrust uh movement has been percolating I would say for over a decade now um well probably 14 15 years I mean in in earnest and um there's a lot more sensitivity to the fact that we left our prior um notion of antitrust and the arguments to return and again this is a mirror image of what happened in the 60s in the 70s um with what was coming out of Chicago uh school in that you know sometimes with these legal movements it's really just one player on the field and is it your sense that like that that that there again this might be outside your portfolio as it's coming more from the legal institution but that there is still momentum in pushing that and and what would it take from a statue? Like what would it take for this to sort of really turn in terms of the franchises? Like because I don't think antitrust has caught up to where we the the heights if you were we reached on the labor side but those heights were not as durable uh because Trump comes in he reverses it. But if we get it within the legal institution, there's a certain amount of momentum that continues to go. What's your sense of that?

[01:00:03]>> Yeah, so I think, you know, just like the Chicago school, this stuff is going to percolate up, you know, through with law students. Um, you know, and, you know, as they um, you know, the um, you know, the saying about science, you know, science uh, progresses one funeral at a time. You know, you need to get, you know, new cohorts of of of lawyers and and you know, litigators and judges who have different understandings um, you know, better understandings of how the economy really works. So, I think that that's that's a big part of it and new legislation is is essential. But in the meantime, you know, one thing that that maybe is a cause for a little bit of op optimism on the antitrust side of things is a lot of judges don't really have whether right whether they're rightwing or leftwing Republicans or Democrats don't have super well-formed doctrinary ideas about antitrust. So, I think some of them can be moved, you know, by by good arguments that are rooted, you know, in past cases. A lot of the the stuff I'm talking about um a lot of it is particularly under the Federal Trade Commission Act rather than the Sherman Act, you know, the major antitrust law is still good law. We can still, you know, move forward on some of these things. Uh but yeah, ultimately, uh federal legislation, whatever can be done. The other thing, a wonderful thing about antitrust is that there is no federal preeemption. So, states can make their own antitrust laws that are stronger on these issues of of controlling small businesses. There's a lot that can be done there. And then on the labor side, yeah, I mean, pass a proact.

[01:01:22]Uh and in the meantime, you know, we need Yeah, we need we just need to um yeah, reverse some of the, you know, win again and administratively reverse some of those bad joint employer uh rulings.

[01:01:32]Brian Kalachi, the book is Chains of Command, the Rise and Cruel Reign of the Franchise Economy. Thanks so much for your time today. We'll put a link to that at majority.fm and in our podcast and YouTube descriptions. Really appreciate it.

[01:01:49]>> Thanks for having me.

[01:01:50]>> All right, folks. That's it uh for this half of the program.

[01:01:57]It's uh Monday and that means that we're headed into Monday's um fun half.

[01:02:05]>> Emma Viglin will not be joining us today, but uh she'll be back tomorrow.

[01:02:11]What was >> I just anticipated something passive aggressive coming from.

[01:02:16]>> No, it wasn't at all. Now it made me feel like it was passive aggressive after you started laughing that.

[01:02:22]>> Uh Matt, I wonder do you uh ever have moments where you think about like somewhere in corporate McDonald's headquarters there's a file that says uh Matt Lech and uh like assesses your frier work back from when you were a kid. I would like it if there was like a big file that was collecting all of the things that me and the other people on headsets would say about the people coming through the drive-thru because we basically just made fun of them.

[01:02:53]>> Is that right?

[01:02:53]>> Yeah. Yeah. People there's this thing people say about like, "Yeah, no one's really thinking about you." But when it comes to McDonald's, in my experience, when people come to the drive-thru, we'd make fun of them immediately after they were done making their order. If they made a single flub of uh pronunciation or even if they had a funny voice, we would make fun of them immediately.

[01:03:13]>> So, you would say like, "Oh my god, they called it a m chicken."

[01:03:17]>> Exactly. Or like if they ordered something a stupid way. Um there's a simpler word >> like what would that >> just like ordering like McDonald's?

[01:03:24]>> Oh, not not organizing your drink order with your food order. So like >> being inefficient.

[01:03:31]>> So yeah. So they're like I'll have one cheeseburger and uh fries and a Oh, and then another cheeseburger.

[01:03:39]>> Yeah. Everyone's just like, oh my god, this person. This is the first time you've ordered a McDonald's.

[01:03:46]>> Get out more.

[01:03:47]>> Organize your your burgers.

[01:03:51]>> No, we don't have Whoppers here. I would love love to hear recordings of that.

[01:03:59]>> I would too. I it'd be worth the sort of like palunteer ponop that would require keeping that stuff for 25 years.

[01:04:09]>> Austin says, "I want to nominate that interview for best of that was fascinating. I've never thought about the intersection between franchises and antitrust."

[01:04:20]Noted.

[01:04:22]Do you have that?

[01:04:23]>> I'm on it, boss.

[01:04:24]>> Okay.

[01:04:25]>> You're like, "Oh, shoot. I was supposed to start this list uh 3 months ago."

[01:04:29]>> Didn't we best of that one about the Nixon administration and McDonald's franchises?

[01:04:35]Do we best of that one? Do you remember that interview?

[01:04:37]>> I think so. Was that part of like, you know what, that came up in this book and I meant to ask him about it. Uh Nixon had a um like a like a black employment thing and he was like uh pushing uh franchises >> sort of black capitalism through like McDonald's franchises type of thing.

[01:04:59]>> Folks, it's your support that makes this show possible.

[01:05:03]You can become a member at join the majorityreport.com.

[01:05:06]When you do, you not only get the free show free of commercials, but you also get the fun half and you can IM us on the fun half.

[01:05:14]>> I just want to note I already got six things in the best of list. So >> from from this year >> from this year.

[01:05:19]>> Damn. I need to do a year midyear best of.

[01:05:23]>> That's right. Uh >> oh. Somebody's bucking for a day off.

[01:05:29]>> Take a Junal Christmas in July.

[01:05:34]Maybe we'll do that. Maybe we'll do an extended uh July 4th is on a Saturday this year.

[01:05:40]>> I hate this country.

[01:05:41]>> Yeah, this year's this year's the calendar has been so messed up this year.

[01:05:48]>> So messed up. Uh also folks, just coffee. Fair trade coffee, hot chocolate. Use the coupon code majority, get 10% off. Matt, what's happening in the Matt Lechian media universe? Yeah, brand new Jackabin show for everyone who sub subscribes over at the Jacabin Meg YouTube channel. Uh we talked with Bronco March Teach about his piece uh going into how uh Peter Teal got a little bump back into politics from none other than Jeffrey Epstein who said he needed to develop a world sense and start looking into uh you know doing deals with people like Ehood Barack. So, check that out uh and talk about those emails and where we're at now that Epstein is dead and Peter Teal is a one of the primary government contractors in our uh surveillance state. Uh check that out at Jackaban YouTube channel.

[01:06:38]>> Speaking of Peter Teal, did you see that uh article that uh JD Vance there was a lobbyist paying people bucks a pop to be was it in Iowa?

[01:06:47]>> It was in Iowa. Yeah.

[01:06:48]>> To fill the room in Iowa for him. Jeez.

[01:06:52]>> Shabby. And then also somebody else uh just I am this and you know it's worth mentioning on um we'll talk more about it probably in the fun half but uh maybe we'll wait for Emma to come back to talk about this but uh a week or two ago we had Chris Rob on and uh he is running in Pennsylvania's is it fourth I can't remember exactly which uh district it is in Pennsylvania and I had interviewed him I didn't realize it like 20 years ago uh when he was uh a blogger and he's since been a a Pennsylvania uh state rep and he's running for Congress in the third. And it's just been revealed that Josh Shapiro, the governor of Pennsylvania, has been playing in the background in that um in that primary and apparently really worried about Chris Rob winning.

[01:07:53]And uh I mean we we had him on obviously supportive of of him. great policies, Chris Rob. But that gives us I think, you know, for me that story tells me a Chris Rob is definitely the person I want to win that primary and b um there's a lot more problems with Josh Shapiro than just uh his virulent Zionism.

[01:08:24]>> I don't think we actually covered it on air, but we had on the sound sheet for a while. He was, was it the state treasurer of Pennsylvania that he went and got unions to back the Republican because the Democrat >> said something mean about him or something real petty.

[01:08:39]>> Exactly. Yeah, she she apparently has been sort of dishing the tea on uh Twitter, too. So, yeah, maybe we'll Oh, AOC's to rally with Chris Rob this week in Pennsylvania's third. That's good. All right, folks. Look, we're gonna head into the fun half and we're going to do that.

[01:09:04]Now, three months from now, six months from now, nine months from now. And I don't think it's going to be the same as it looks like in six months from now. And I don't know if it's necessarily going to be better 6 months from now than it is 3 months from now. But I think around 18 months out, we're going to look back and go like, "Wow, what? What is that going on? It's nuts."

[01:09:30]>> Wait a second. Hold on for hold on for a second.

[01:09:32]>> The majority >> Emma, welcome to the program.

[01:09:37]>> Hey, >> Matt.

[01:09:40]Fun.

[01:09:41]>> What is up everyone?

[01:09:43]>> Fun.

[01:09:44]>> No me key.

[01:09:45]>> You did it.

[01:09:46]>> Fun. Let's go Brandon.

[01:09:49]>> Let's go Brandon.

[01:09:53]>> Bradley, you want to say hello? Uh, sorry to disappoint everyone. I'm just a random guy.

[01:09:58]>> It's all the boys today.

[01:09:59]>> Fundamentally false.

[01:10:00]>> No, I'm sorry. Women, >> stop talking for a second and let me finish.

[01:10:04]>> Where is this coming from, dude?

[01:10:06]>> But dude, uh, you want to smoke this um 78?

[01:10:10]>> Yes.

[01:10:13]>> All right. Me?

[01:10:16]>> Yes.

[01:10:19]Is this me?

[01:10:20]>> Is it me?

[01:10:21]>> It is you.

[01:10:25]>> Is this me? Hello. It's me.

[01:10:27]>> I think it is you. Who is you?

[01:10:30]>> No sound. Every single freaking day.

[01:10:34]What's on your mind? Sport.

[01:10:35]>> We can discuss free markets and we can discuss capitalism. I'm going to go snow.