Blog Post
Jan 21, 2026
Jan 21, 2026
The Franchise Payment Paradox
How to Have Centralized Control Without Co-Employment Risk
The Franchise Payment Paradox
How to Have Centralized Control Without Co-Employment Risk
Your franchise business consultant is boarding a plane to visit locations in Illinois. She's armed with last quarter's sales reports and a list of franchisees who seem to be struggling. Meanwhile, three locations are quietly underperforming, another is implementing a pricing strategy that's driving exceptional results, and one is about to run into cash flow problems that could have been prevented.
You have no visibility into any of this in real time. And here's the frustrating part: you can't—at least, not if you want to avoid co-employment risk.
This is the impossible choice that franchise systems face with payment processing. You want to know what's happening across your network, ensure brand consistency, and use data to help franchisees succeed. But your legal counsel says: "Don't get too involved. Co-employment risk is real."
Fortunately, this isn't actually a compromise you have to make.
Understanding the Co-Employment Trap
The stakes around co-employment have never been higher for franchisors. Under the National Labor Relations Act (NLRA), when two entities are deemed joint employers, the consequences are severe. According to labor law, they can be held jointly responsible for each other's employment practices: Foster Garvey PC, such as unfair labor practices, or have joint employment responsibilities for the affected workers, such as joint responsibility to collectively bargain with a union.
For franchisors, this could mean liability for:
Wage and hour violations at franchisee locations
Discrimination in hiring practices
Unsafe working conditions
Union negotiations and labor disputes
Even when the franchisor had no direct involvement in those decisions.
So where does the line actually fall? Under the current legal standard, an entity is a joint employer only if it exercises "substantial direct and immediate control" over one or more essential terms and conditions of employment: Faegre Drinker. While this is more favorable to franchisors than previous proposed rules, the definition of "substantial direct and immediate control" remains ambiguous enough—especially when it comes to centralized payment systems—that many franchisors play it extremely safe.
The fear is legitimate. And it drives conservative decision-making that comes at a significant cost.
What Everyone Loses When You Play It Safe
To maintain arm's length distance, many franchisors push their franchisees to ISOs (Independent Sales Organizations) for payment processing. Each franchisee negotiates their own rates, chooses their own processors, and operates independently.
This might protect against co-employment risk, but it creates problems for both franchisors and franchisees.
Loss #1: The Customer Experience
Without unified payment standards, the customer experience varies wildly across your system:
One location accepts Apple Pay, another doesn't
One offers financing options for high-ticket services, another only takes cash and cards
One has a modern, seamless checkout experience, another is using a duct taped terminal from 2010
Your franchisees are competing against each other—not on operations or service quality—but on basic payment capabilities. Customers who have a poor checkout experience at one location may avoid the entire brand.
Loss #2: Performance Visibility (Both Sides Miss Out)
When franchisees use independent payment processors, nobody has the complete picture.
Franchisors lose:
Real-time performance trends across the system
Early warning signs of locations in trouble
The ability to identify and replicate what's working
Franchisees lose even more:
Benchmarking against similar locations
Insights into pricing strategies that drive results
Access to best practices from top performers
The ability to see problems before they become crises
As one franchise operator put it, franchisees lose "the ability to know from a business intelligence perspective what's going on" in their own business relative to others. They're operating in isolation when they could be learning from the collective success of the network.
Loss #3: System-Wide Support and Innovation
Without unified payment data, you can't build the support systems that help franchisees succeed:
Your franchise business consultants show up with outdated information instead of real-time insights
Struggling franchisees can't get proactive help before problems escalate
Successful strategies can't be identified and shared across the system
AI-powered tools that could make franchisees more efficient can't be built (they require data you don't own)
Your franchisees end up reinventing the wheel, solving problems that others in the network have already figured out. That's inefficient for everyone.
The Multi-MID Solution: Having Your Cake and Eating It Too
Here's what most franchisors don't realize: modern payment architecture can solve this paradox entirely.
How Multi-MID Architecture Works
Multi-MID (Multiple Merchant ID) architecture allows each franchisee to operate with their own merchant ID—maintaining their status as an independent business owner—while giving you unified reporting, system-wide visibility, and consistent brand standards across all locations.
From the NLRB's perspective, this structure is unambiguous: each franchisee operates their own independent business with their own merchant account. The franchisor maintains the arm's length relationship that protects against co-employment exposure.
From the franchisee's perspective, they get the best of both worlds: the independence and competitive rates that come with their own merchant account, plus the benefits of being part of a larger network with better tools, insights, and support.
It's not a choice between control OR independence—both franchisor and franchisee get both.
Think of It This Way
Instead of one business with locations (which creates co-employment risk), you have independent businesses with shared infrastructure.
The shared platform sitting on top of these independent merchant accounts enables system-wide insights and innovations without triggering the "substantial direct and immediate control" that defines joint employment.
What This Unlocks for Your System
For Franchisors:
Unified performance dashboard – Real-time visibility across all locations without compromising franchisee independence
Automated royalty collection – Transaction-level visibility that eliminates manual reporting and disputes
Foundation for AI-powered support – Build intelligent tools to help franchisees succeed
For Franchisees:
Standardized brand experience – Consistent payment capabilities that match or exceed what competitors offer
Performance benchmarking – See how they compare to similar locations and identify improvement opportunities
Access to innovation – Roll out new payment solutions (BNPL, financing options, etc.) that help them increase ticket sizes and win more business
Better support – FBCs arrive with real-time insights, not outdated reports
The Solution: Aligned Interests, Better Outcomes
For too long, franchisors have been forced to choose between protecting themselves legally and supporting franchisees operationally. That's a false choice based on outdated payment practices.
Multi-MID architecture changes the equation entirely. Franchisors get the visibility needed to provide effective support. Franchisees maintain their independence while gaining access to better tools, benchmarking insights, and system-wide innovations. Top performers get recognized and their strategies get shared. Struggling locations get help before problems escalate.
The Bottom Line
If you're currently pushing franchisees to ISOs or using a single-MID structure, you're facing an unnecessary tradeoff. Modern payment architecture eliminates the choice between legal protection and operational visibility.
The question isn't whether to own your payment data and create system-wide visibility—it's how to do it without creating co-employment exposure.
When both franchisor and franchisee interests are aligned, everyone wins. The franchisor gets the visibility and data needed to support the system effectively. Franchisees get better tools and support while maintaining their independence. And the entire franchise network becomes more competitive.
The co-employment paradox has a solution. As franchisees demand better tools and insights, the systems that can deliver both support and independence will win.
——
About JustiFi: JustiFi is an embedded fintech platform built for vertical SaaS platforms and franchise networks. Our multi-MID architecture enables franchisors to maintain brand consistency and data ownership while preserving franchisee independence and mitigating co-employment risk.
Your franchise business consultant is boarding a plane to visit locations in Illinois. She's armed with last quarter's sales reports and a list of franchisees who seem to be struggling. Meanwhile, three locations are quietly underperforming, another is implementing a pricing strategy that's driving exceptional results, and one is about to run into cash flow problems that could have been prevented.
You have no visibility into any of this in real time. And here's the frustrating part: you can't—at least, not if you want to avoid co-employment risk.
This is the impossible choice that franchise systems face with payment processing. You want to know what's happening across your network, ensure brand consistency, and use data to help franchisees succeed. But your legal counsel says: "Don't get too involved. Co-employment risk is real."
Fortunately, this isn't actually a compromise you have to make.
Understanding the Co-Employment Trap
The stakes around co-employment have never been higher for franchisors. Under the National Labor Relations Act (NLRA), when two entities are deemed joint employers, the consequences are severe. According to labor law, they can be held jointly responsible for each other's employment practices: Foster Garvey PC, such as unfair labor practices, or have joint employment responsibilities for the affected workers, such as joint responsibility to collectively bargain with a union.
For franchisors, this could mean liability for:
Wage and hour violations at franchisee locations
Discrimination in hiring practices
Unsafe working conditions
Union negotiations and labor disputes
Even when the franchisor had no direct involvement in those decisions.
So where does the line actually fall? Under the current legal standard, an entity is a joint employer only if it exercises "substantial direct and immediate control" over one or more essential terms and conditions of employment: Faegre Drinker. While this is more favorable to franchisors than previous proposed rules, the definition of "substantial direct and immediate control" remains ambiguous enough—especially when it comes to centralized payment systems—that many franchisors play it extremely safe.
The fear is legitimate. And it drives conservative decision-making that comes at a significant cost.
What Everyone Loses When You Play It Safe
To maintain arm's length distance, many franchisors push their franchisees to ISOs (Independent Sales Organizations) for payment processing. Each franchisee negotiates their own rates, chooses their own processors, and operates independently.
This might protect against co-employment risk, but it creates problems for both franchisors and franchisees.
Loss #1: The Customer Experience
Without unified payment standards, the customer experience varies wildly across your system:
One location accepts Apple Pay, another doesn't
One offers financing options for high-ticket services, another only takes cash and cards
One has a modern, seamless checkout experience, another is using a duct taped terminal from 2010
Your franchisees are competing against each other—not on operations or service quality—but on basic payment capabilities. Customers who have a poor checkout experience at one location may avoid the entire brand.
Loss #2: Performance Visibility (Both Sides Miss Out)
When franchisees use independent payment processors, nobody has the complete picture.
Franchisors lose:
Real-time performance trends across the system
Early warning signs of locations in trouble
The ability to identify and replicate what's working
Franchisees lose even more:
Benchmarking against similar locations
Insights into pricing strategies that drive results
Access to best practices from top performers
The ability to see problems before they become crises
As one franchise operator put it, franchisees lose "the ability to know from a business intelligence perspective what's going on" in their own business relative to others. They're operating in isolation when they could be learning from the collective success of the network.
Loss #3: System-Wide Support and Innovation
Without unified payment data, you can't build the support systems that help franchisees succeed:
Your franchise business consultants show up with outdated information instead of real-time insights
Struggling franchisees can't get proactive help before problems escalate
Successful strategies can't be identified and shared across the system
AI-powered tools that could make franchisees more efficient can't be built (they require data you don't own)
Your franchisees end up reinventing the wheel, solving problems that others in the network have already figured out. That's inefficient for everyone.
The Multi-MID Solution: Having Your Cake and Eating It Too
Here's what most franchisors don't realize: modern payment architecture can solve this paradox entirely.
How Multi-MID Architecture Works
Multi-MID (Multiple Merchant ID) architecture allows each franchisee to operate with their own merchant ID—maintaining their status as an independent business owner—while giving you unified reporting, system-wide visibility, and consistent brand standards across all locations.
From the NLRB's perspective, this structure is unambiguous: each franchisee operates their own independent business with their own merchant account. The franchisor maintains the arm's length relationship that protects against co-employment exposure.
From the franchisee's perspective, they get the best of both worlds: the independence and competitive rates that come with their own merchant account, plus the benefits of being part of a larger network with better tools, insights, and support.
It's not a choice between control OR independence—both franchisor and franchisee get both.
Think of It This Way
Instead of one business with locations (which creates co-employment risk), you have independent businesses with shared infrastructure.
The shared platform sitting on top of these independent merchant accounts enables system-wide insights and innovations without triggering the "substantial direct and immediate control" that defines joint employment.
What This Unlocks for Your System
For Franchisors:
Unified performance dashboard – Real-time visibility across all locations without compromising franchisee independence
Automated royalty collection – Transaction-level visibility that eliminates manual reporting and disputes
Foundation for AI-powered support – Build intelligent tools to help franchisees succeed
For Franchisees:
Standardized brand experience – Consistent payment capabilities that match or exceed what competitors offer
Performance benchmarking – See how they compare to similar locations and identify improvement opportunities
Access to innovation – Roll out new payment solutions (BNPL, financing options, etc.) that help them increase ticket sizes and win more business
Better support – FBCs arrive with real-time insights, not outdated reports
The Solution: Aligned Interests, Better Outcomes
For too long, franchisors have been forced to choose between protecting themselves legally and supporting franchisees operationally. That's a false choice based on outdated payment practices.
Multi-MID architecture changes the equation entirely. Franchisors get the visibility needed to provide effective support. Franchisees maintain their independence while gaining access to better tools, benchmarking insights, and system-wide innovations. Top performers get recognized and their strategies get shared. Struggling locations get help before problems escalate.
The Bottom Line
If you're currently pushing franchisees to ISOs or using a single-MID structure, you're facing an unnecessary tradeoff. Modern payment architecture eliminates the choice between legal protection and operational visibility.
The question isn't whether to own your payment data and create system-wide visibility—it's how to do it without creating co-employment exposure.
When both franchisor and franchisee interests are aligned, everyone wins. The franchisor gets the visibility and data needed to support the system effectively. Franchisees get better tools and support while maintaining their independence. And the entire franchise network becomes more competitive.
The co-employment paradox has a solution. As franchisees demand better tools and insights, the systems that can deliver both support and independence will win.
——
About JustiFi: JustiFi is an embedded fintech platform built for vertical SaaS platforms and franchise networks. Our multi-MID architecture enables franchisors to maintain brand consistency and data ownership while preserving franchisee independence and mitigating co-employment risk.