Uber and Lyft might adopt a franchise business model in California

Uber and Lyft are reportedly considering adopting a franchise model in California as an alternative to having to classify their contracted drivers as full-time employees. 

The New York Times reports that both ridesharing companies are “seriously discussing” licensing out their brands to vehicle fleet operators in a franchise-like model. The new business model results from the companies trying to dodge a gig economy law that requires app-based companies to categorize contractors the same as regular employees. 

By adopting a model resembling an independently owned franchise, Uber and Lyft would not be in full control over their drivers. Lyft has reportedly already discussed the idea with its board of directors, according to the Times. 

Julie Wood, a Lyft spokesperson, told Digital Trends that they support a business model that keeps contractors as independent workers.

“We’ve looked at alternative models, and the one that would work best for drivers is what we’re supporting in the ballot measure — they remain independent and can work whenever they want while also receiving additional health care benefits and an earnings guarantee,” Wood said.

Digital Trends also reached out to Uber to comment on the report. We will update this story when we hear back. 

Uber
Uber

The report comes a week after both companies said they would temporarily shut down their apps in California if they were forced to classify drivers as independent workers. 

Last week’s preliminary injunction requires Uber and Lyft to stop classifying their drivers in California as contractors under the Assembly Bill 5 law that went into effect earlier this year. Under the new law, contractors are eligible for basic protections like minimum-wage requirements, health benefits, and Social Security. 

The two companies must appeal the injunction this week or face the consequences, which include up to $ 2,500 for each violation and civil penalties that could reach up to hundreds of millions of dollars. 

“If the court doesn’t reconsider, then in California, it’s hard to believe we’ll be able to switch our model to full-time employment quickly,” Uber CEO Dara Khosrowshahi said during an interview on MSNBC last week. 

Lyft CEO Logan Green echoed Khosrowshahi’s statements last week, saying, “If our efforts here are not successful it would force us to suspend operations in California. Fortunately, California voters can make their voices heard by voting yes on Prop 22 in November.”

Proposition 22 in California would effectively repeal Assembly Bill 5. Both ridesharing companies have thrown millions of dollars into supporting Prop 22. 

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