This Private Equity Firm Owns EVERY Chain

This footlong pretzel has a dark secret behind it. I bought it at a Subway, but it's an Auntie Anne's pretzel. That's not the dark secret.

Hold on. It's part of Subway's new campaign, where they're footlonging everything. They've got the Auntie Anne's pretzels, their own cookies and Cinnabon churros.

And that's because Auntie Anne's and Cinnabon and Subway and Baskin-Robbins and Dunkin' and dozens of other iconic brands from the Cheesecake Factory to Arby's to Sonic to the Bar Method to the actual School of Rock are all owned by the same company, adding up to around 1. 4 million employees. And that company, Roark Capital, wants all of the profit of those employees' labor with none of the responsibility or accountability that comes with it.

And the fight for them to keep it that way is at the heart of one of the least discussed and most important labor law battles of the year. So let's look at how we got here. This is Neal Aronson.

He's a bit reclusive to the degree where most of his Google image results are just this one picture. But these two photos are the most enlightening: one with a table full of fast food and one with a literal bucket of money. Aronson began his career as the private equity industry was first growing into the juggernaut it is today.

The early age of buyouts and pilferage capitalism. Check out our video here for more on the basics of private equity. In 2001, Aaronson and his uncle founded U.

S. Franchise Systems, a holding company for franchisable hotel chains. Franchise is going to be a key word throughout this.

A lot of you might already know this, so I'll make it quick. Franchising is a business model where the main brand company, let's say Subway, doesn't own all of its locations. Instead, they sell a license and all the parts one would need to run a subway.

The name, the recipes, the decor to an individual or much smaller business who then owns and often operates that one location. Many franchise owners own multiple locations. That smaller owner pays the bigger corporation licensing fees and often has to use the bigger corporations' vendors.

Like Subway owns the technology for their point of sale systems, which the smaller owners must use. We'll go a bit more into that relationship in a bit because it's complicated and it's changing right now. Aronson's franchise hotel business grew rapidly and in 2001 he sold it for $100 million.

Aronson used that money and his knowledge of how much he could make off franchises to start a new company, Roark Capital Group, a private equity firm. We literally had nothing when we started. The only thing we had was a dream, and we had something called Roark's core values.

Yeah, and $100 million. But about those values. Let's look at the name, Roark.

The firm is named after Howard Roark, the main character in Ayn Rand's The Fountainhead. Maybe you know Ayn Rand as the famous author whose philosophy of self-reliance and individualism has influenced politicians for years. So true.

But what does Howard Roark specifically represent? Aronson, in a rare interview, and Roark's official website, attribute the name to The Fountainhead character's "conviction" and "integrity" and "not any political philosophy. " But what Howard Roark really represents can tell us a lot about how the company named after him and Aronson do business.

Roark is Rand's main example of egoism written in the book as egotism. Randian egoism says that selfishness- that's acting purely in one's own self-interest with no concern for anyone else-is not only okay, but is a moral imperative. Here's a clip from a Fountainhead movie that comes straight from the book.

I came here to say that I do not recognize anyone's right to one minute of my life, nor to any part of my energy, nor to any achievement of mine. The fictional Roark also claims, it's not in the movie, sorry, "The egotist, in the absolute sense, is not the man who sacrifices others. He is the man who stands above the need for using others in any manner.

He does not exist for any other man and he asks no other man to exist for him. We'll come back to that. But let's look at what Roark actually does.

Their first big acquisition is Carvel, the ice cream chain. You know, Fudgie the Whale and whatever. And over the years, they just kept expanding and expanding and expanding there in food and auto repair, exercise, and even education.

Yeah, they own schools. Primrose Schools is a chain of franchised private early education facilities. Franchisees are encouraged to open schools in office and retail spaces.

And because each school is independently owned, parents have no idea what their kids are being subjected to. Like one Redditor who reports children being forced to pray before getting fed. So clearly it's a wide variety of brands, but there's one thing they all have in common: incredibly low wages and other worker mistreatment.

I spoke with the labor team at the Private Equity Stakeholder Project. Usually you see a little bit more diversification within a private equity portfolio. But Roark really does kind of specifically focus on low wage work because that's how they can extract the most value.

There's this kind of constant stream of capital, constant stream of workers. And so it also makes it really difficult for workers to unionize. Roark oesn't have any union presence at any of its companies.

It's worse than most private equity firms. Roark really is the champion of exploitation. Wage theft is a huge issue at Roark.

We found that Roark actually had the highest rate of wage and hour violations out of its peer group. So higher than Blackstone, higher than Apollo, higher than Carlyle, etc. .

And Roark isn't ashamed of any of this. Inspire Brands- that's one of Roark's holding companies that they own all the other companies through-bragged to franchisees about their efforts to kill the $15 minimum wage and other pro-worker legislation. Federal minimum wage, you know, remains at $7.

25, which is not a livable wage anywhere in the U. S. So how do they get away with treating their 1.

4 million employees like this? Because they're not really Roark's employees yet. Let's look what the franchise model actually means, both for workers and franchisees, the small business owners who contract with work brands to start Subways and Buffalo Wild Wingses and Dunkins and Schools of Rock.

In 2023, Neal Aaronson, the head of Roark, was inducted into the International Franchise Association's Hall of Fame. He was the first private equity executive to reach that honor. The IFA is the main trade group for giant franchise corporations.

And as is usual with corporate trade groups, you can learn a lot about what they want from their own website. The only political issue that gets its own whole section on their side is something called Joint Employer, which is about who a franchise employee works for, who is their actual boss, who is responsible for their rights. Does a Subway worker work for the guy who owns that Subway or for Subway, The giant international corporation?

And by extension, Neal Aronson? Here's some quick history. In 2014, McDonald's franchises in California were committing gross wage theft against their workers.

The workers got together and sued the franchise owner and corporate McDonald's. At the time, this was unprecedented. But the National Labor Relations Board ruled that McDonald's corporate was a joint employer with the workers on paper employer, the local location owner, allowing the workers to sue McDonald's HQ.

The workers got millions in their settlement. This sent chills through the franchise corporation industry. A year later, the NLRB ruled that a franchisor-that's the big corporation doesn't need to directly control franchise employees to be a joint employer, making the giant corporations liable for labor violations.

But then in 2017, after this dude gutted the NLRB and put his own guys in, the definition of joint employer was weakened, removing responsibility from the giant corporations and leaving it with the local owners in most cases. The franchise model is problematic because any issues that arise in one of the franchises, Roark, as the ultimate owner, can kind of shirk responsibility. So this is a really profitable, you know, preferable model for a business owner because they never have to take any of the responsibility.

So if the franchise industry got what they wanted, why are they talking about it now? Because in 2023, the NLRB under this dude reversed the rule again. The new standard defines joint employer as any entity that has control of at least one of the following wages and benefits hours and schedule the assignment of duties to be performed, supervision or performance rules and disciplined hiring and discharge and working conditions.

This change will make the corporate giants responsible for the rights of the employees at their franchise locations. And of course, the changes is facing challenges in court from the Chamber of Commerce, a pro-business, anti-worker lobbying group. They spend more on lobbying than anyone else.

And, of course, Roark Capital sponsors their events. There are also challenges in Congress. Perhaps that's why Neal Aronson focused his political donations this year entirely on West Virginia Senator Joe Manchin, because he's fighting to keep the NLRB from officially making the change.

Joint employer is an essential role for millions of American workers. So when you look at the lawsuits for wage theft, you know, only the franchises are listed because the franchisees are technically liable for it and Roark is not liable. But Roark, as the ultimate owner, still has control over what the franchises do.

So either these workers are not being paid at the direction of Roark or Roark is not giving the franchise the financial backing and support to be able to pay workers adequately. It really should be. Roark As the ultimate owner that, you know, takes the ultimate responsibility And perhaps Roark isn't too optimistic about this change because around the time the rule change was suggested, they began looking to sell one of their largest brands in the public stock market.

Meanwhile, the Subway deal is still going through with the minute chance the FTC will stop it to prevent a sandwich monopoly. More and more people will continue to work for both brands as they set the standard for labor in America. When Roark and the National Restaurant Association put out their brief about why they did not support the Federal Minimum Wage Act, they said that it was, you know, the price increase would be passed along to consumers and that would make, you know, their business model untenable.

We see that the prices are going up anyway. Rourke went from having $33 billion in assets in 2023 to $37 billion in assets in 2024. How are you making $4 billion and someone can't even get seven more dollars an hour?

Right. Which brings us back to Roark. The fictional character, the ideal man of people like Neal Aronson.

Howard Roark says he is the man who stands above the need of using others in any manner. He does not function through them. He is not concerned of them in any primary matter.

He asks no other man to exist for him. But everything Aronson built wouldn't be possible without the over a million people who work for him, the thousands who pay him franchise fees, the workers whose pensions are invested in his fund, and the politicians he pays off to get his way. Everyone makes fun of the idea that Dubway workers are called 'sandwich artists', but they're the ones who create the sandwich.

So I leave you with this clip of Aronson's ideal man. The creator thinks, the parasite copies. The creator produces, the parasite loots.

Roark brands, had some of the highest level of food stamp recipients. And so Roark is actually subsidizing billions and billions of dollars in gains through tax payers. Aronson’s 1.

4 million workers produce every day, and Aronson profits with no responsibility for them. Who's the looter here? Thank you so much for watching.

And we saved the most revelatory bit of this for last. The pretzel is only 11 inches. It's called a footlong and the pretzel is 11 inches.

So. Thanks for watching. And please don't forget to, like, subscribe to support more quality journalism like this.