Fee Hikes & Whoppers

What the Union didn't tell you about the franchising option

By Scott Henson and Tom Philpott
November 1990; page 3; Volume 2, No. 2

Throughout the controversy over bringing franchise food operations into the Texas Union, the debate has been framed in terms of "fee increase vs. franchising" - but the truth is more complex. The Daily Texan as well as pro-franchising jingoists on the Union board of directors have propagated the myth that franchising will solve the Union's financial problems caused by state-mandated pay hikes for its employees. The justification for franchising has been that has been that the Union can no longer afford to pay Union Dining Service (UDS) employees wage increases, which are periodically mandated by the legislature.

Fee Hikes: Myths and Realities

Several obfuscations surround the immediate $2.94 fee increase the board says the Union will need if UDS doesn't franchise. Basing its wording on these false assumptions, the November 14-15 referendum proceeds to place a financial gun to students' heads, giving them the option of either paying an immediate fee increase or selling off the student union to McDonald's and Taco Bell.

In reality, according to the Union's 1990-1991 budget projections, 67.6 percent of the Union's labor costs pay for non-UDS employees, so even under franchising the Union must still pay a substantial sum if the state hikes wages. In other words, students will have to pay a fee increase whether or not the Union franchises its dining services. At the Union board meeting where the board decided the wording for the referendum, the fact of fee increases under franchising was openly discussed, but the board made the decision to leave the issue of long-term fee increases off the referendum. The Texan failed to mention this key fact in its coverage of the meeting the next day.

Since that time the board has avoided discussing the prospect of long-term fee hikes or the real sources of financial problems at the Union. Take a look at the paid advertisement on page 19 of this Polemicist. The propaganda declares, in small print, that "neither option in this referendum addresses the long term financial concerns of the Texas Union as a whole," and then claims that "self operation" will require a fee increase in Fall 1991 while "independent contracting" will not. Union Director Andy Smith, however, admitted in an October 17 open forums with the Union board that a fee subsidy would "probably" be required next fall even if students vote in favor or franchising. The Texan missed reporting this important detail as well.

In addition, all board members and Smith agree that fee hikes will be necessary after the '91-'92 school year to pay for potential wage hikes for the 67.6 percent of the Union workforce that doesn't work for UDS. The long-term need for a fee increase with or without franchising has been conveniently left out of the picture.

In fact, franchising jingoist Neel Baumgarder originally wanted to put wording on the ballot that declared that "self operation" would require fee hikes in the out years as well as next fall, but didn't mention fee hikes in the out years under franchising at all. When confronted by boardmember Kerry O'Brien over the boldly biased wording of the proposed ballot language, the board's solution was not to talk about long-term fee hikes at all, rather than admit to the student body that fee increases would be required under franchising.

Indeed, it makes little sense to sever UDS from the Union to combat rising labor costs, because mandatory wage hikes have historically not been a problem for UDS - the cost increases have come from the non-UDS segment of the Union payroll. According to UDS's top manager Bud Wheeler, UDS covered the last two pay hikes out of its own budget without taking money from the rest of the Union. In fact, under its current budget UDS doesn't receive any of the fee money that funds the rest of the Union, and in fact contributes substantially to fund its overhead.

Franchising and Food Prices

A Union committee released a study last spring which showed that UDS charges less for food than other vendors in the campus area - most of which are franchising outlets. This means that if you have lunch in the Union a few times in a semester, you will actually save money by voting for a self-controlled UDS over franchising.

Further, franchises set the market price for their food without input from or accountability to students. But for UDS to raise prices, the student-controlled Union board of directors would have to vote. McDonald's and Taco Bell raise prices at will. An information packet and proposed contract prepared by Union for potential vendors (dated August 28, 1990) discusses no controls on food prices. In fact, the packet describes a "tenant food service advisory committee" which deals with issues like "employee appearance" and "service problems," but never mentions prices.

Also, the figures on which franchising boosters base their arguments are grossly inflated. Neel Baumgardner, a Union boardmember and franchising booster, admits that the Union's budget projections are based on an across the board 10-percent pay hikes for employees, because that's the number the University's lobbyists submitted to the legislature. But given the current economic crisis, that's an absurd projection. Expensive financial problems like prison overcrowding and education reform necessarily must take priority over wage increases. If the legislature raised wages for state employees by 10 percent, the state would quickly go bankrupt. University employees will be lucky to get anything at all.

Franchising: Financial Boon or Corporate Boondoggle

Would-be franchisers fail to address a certain contingency involved with their scheme: What happens if franchises crash in the middle of their contracts? In such a scenario, the Union would experience a dramatic loss of revenue. Then the board would quickly ask students to subsidize their managerial incompetence with a hefty fee increase. Of course, by then current franchising enthusiasts like Baumgardner would be long gone, although you can be sure that the implementation of franchising at the Union would be featured prominently on their resumes.

And what happens if the market for junk food on campus won't support franchises at all? According to a report from the Union board's Subcommittee on Cooperatives, every franchise failed except for McDonald's at the Eastern Illinois University student union. Given that possibility, why should we expect franchising to succeed here? Such a case would spell the death of dining services at the Union, since to reinstate a self-supporting service would require astronomical start-up costs - funded, of course, by astronomical fee increases.

This scenario is as far-fetched as it may seem. An internal franchising document from last spring reveals the corporations the board has targeted. The list includes McDonald's, Wendy's, Burger King, Domino's, Pizza Hut, Mr. Gatti's, Taco Bell, and a few chicken vendors. Almost every corporation listed owns a franchise within walking distance of campus. It's doubtful that the student market could support two Whataburgers across the street from each other. In some student Unions where franchising has been successful - e.g., UC San Diego - the campus is isolated and the Union faces no significant competition. Here, the market is already flooded with fast-food. Franchising tempts permanent disaster.

Franchising and Student Control

The board last spring responded to student outrage over inviting multinationals into the Union by claiming that it would attract locally and minority owned businesses. The latest franchising document puts the lie to that claim. In the point system on which the Union would evaluate prospective franchises, local ownership is listed but given no point value, and minority/woman ownership merits only 100 points out of 1,000. Of the businesses listed above, none are locally based, and at least one - Domino's - actively subverts women's rights by funding the anti-choice movement. Clearly, the board's pro-franchising wing is hunting for multinationals, not small local businesses that might actually provide quality fare.

Franchising would thus cede all control over dining services to huge corporations, while still requiring student subsidies to keep the Union running. Any hope for implementing boycotts or banning styrofoam from the Union would be lost. This amounts to taxation without representation - the board will have sold off our autonomy to the highest bidder.

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Thankfully, all of this can be avoided if students express their determination to stop this scheme by voting for a self-operated Union on Nov. 14-15. Don't let multinational corporations and their resume-padding champions turn your Union into a giant Burger King.