A Lesson in Economic Liberty

Sometimes, it is the cliche that perpetuates the tale. A story in yesterday’s New York Post would be much less of one had it been about, say, doctors or firefighters and donuts, but when it’s cops and donuts, the incident catches wide attention. Even more so in a time of tension between police and citizens, tension fueled by lightning-quick social media.

It is alleged that two plainclothes officers, with visible badges on their belts, were skipped over for service by a counter clerk at a Dunkin Donuts shop in the Bushwick/Brownsville section of Brooklyn, NY. When the customer being served reportedly told the clerk that the cops were next in line, the clerk allegedly retorted “Yeah, I know, but I don’t serve cops.” The follow-up played out as: the manager offered a different account, suggesting the cops were standing in the wrong place, but then claimed that the store served everyone without discrimination (and refused to share video recordings of the incident). The owner of the location (it is a franchise) personally apologized to one of the cops and is doing his best to mea culpa (and save his business, I presume). Dunkin Donuts corporate issued a statement that has been deemed insufficient by a police union head. The fate of the clerk has not been disclosed.

Those are the particulars. There is much insight to be had in considering them in the context of economic liberty and free markets.

Does a Dunkin Donuts store have the right to refuse service to cops, in a genuinely free market? Yes, with a major caveat. The store itself is not sentient and, and thus we must figure out who, exactly, has that right. The answer to that question depends on the economic relationships between the various actors, in this case, a corporate parent, an owner, a manager, and a clerk.

The manager and the clerk are employees of the owner. They are being paid to perform a service. If they do anything other than carry out the tasks for which they are being paid, they are in breach of that agreement. So, if the owner does not grant them the discretion to refuse service to cops, then neither has any right to do so. Either or both do have the right, barring some written contract that almost certainly doesn’t exist, to quit on the spot rather than serving the cops, but that’s as far as their rights go in this case.

The owner, in turn, has a contractual arrangement with the parent company, selling trademarked goods under a corporate name and enjoying the marketing and goodwill associated with that name. Thus, the owner doesn’t have carte blanche to serve or not serve according to his own desires, and if Dunkin Donuts has a no-discrimination policy as part of the franchise agreement, the owner himself doesn’t have any right not to serve. Not, by the way, that I’m alleging anything of the sort. So far, the owner has been the best actor of all in this affair.

So, even though the clerk, the manager, and the owner all have the right to their opinions regarding cops, or anyone else for that matter, none of them has a right not to serve cops. Note, by the way, that I have not yet introduced any public accommodation or anti-discrimination law or principle into the discussion. All this is strict economic-liberty contractual stuff.

People are calling for a protest against Dunkin Donuts, presumably on a national level. This would be in response to the perceived tepidness of the corporate statement. Such a protest lies well within the principles of economic liberty, but, ideally, the protest might actually exclude the location of the incident if it is deemed that the owner has sufficiently addressed and atoned for the inappropriate actions of the clerk, and it is the parent company that has been deemed insufficiently penitent.

The corporate parent certainly didn’t want this bit of bad publicity, and its status as a mere franchisor (it didn’t hire nor does it have any real control over the clerk) makes its involvement nothing more than bad luck, exacerbated by a cliche. But, such guilt-by-association is a risk associated with the franchise business model, and just as the parent benefits from offloading the location- and operations-based risk of each franchised unit onto the franchisee, it assumes the risk of damage to the brand caused by such missteps and bad acts.

Meanwhile, the corporate parent also has to weigh its response here against the prejudices of other segments of its customer base. There are DD patrons who are pro-cop, there are DD patrons who are anti-cop, and there are DD patrons who are cop-indifferent but who have specific opinions about fairness and justice. Any response put forth by Dunkin Donuts here will be interpreted in various ways by these various segments, and DD’s proper goal as a publicly traded company is to put forth a response that best protects the brand and the company’s performance. Gauging this is the toughest part of this whole business, and it’s why C-suite executives get paid the big bucks.

The owner is the most SOL player in this incident. Small business owners are constantly at-risk from un-condoned behavior by those they hire, and the smaller the business, the greater the risk. The corporate parent will weather the kerfuffle, and while the clerk or manager might lose a job, neither of them has a financial stake in the business or has invested risk capital. If the bad taste of this incident lingers with the community and the NYPD, the business could suffer significantly, and that’s even before we consider less-than-savory but all-too-real possibilities such as slow NYPD responses to 911 calls (yes, this has happened).

Basic free-market economics can easily predict the behaviors we witnessed here. A low-level employee, either inexperienced, insufficiently trained, or merely unaware of the obligations of a job, did something out-of-bounds. His or her fate remains uncertain, but even if fired, the setback will be temporary. A manager, stuck somewhere in the middle, tried to manage the incident in real time with a variety of responses. An owner, legitimately fearing the biggest repercussions from a nasty but small incident, is going all-out to save his business from crippling protests. A corporate franchisor, with deep pockets, a wide and varied customer base, strategic goals, and limited association with the incident, offers a tempered and calculated response.

What would properly happen? Given the damage caused, the employee (assuming the allegations are true, and perhaps even if they aren’t) would be canned, the manager would be given a talking-to, the owner would do everything he could to mend fences with the NYPD, the NYPD would accept the owner’s efforts, and any protest against the parent (by cops or by supporters/sympathizers) would be targeted solely at corporately-owned locations, not at other franchise locations (who have absolutely nothing to do with any of this), and not at the original location, which would have put things right. We might also witness an outreach by other franchise locations, across the country, if owner/operators deem it economically beneficial to, say, offer special promotions to police and their families to show on which side of this matter they stand.

Is that how it’s going to play out? Fat chance. Far more likely that protests would hit even the innocent and the penitent. Does that fit into economic liberty as well? It does. There’s no utopia, there’s no cosmic scale of fairness, and there’s risk of injustice in everything. That’s how life goes.

Finally, this happened despite all sorts of public accommodation and anti-discrimination laws, and the fallout will not be affected by any of those laws. Market forces will address this better than any bureaucrat or bloviating politician could. Not perfectly, because there is no utopia, no ideal outcome other than a WABAC machine that could put the owner in position to deal with the clerk in the moment or even beforehand. That, too, is reality.

Is this whole business unfortunate? Indeed, but at least we can learn a few things from it. And, perhaps, the clerk might learn a life-lesson as well.

Peter Venetoklis

About Peter Venetoklis

I am twice-retired, a former rocket engineer and a former small business owner. At the very least, it makes for interesting party conversation. I'm also a life-long libertarian, I engage in an expanse of entertainments, and I squabble for sport.

Nowadays, I spend a good bit of my time arguing politics and editing this website.

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