Only a minority of McDonald's stores in China are operated by franchisees but under the CITIC-Carlyle deal, these franchisees would then turn into sub-franchisees and thus face the challenges outlined above, the SEIU explained.
Moreover, "McDonald's extracts higher royalty payments from its licensees, and generally does not allow them to retain some of sub-franchisees' royalties to invest in local operations; it also exerts tighter control over management and operational decisions as well as imposing growth targets which may not be in its licensees' interest," the report found.
And as the primary franchiser gets squeezed, so do employee wages. McDonald's is already a low-wage employer in Hong Kong and often pays the minimum wage as a starting salary, SEIU noted, adding that only seven percent of Hong Kong workers get paid above $4.38 per hour.
Tensions in other Asian countries may be a precursor of what's to come in China and Hong Kong. In South Korea, small franchisees are struggling after McDonald's opened new stores close to existing ones and forced franchisees to buy expensive new equipment, Yonhap News reported last week.
In response to SEUI's claims, McDonald's told CNBC that it took workers' rights very seriously.
"Our staff in the mainland and Hong Kong will not be affected by this transaction. Royalties of our existing franchisee will be paid to the new company directly so McDonald's China will provide the same level of support and commitment to our existing franchisees," said a company spokesperson.
Carlyle and Citic offered no comment.
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