Big Bear Supermarkets No. 3

BIG BEAR SUPERMARKETS NO. 3 Big Bear Supermarkets #3 and Retail Clerks Union, Local 1222, Retail Clerks International Association, AFL-CIO and Amalgamated Meat Cutters Local No. 229, Amalgamated Meat Cutters & Butcher Workmen of North America, AFL-CIO. Cases 21- CA-15605 and 21-CA-15703 November 1, 1978 DECISION AND ORDER BY MEMBERS JENKINS. MURPHY, AND TRUESDALE On February 24, 1978, Administrative Law Judge Roger B. Holmes issued the attached Decision in this proceeding. Thereafter, the General Counsel and Charging Parties Retail Clerks Union, Local 1222. Retail Clerks International Association, AFL-CIO, and Amalgamated Meat Cutters Local No. 229, Am- algamated Meat Cutters & Butcher Workmen of North America, AFL-CIO, filed exceptions and sup- porting briefs. Respondent and the Intervenor, Rich- ard Holmes,' filed briefs in support of the Decision of the Administrative Law Judge. Pursuant to the provisions of Section 3(b) of the National Labor Relations Act, as amended, the Na- tional Labor Relations Board has delegated its au- thority in this proceeding to a three-member panel. The Board has considered the record and the at- tached Decision in light of the exceptions and briefs and has decided to affirm the rulings, findings, and conclusions of the Administrative Law Judge only to the extent consistent herewith. Respondent, a corporation engaged in the opera- tion of retail grocery markets in San Diego County, California, owns and operates a chain of approxi- mately 22 supermarkets, known as Big Bear markets, in that area. The corporate entity, designated as Big Bear Supermarkets #3, additionally owns and oper- ates a number of other businesses. Big Bear Super- markets #3 has, since at least 1957 and 1950, respectively, been party to successive col- lective-bargaining agreements with Retail Clerks Union, Local 1222, Retail Clerks International Asso- ciation, AFL-CIO, herein called Local 1222, and Amalgamated Meat Cutters Local No. 229, Amalga- mated Meat Cutters & Butcher Workmen of North America, AFL-CIO, herein called Local 229, cover- ing multistore bargaining units at its retail grocery and meat markets in San Diego County.3 Prior to Holmes, who was alleged In the complaint t ) be the alter ego of Respon- dent. was permitted to intervene at the hearing 2 These include 6 other grocery stores and markets operated under the trade names of Market Place and Cooks Markets. 9 Daisy's Restaurants. and 15 Par Liquor Stores, as well as several shopping centers. November 15, 1976, Respondent applied its con- tracts with Local 1222 and Local 229 to bargaining unit employees covered by these contracts at all Big Bear markets in San Diego County. Effective November 15, 1976, Respondent fran- chised its Big Bear store 13, located in La Mesa, Cali- fornia, to Richard Holmes, the Intervenor in this proceeding. Richard Holmes, a former store manager at another of Respondent's Big Bear markets, is the son of Gerald Holmes, a corporate officer of Re- spondent,4 who is a 5-percent shareholder of Big Bear Supermarkets #3. Respondent had not previ- ously, nor has it since, franchised any other of its operations. Under the terms of the franchise agreement execu- ted by the parties on November 8, 1976, Richard Holmes has exclusive control over the labor relations of the La Mesa store. In preparation for taking over the store's operation, Holmes recruited and hired a new complement of employees for that store, paying them wages and benefits less than those required un- der Respondent's union contracts. The 12 Big Bear employees working in the La Mesa store were trans- ferred by Respondent to other of its Big Bear mar- kets before Holmes commenced operation of the store as franchisee. Only one former employee of store 13, a part-time janitor who was not included in the bargaining unit under either of Respondent's union contracts, was retained by Holmes at the fran- chised store. The parties have stipulated that Respondent's em- ployees at the La Mesa store were transferred to other Big Bear stores without being given the oppor- tunity to seek continued employment at the fran- chised store, as we note is required by Respondent's contract with Local 1222.' The parties have further stipulated that Respondent neither notified nor bar- gained with the Unions representing these employees regarding the employees' transfer either before or af- ter the transfers occurred. The parties additionally stipulated that Richard Holmes has refused to recog- !Respondent's contracts with Local 1222, the most recent of which is effective from July 28, 1975. to July 30, 1978. set forth the specific job classifications constituting the unit appropriate for collective bargaining. Respondent's contracts with Local 229, the most recent of which is effective from November 8. 1976. to November 4. 1979. likewise set forth the job classifications included in the appropriate bargaining unit 'Gerald Holmes is Respondent's general manager and secretary-treasur- er. as well as a member of the corporation's board of directors. Art XIX(D) of Respondent's contract with Local 1222 states as follows: D. ,ALE O TiNSFEII I In the event of a sale or transfer of a store or stores, an employee shall be allowed a seven (7) das period from the date of announcement to the employees of the sale or transfer during which time he may determine whether he wishes to stay with the seller or whether he wishes to make application for employment with the new owner or transferee In the event the employee chooses to remain with the seller. such choice shall not be construed as any guarantee of employment over and beyond the terms if this Agreement 179 DECISIONS OF NATIONAL LABOR RELATIONS BOARD nize either Local 1222 or Local 229 as the bargaining representative of the employees at the franchised store, and has also refused to apply the terms of Re- spondent's contracts with these Unions to the em- ployees at the La Mesa store. He has declined as well to supply Local 1222 with the names and addresses of the store's current employees in the job classifica- tions included in its bargaining unit when such infor- mation was requested by that Union. As a result of the employee transfers and of franchisee Holmes' subsequent refusal to recognize and bargain with these Unions as representatives of the employees at store 13, or to abide by the terms of Respondent's collective-bargaining agreements with Local 1222 and Local 229, both Unions filed the instant unfair labor practice charges. The Regional Director for Region 21 consolidated the two cases and, on June 9, 1977, issued an amended complaint alleging that the La Mesa store is an alter ego of Big Bear Supermarkets #3. The gravamen of the General Counsel's contention is that Respondent's purported franchising of store 13 to Richard Holmes was, in actuality, a sham trans- action motivated by Respondent's desire to trans- form a losing operation into a profitable one by avoiding its obligation to pay contractually agreed to union wages and benefits. Specifically, the General Counsel alleges that Big Bear retained and exercises such extensive control over the franchised operation as to render it in effect a subordinate entity and dis- guised continuance of Big Bear Supermarkets #3. Thus, the complaint alleges that Respondent violated Section 8(a)(l), (3), and (5) of the Act by refusing to bargain with Local 1222 and Local 229 as representa- tives of the employees at the La Mesa store; by refus- ing to honor its collective-bargaining agreements with these Unions with regard to those same employ- ees; by withdrawing recognition from the Unions as collective-bargaining representatives of the employ- ees in the separate units at the La Mesa store; by unilaterally transferring the previous employees of the La Mesa store to other stores of Respondent within the multistore bargaining units, and without bargaining with the Unions over such transfers, be- cause of their union representation; and by refusing to furnish Local 1222 with the names and addresses of current employees of the La Mesa store in job classifications included in its bargaining unit when such information was requested by that Union. The Administrative Law Judge, rejecting the Gen- eral Counsel's alter ego contention, dismissed the complaint in its entirety. Analyzing the instant case in terms of whether the two enterprises have substan- tially identical ownership and control and common business purpose, management, operations, equip- ment, customers, and supervision, the Administrative Law Judge concluded that these factors did not pre- ponderate in favor of finding Richard Holmes to be the alter ego of Big Bear Supermarkets #3.6 Nor, he concluded, did the evidence establish the selection of Holmes as franchisee to be a subterfuge by which Respondent would continue to operate the store. In addition, the Administrative Law Judge found that neither the transfer of all union-represented employ- ees at the La Mesa store to other stores in Respon- dent's chain nor Respondent's failure to notify and bargain with the Unions representing those employ- ees regarding their transfer and change in status of the store violated the Act. For the reasons set forth below, we disagree with certain of these conclusions, and therefore find that Respondent committed cer- tain of the unfair labor practices alleged. The Alter Ego Issue The La Mesa store, as indicated in the Administra- tive Law Judge's Decision more fully describing the facts in this proceeding, is located in a shopping cen- ter which Respondent owns. This particular shop- ping center has been subject to three separate free- way construction condemnation proceedings by the State of California, shrinking its size from a total of some 13 acres in 1950 to less than 2 acres in 1976. The most recent condemnation and road construc- tion, occurring in 1975-76, resulted in an approxi- mate 25-percent sales drop for store 13 and the elimi- nation of a substantial portion of the store's parking area. Profit and loss statements show that the store declined from a fiscal 1974 profit of $1,580 to a fiscal 1975 loss of $52,507 and a fiscal 1976 loss of $55,320. It was these financial losses, along with economic difficulties at some of its other operations, which Re- spondent asserts precipitated its decision to franchise the La Mesa store. Further influencing that decision, Respondent maintains, was its desire to retain its overall market share of the grocery business in San Diego County, and the need to keep the Big Bear name in its shopping center as a customer-drawing factor for the benefit of its tenants in other stores and shops in the center. Thus, Respondent claims, the franchising of the store was a bona fide arm's-length business transaction motivated by a desire to mini- mize its financial losses while achieving these related business objectives. Selected by Respondent as franchisee was Richard Holmes, an employee of Big Bear Supermarkets #3 These factors have previously been identified as being generally indica- tive of alter ego status. Crawford Door Sales Comnpany, Inc. and Cordes Door Compan., Inc., 226 NLRB 1144 (1976); Marquis Printing Corporarion and Mutual Lithograph Coompans, 213 NLRB 394 (1974). 180 BIG BEAR SUPERMARKETS NO. 3 since 1969. The son of Gerald Holmes, a major offi- cer and a shareholder of Respondent,7 Richard Holmes was until November 1976 manager of a high volume Big Bear market in El Cajon. His ability to continue in that capacity was, unfortunately, limited by the fact that he is a victim of multiple sclerosis. The effects of this disease had necessitated his taking a leave of absence of about 4 months in 1975, and Holmes testified that the disease was affecting his ability to perform as a Big Bear manager in 1976. Rated by the Veterans Administration as 30 percent disabled, Holmes testified that multiple sclerosis is generally a progressive disease, depending upon the person and the kind of pressure he is under. Holmes has been aided in the operation of the franchised store by his wife and mother, who have worked at the store without pay. The franchise agreement executed by the two par- ties was, according to Respondent's attorney who prepared the document, patterned after a 1966 copy of a Southland Corporation franchise agreement for a 7-Eleven store which the Board had found to create an independent contractor relationship between a franchisor and its franchisee.s While identifying sev- eral areas in which modifications to that document were made, including rent, advertising, termination, and inventory, Respondent avers that it basically merely incorporated the provisions of Southland's agreement in drafting Big Bear's franchise and leas- ing agreements.9 (Major provisions of the Big Bear agreement are set forth verbatim in the attached De- cision of the Administrative Law Judge.) As a review of this agreement reveals, Big Bear retains under the contract terms a substantial num- ber of controls over the operation of the La Mesa store. Thus the agreement provides, for example, that 7Approximately 80 percent of the stock of Big Bear Supermarkets #3 is owned by its president, John Mabee, with Gerald Holmes owning about 5 percent, and the remaining 15 percent being held primanly by supervisors of Respondent. 5 The Southland Corporation, d/b/a Speeder 7-Eleven, 170 NLRB 1332 (1968). ' While we do not find it necessary to our decision herein to engage in an extensive comparison and analysis of the Big Bear and Southland Corpora- tion agreements, we note significant vanations between the two. Southland franchisees, for example, are required to pay a cash initial franchise fee at contract execution, as well as provide cash operational capital as an initial investment. They are also charged interest on open account items advanced by Southland, if they desire to finance their operation through Southland rather than from some other source. Big Bear, as discussed infra, has mark- edly different provisions regarding these items. (Any thorough and accurate comparison of Big Bear's contract with the Southland agreement, asserted by Respondent to have been its model, is precluded, however, by the fact that Respondent introduced into evidence only a copy of a Southland agree- ment dated July 1977, and the 1966 version claimed as the prototype for Big Bear's franchising contract was not made available as record evidence.) In any event, given the overall facts of this case, we do not find the situation of the Southland Corporation, which is an acknowledged entity in the fran- chising industry, to be analogous to that of Big Bear, which is not in the business of franchising and, indeed, aside from the La Mesa store has made no attempt to franchise its business units. (1) the La Mesa store is to be operated as part of Respondent's system of Big Bear stores; (2) Holmes is specifically obligated to carry such product lines as are customarily carried in the Big Bear system, and in such quantities as are reasonably necessary, in the sole judgment of Big Bear, to meet customer de- mands: (3) Holmes must obtain permission from Big Bear before changing any product line customarily carried in the Big Bear system; (4) Big Bear has the authority to contract for such advertising as it deems sufficient in its sole judgment and, while Holmes may purchase such additional advertising as he may de- sire, that advertising must be approved in writing by Big Bear and may not, in the sole judgment of Big Bear, be inconsistent with its advertising purposes; (5) Holmes must stock and sell advertised goods at the advertised prices and honor discount coupons contained in Big Bear advertisements; (6) Holmes is obligated to purchase and distribute trading stamps for so long as Big Bear gives them; and (7) Big Bear reserves the right to provide Holmes with supervision and technical assistance, and in any event with no less supervision than is provided to other markets in the Big Bear system. Holmes is moreover precluded from as- signing, encumbering, mortgaging, pledging, or hy- pothecating his interest in the leasehold estate or equipment (although Big Bear's right to take the same actions with regard to the store's equipment and fixtures is retained), and from selling, transfer- ring, or assigning his interest in the contract as well. A termination clause provides that Holmes may lose his franchise if he fails to request and receive any approvals required by the agreement, among several listed conditions justifying termination. Thus, the franchised store continues to operate essentially as any other Big Bear market, with Big Bear actively exercising its contractual prerogatives. Also of import, particularly since Respondent as- serts that the franchising resulted from valid eco- nomic considerations, are the financial provisions underpinning the franchising agreement. For a downpayment of $2,000 and the execution of an unsecured promissory note in the amount of $114,400.81, Holmes took over a $116,400.81 inven- tory of goods and became the putative owner of this ongoing business operation having an annual sales volume well in excess of $1 million.'s According to article 19 of the agreement, outlining the operation of the owner's open account, Big Bear pays for all ex- penditures required to be made in the operation of the business, and debits these to Holmes' open ac- °0 The value of "goodwill" accruing to the new owner in his assumption of the business is not financially recognized in this document. In marked contrast, the purchase prices of two stores recently sold by Respondent included amounts of S40.000 and S100.000, respectively, over and above the value of inventory transfered 181 DECISIONS OF NATIONAL LABOR RELATIONS BOARD count. There is no requirement for the payment of interest on this account; therefore, Big Bear in actu- ality advances interest-free all moneys required for the store's operation-including so-called owner's in- vestment costs of permits, transfer fees, business li- censes, and "set-up" fees." Big Bear then collects and deposits Holmes' daily sales receipts, credits this income to Holmes' open account, and, by virtue of the accounting services which it also provides, de- termines the quarterly and, finally, yearly net operat- ing income for apportionment between it and Holmes. As consideration for the lease, franchise, li- cense agreement, utilities, and services to be per- formed by Big Bear, the agreement requires that Big Bear be paid a "Big Bear Charge" consisting of 40 percent of Holmes' net operating income.' 2 Interspersed throughout the agreement are provi- sions whereby Big Bear commits itself to pay various items to be borne by Holmes under the contract's terms, debiting these payments to Holmes' noninter- est-bearing open account. Thus, Big Bear obligates itself to pay all bills, invoices, or other obligations Holmes is required to pay under the maintenance and repair provisions for the leased premises and equipment; the rent itself for the building and fix- tures is debited to the open account (since Big Bear owns the leased building and fixtures, it is in effect advancing the economic costs of these items by de- biting Holmes' account); Big Bear agrees to advance Holmes sufficient sums to obtain all permits and li- censes required by law for the store's operation; Big Bear agrees initially to arrange for fire and casualty insurance, debiting its cost to the open account; Big Bear is required, in addition to paying real property taxes under the agreement, to make the actual tax payments for Holmes' personal property taxes on the inventory and equipment, as well as the business' sales taxes, again debiting the open account; Holmes' pro rata share of the advertising and supervision Big Bear provides is to be debited to the account; Big Bear is obligated to pay and debit to his open ac- count Holmes' state unemployment insurance, social security, payroll insurance, workmen's compensation insurance, and any other similar expenses relative to Holmes' employment relationship. As is apparent I Art. 18 of the agreement, which is not among those provisions included in the Administrative Law Judge's Decision, states as follows: ii ownear 10srfatr OWNER shall pay for all permits, transfer fees. business licenses. or any other "set-up" fees that may be necessary to take over the store and operate it. In addition. OWNER agrees to pay to BIG BEAR the cost of opening inventory as is provided in paragraph 17 above. These amounts shall constitute the OWNER'S investment. These costs shall be debited to OWNER'S Open Account as provided above. 2 Net operating income is defined as "gross gain less operating expen- sC. from all of the above, it is Big Bear and not Holmes providing the capital to operate the La Mesa store. Holmes would moreover appear under the agreement's terms to have no choice of obtaining his financing from any other source, a fact which we note without comment other than the observation that he would not appear likely to desire other fi- nancing, with Big Bear financing the store's opera- tion interest free. It is, of course, relevant to a consid- eration of the alleged bona fide nature of the franchising transaction. Holmes' unsecured $114,400.81 promissory note in payment for the store's initial inventory is payable $500 or more monthly, including interest at the rate of 5 percent per annum, until the note has been paid in full. At the end of each quarterly accounting, Holmes is required to make a principal payment on this note in an amount equal to 50 percent of his net profit until the cost of the initial inventory has been paid in full. There is no time limit as to when this principal amount must be fully paid. The Adminis- trative Law Judge found it significant that Holmes had applied his total net profits, rather than only the half required by the contract, to the repayment of the principal on this note, as indicative that Holmes is truly a franchisee and the agreement is not a sham. A review of the record, however, indicates that the Ad- ministrative Law Judge was factually in error in this regard. Whereas Holmes did apply his total quarterly profits to payment of the principal on January 13 and April 20, 1977, on July 31, 1977, he paid on the note's principal only the half of his net profits man- dated by the contract. Thus, whatever weight the Ad- ministrative Law Judge accorded this fact in reach- ing his conclusion would appear misplaced. Another significant financial aspect of the trans- action is reflected in article 21 of the agreement, re- lating to Holmes' "Draw on Anticipated Profits." This provision requires Big Bear to pay Holmes $425 each week, irrespective of whether or not the busi- ness is showing a profit. Moreover, the amount may be changed only upon the written request of Holmes and with Big Bear's approval, and may not be re- duced either quarterly or at the close of the fiscal year for lack of a profit. This amount, roughly com- parable to the $18,500 to $23,000 annual salaries re- ceived by managers of Respondent's Big Bear mar- kets, is also to be debited to Holmes' interest-free open account. Although the agreement refers to this payment as a "Draw on Anticipated Profits," the payment is totally unrestricted under the contract terms by any necessity of ever having any profits to draw on. 3 It would appear, rather, to operate as an I The 1977 Southland agreement, in comparison, likewise provides for an owner's draw on anticipated profits, but reduces that draw if the draw plus 182 BIG BEAR SUPERMARKETS NO. 3 open-ended salary guarantee with Big Bear again ad- vancing these funds interest free. Big Bear, as stated, avers that it entered into the franchising agreement in order to cut its financial losses at the La Mesa store.'4 The agreement does not, however, as described above, function to relieve Big Bear of an unprofitable operation. Richard Holmes paid Big Bear only $2,000 and his unsecured promissory note, the principal of which is essentially to be amortized from the store's future profits, if any, for the Big Bear franchise. As a result of this trans- action, Big Bear gained only $2,000 and a promise from Richard Holmes to pay for the other $114,400.81 worth of inventory provided him at some time in the future when the store makes money. Al- though the agreement requires Holmes to share in any losses of the store, if his open account reflects a balance due upon the termination of the agreement, the record contains no evidence that Holmes owns assets accessible for such purpose. It does indicate, however, that he has pledged no other assets as se- curity. Meanwhile, under the agreement Big Bear is committed to continue its general financing of the store's operation, by virtue of various provisions re- quiring it to pay all the bills, and by the fact that Holmes pays no interest on these moneys advanced. Thus, any true entrepreneurial risks would appear to be borne in the first instance by Big Bear, rather than by Holmes. Furthermore, franchising could not solve the ma- jor reason adduced by Respondent for the store's poor financial record. Big Bear President John Ma- bee testified that the store's volume had been "head- ed on a straight line up, and all of a sudden with the taking of the parking lot it leveled off and flat- tened-dropped and has sort of maintained a level line since that particular time," referring to the 1974 state condemnation and 1976-76 freeway construc- tion at the store's locale which resulted in about a 25-percent drop in its sales volume. Franchising could hardly remedy a lack of parking space. Nor does the record contain any evidence that Holmes overcame this problem. What was accomplished through the purported franchising, however, was a drastic reduction in the store's operating costs through avoidance of the ap- plication of Respondent's union contracts to the franchised store's employees. Thus, an examination of profit and loss statements for the store shows, for the4payroll for the store exceeds a stated percentage of net sales. While Respondent's other asserted reasons for the franchising of the store. i.e., the desire to maintain its overall market share of the grocery business in San Diego County and to keep Big Bear in the shopping center as a customer-drawing factor, may explain why Respondent did not want to sell the store, they would appear to bear no logical relationship to how franchising could resolve this store's financial difficulties. example, that whereas salaries and wages cost Big Bear $174,204, and employee benefits an additional $24,537, for the period from August 1, 1975, to July 31, 1976, Holmes has operated the franchised store from November 15, 1976, to July 31, 1977, at a salary and wage cost of $81,687, with employee benefits costing only $1,988. While these figures do not, of course, represent equivalent time periods, they are indicative of drastically reduced costs in this area, with approximately the same number of employees working at the store during both time periods.' Op- erating the store in essentially the same manner as it had previously functioned under Big Bear, Holmes has succeeded through these operating cost reduc- tions in transforming the store from a losing opera- tion to one which earned a net operating income in excess of $30,000 for the first 8-1/2 months of its fiscal year, as reflected in the instant record. We agree with the General Counsel that the fore- going shows that Respondent's real purpose behind the entire arrangement was to retain for itself control of the La Mesa operation while, through the appear- ance of a bona fide franchise agreement, achieving a reduction in labor costs through the avoidance of the economic obligations imposed by its collective-bar- gaining agreements with Local 1222 and Local 229. Further evidence that Big Bear's real objective was simply to oust the Unions from its La Mesa store is, as the General Counsel argues, found in the manner in which it rid that store of those employees who had been represented by the Unions. Thus, those employ- ees were given no option to continue at La Mesa but were, without any consideration apparently being given to their choice in the matter, transferred to other Big Bear stores. This was done with respect to employees represented by Local 1222 despite that Union's contract with Big Bear requiring, as noted above, that in the event of a store's transfer or sale an employee be given 7 days to choose between ap- plying for a job with the new owner or moving to another of Respondent's stores.'6 Such preemptory transferring out ostensibly would obviate the possi- bility that Holmes would be a successor employer obliged, despite even a bona fide franchising, to rec- ognize and bargain with the Unions. Therefore, in view of all the foregoing, including, inter alia, the selection of Richard Holmes, a close relative of high management, as the purported fran- chisee; the controls retained and exercised by Big Bear over the store's operation; and the economic realities of the arrangement reflected in the franchise ' The parties have stipulated that prior to November 15, 1976. there were 12 employees at the store, and that the number of employees of Holmes at the store after that date was 13. At the time of the hearing, Holmes testified, the store had 16 employees. t6 See fn 5. supra. 183 DECISIONS OF NATIONAL LABOR RELATIONS BOARD agreement whereby Holmes initially invested only $2,000 cash and Big Bear financed the store's opera- tion without charging interest to Holmes, we con- clude, contrary to the Administrative Law Judge, that the arrangement between Big Bear and Holmes was not a bona fide franchising transaction, but rath- er that Holmes' position was essentially that of a manager of,'7 and that he was in fact Respondent's alter ego with respect to, the La Mesa store.' Accord- ingly, we find that Richard Holmes and Respondent constitute a single employer within the meaning of Section 2(2) of the Act, and that employees of the La Mesa store are employees of Respondent and part of the bargaining units covered by Respondent's collec- tive-bargaining agreements with Local 1222 and Lo- cal 229. Therefore, by withdrawing recognition from and refusing to recognize Local 1222 and Local 229 as the collective-bargaining representatives of the em- ployees in the separate units at the La Mesa store on and after November 15, 1976, and by refusing at such times to apply the terms of the collective-bar- gaining agreements to such employees, thereby uni- laterally changing the terms and the conditions of employment specified in the applicable collective- bargaining agreements, Respondent violated Section 8(aX5) and (1) of the Act. Respondent additionally violated Section 8(a)(5) and (1) of the Act by refusing to furnish information to Local 1222 when that Union requested names and addresses of its bargain- ing unit employees at the La Mesa store from Re- spondent's alter ego, Richard Holmes. Finally, by transferring employees at the La Mesa store to other stores because of their representation by Local 1222 and Local 229, Respondent violated Section 8(a)(3) and (1) of the Act as well.' CONCLUSIONS OF LAW 1. Respondent Big Bear Supermarkets #3 and its alter ego, Richard Holmes, constitute a single em- 17 As noted above, Holmes' "guaranteed" minimum income under the "franchising" arrangement was substantially the same as that earned by managers of Respondent's other stores. Is The record indicates that control over labor relations with the new La Mesa store employees existed essentially in Richard Holmes. While we have regarded the control which one party exercises over the labor relations poli- cy of another to be an important factor in deciding whether a franchisee is an independent contractor or a single or joint employer with its franchisor, our application of that criterion has been premised upon the existence of a bona fide, arm's-length franchising relationship between the contracting parties. See The Southland Corporation, d/b/a Speedee 7-Eleven, supra. Here, based upon a consideration of all the factors present in this case, we cannot, as concluded above, find that Richard Holmes and Big Bear entered into such a bona fide, arm's-length franchising relationship. 19 Inasmuch as we have found that Big Bear Supermarkets #3 and Rich- ard Holmes are a single employer, and Respondent's union contracts pro- vide for employee transfers between stores within the multistore bargaining units without prior consultation with the Unions, we do not find the trans- fers violated Sec. 8(aX5) of the Act. ployer engaged in commerce within the meaning of Section 2(2), (6), and (7) of the Act. 2. Richard Holmes is the alter ego of Big Bear Su- permarkets #3 in the operation of Respondent's Big Bear store 13, located in La Mesa, California. 3. Retail Clerks Union, Local 1222, Retail Clerks International Association, AFL-CIO, and Amalga- mated Meat Cutters Local No. 229, Amalgamated Meat Cutters & Butcher Workmen of North Amer- ica, AFL-CIO, are labor organizations within the meaning of Section 2(5) of the Act. 4. All employees of Respondent Big Bear Super- markets #3 and its alter ego, Richard Holmes, in a unit of all hourly employees working in the job clas- sifications enumerated in its collective-bargaining agreement with Retail Clerks Union, Local 1222, Re- tail Clerks International Association, AFL-CIO, ef- fective from July 28, 1975, to July 30, 1978, at its retail grocery and meat markets in San Diego Coun- ty, including the La Mesa store, constitute a unit ap- propriate for the purposes of collective bargaining within the meaning of Section 9(b) of the Act.20 5. Retail Clerks Union, Local 1222, Retail Clerks International Association, AFL-CIO, is now, and at all times material herein has been, the exclusive bar- gaining representative of all the employees of Re- spondent Big Bear Supermarkets #3 and its alter ego, Richard Holmes, in the aforesaid unit for the pur- poses of collective bargaining within the meaning of Section 9(a) of the Act. 6. All employees of Respondent Big Bear Super- markers #3 and its alter ego, Richard Holmes, in a unit of all hourly employees working in the job clas- sifications enumerated in its collective-bargaining agreement with Amalgamated Meat Cutters Local 229, Amalgamated Meat Cutters & Butcher Work- men of North America, AFL-CIO, effective from November 8, 1976, to November 4, 1979, at its retail grocery and meat markets in San Diego County, in- cluding the La Mesa store, constitute a unit appropri- ate for the purposes of collective bargaining within the meaning of Section 9(b) of the Act.2' 7. Amalgamated Meat Cutters Local 229, Amal- gamated Meat Cutters & Butcher Workmen of North America, AFL-CIO, is now, and at all times material herein has been, the exclusive bargaining representa- tive of all the employees of Respondent Big Bear Su- permarkets #3 and its alter ego, Richard Holmes, in the aforesaid unit for the purposes of collective bar- gaining within the meaning of Section 9(a) of the Act. 20 We have adopted herein the description of the appropriate unit for collective bargaining as described in the amended complaint and stipulated to by the parties in this proceeding. 21 See In. 20, supra. 184 BIG BEAR SUPERMARKETS NO. 3 8. By refusing since on or about November 15, 1976, to bargain collectively with the Unions as the exclusive bargaining representatives of the employees in the aforesaid separate units, by withdrawing rec- ognition from and refusing to recognize Local 1222 and Local 229 as the exclusive bargaining representa- tives of the employees in the separate units at the La Mesa store, by refusing to apply the collective-bar- gaining agreements with these Unions to such unit employees, thereby unilaterally changing the terms and conditions of employment established by its col- lective-bargaining agreements, and refusing to fur- nish Local 1222 with the names and addresses of bar- gaining unit employees at the La Mesa store when such information was requested by that Union, Re- spondent has engaged in unfair labor practices with- in the meaning of Section 8(a)(5) and (1) of the Act. 9. By transferring employees of the La Mesa store to other stores within said multistore units because of their union representation at the La Mesa store, Re- spondent has engaged in unfair labor practices with- in the meaning of Section 8(a)(3) and (1) of the Act. 10. The aforesaid unfair labor practices affect commerce within the meaning of Section 2(6) and (7) of the Act. THE REMEDY Having found that Respondent has engaged in, and is engaging in, unfair labor practices in violation of Section 8(a)(l), (3), and (5) of the Act, we shall order Respondent to cease and desist therefrom and to take certain affirmative action designed to effectu- ate the policies of the Act. As we have found that Respondent unlawfully withdrew recognition from and refused to recognize and bargain with Local 1222 and Local 229 as the exclusive representatives of the La Mesa store em- ployees in their respective bargaining units, we shall order Respondent to recognize and bargain with the Unions as the representatives of Respondent's em- ployees in those units at the La Mesa store. Having also found that Respondent unlawfully refused to apply the collective-bargaining agreements with these Unions to the unit employees at the La Mesa store, thereby unilaterally changing the terms and conditions of employment specified in its collective- bargaining agreements, we shall also order Respon- dent to restore the status quo ante by applying the terms and conditions of the current collective-bar- gaining agreements with these Unions to the La Mesa store employees, retroactive to November 15, 1976, and to make the La Mesa store employees whole for any losses suffered as a result of Respon- dent's failure to apply the collective-bargaining agreements to them, with interest to be computed in the manner prescribed in Florida Steel Corporation, 231 NLRB 651 (1977).22 We shall also order Respondent to supply Local 1222 with the names and addresses of its La Mesa store bargaining unit employees, as requested by that Union, as well. Furthermore, as we have found that Respondent discriminatorily transferred La Mesa store employees to other stores within the multistore bargaining units because of their union representa- tion, we shall order Respondent to offer the employ- ees who were transferred out of the La Mesa store immediate reinstatement to their former jobs or, if those no longer exist, to substantially equivalent po- sitions, displacing if necessary any employees as- signed to these positions since November 15, 1976, without prejudice to their seniority or other rights and privileges, and to make whole the transferred employees or any other unit employees 23 for any losses they may have suffered as a result of the un- lawful transfers. All such losses are to be reimbursed in the manner set forth in F. W. Woolworth Compa- ny, 90 NLRB 289 (1950), with interest thereon to be computed as prescribed in Florida Steel Corporation, supra. Finally, inasmuch as Respondent's unlawful con- duct was for the purpose of avoiding and evading its collective-bargaining obligations, we regard such conduct as antithetical to the entire collective-bar- gaining process and, thus, to a primary policy of the Act. Accordingly, we shall order that Respondent cease and desist from infringing in any other manner upon the rights guaranteed to its employees by Sec- tion 7 of the Act. ORDER Pursuant to Section 10(c) of the National Labor Relations Act, as amended, the National Labor Re- lations Board hereby orders that the Respondent, Big Bear Supermarkets #3 and its alter ego, Richard See. generally, Iris Plumbing & Hearing Co., 138 Nl RB 716 (1962). Local 1222 has asserted that the transfer of the La Mesa store emplo)- ees to other stores within the multistore bargaining unit resulted in lasyoffs and reductions in hours of unit employees at these other stores The Admin istrative Law Judge, while noting this general assertion. found Insufficient record evidence to support such a finding. Inasmuch as we haie found Respondent's transfer of union-represented employees from the 1.a Mesa store to be unlawful, ans unit employees at other Big Bear stores iof Respon- dent within the bargaining units represented by either Local 1222 or lIocal 229 who in fact suffered losses as a result of Respondent's unlawful conduct are entitled to be made whole for such losses. Whether or not such losses occurred. or their extent, is a matter which can properly be resolved at the compliance stage of this proceeding. We shall. however. include in our Or- der herein a proilsion requiring that the Notice to Emplosees be posted at all Big Bear stores of Respondent in the bargaining units. in order that any unit employees who may hase suffered losses as a result of Respondent's unlawful emploee transfers may therebs be apprised of their right to be made whole 185 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Holmes, La Mesa, California, its officers, agents, suc- cessors, and assigns, shall: 1. Cease and desist from: (a) Refusing to bargain collectively with Retail Clerks Union, Local 1222, Retail Clerks Internation- al Union, AFL-CIO, and Amalgamated Meat Cut- ters Local 229, Amalgamated Meat Cutters & Butch- er Workmen of North America, AFL-CIO, herein referred to as Local 1222 and Local 229, respectively, as the exclusive bargaining representatives of the em- ployees in the units set forth in their respective col- lective-bargaining agreements with Respondent, in- cluding the unit employees at the La Mesa store, by withdrawing recognition from and refusing to recog- nize those Unions as the exclusive bargaining repre- sentatives of the employees in the separate units at the La Mesa store. (b) Unilaterally changing the terms and condi- tions of employment established by its collective-bar- gaining agreements with the aforesaid Unions by re- fusing to apply the terms of collective-bargaining agreements with those Unions to its employees in the separate units at the La Mesa store. (c) Refusing to furnish to Local 1222 the names and addresses of employees included in its bargain- ing unit at the La Mesa store as requested by that Union. (d) Transferring employees of the La Mesa store to other stores within the multistore units because they are represented by the Unions. (e) In any other manner interfering with, restrain- ing, or coercing its employees in the exercise of their rights guaranteed by Section 7 of the Act. 2. Take the following affirmative action which is necessary to effectuate the policies of the Act: (a) Recognize and bargain collectively with Local 1222 as the exclusive representative of the employees of Respondent at the La Mesa store in a unit of all hourly employees working in the job classifications enumerated in its collective-bargaining agreement with that Union, effective from July 28, 1975, to July 30, 1978, at its retail grocery and meat markets in San Diego County, and apply the collective-bargain- ing agreement with the Union to the unit employees at the La Mesa store, retroactive to November 15, 1976. (b) Recognize and bargain collectively with Local 229 as the exclusive representative of the employees of Respondent at the La Mesa store in a unit of all hourly employees working in the job classifications enumerated in its collective-bargaining agreement with that Union, effective from November 8, 1976, to November 4, 1979, at its retail grocery and meat markets in San Diego County, and apply the collec- tive-bargaining agreement with the Union to the unit employees at the La Mesa store, retroactive to No- vember 15, 1976. (c) Make the employees at the La Mesa store in the aforesaid units whole for any losses they may have suffered since November 15, 1976, as a result of Respondent's failure to apply the collective-bargain- ing agreements to them, in the manner set forth in the section of this Decision entitled "The Remedy." (d) Supply Local 1222 with the names and ad- dresses of employees included in its bargaining unit at the La Mesa store, as requested by it. (e) Offer employees of the La Mesa store who were transferred to other stores of Respondent with- in the multistore bargaining units immediate rein- statement to their former positions or, if those posi- tions no longer exist, to substantially equivalent positions, displacing if necessary any employees as- signed to those positions since November 15, 1976, without prejudice to their seniority or other rights and privileges, and make whole the transferred em- ployees or any other unit employees for any losses they may have suffered as a result of Respondent's unlawful transfers in the manner set forth in the sec- tion of this Decision entitled "The Remedy." (f) Preserve and, upon request, make available to the Board or its agents, for examination or copying, all payroll records, social security payment records, timecards, personnel records and reports, and all other records necessary to analyze the amount of backpay due under the terms of this Order. (g) Post at all its Big Bear Supermarkets in San Diego County, California, copies of the attached no- tice marked "Appendix." 24 Copies of said notice, on forms provided by the Regional Director for Region 21, after being duly signed by Respondent's author- ized representative, shall be posted by Respondent immediately upon receipt thereof, and be maintained by it for 60 consecutive days thereafter, in conspicu- ous places, including all places where notices to em- ployees are customarily posted. Reasonable steps shall be taken by Respondent to insure that said no- tices are not altered, defaced, or covered by any other material. (h) Notify the Regional Director for Region 21, in writing, within 20 days from the date of this Order, what steps the Respondent has taken to comply here- with. IT IS FURTHER ORDERED that the amended com- plaint herein be, and it hereby is, dismissed insofar as it alleges unfair labor practices not found herein. :4 In the event that this Order is enforced by a judgment of a United States Court of Appeals. the words in the notice reading "Posted by Order of the National Labor Relations Board" shall read "Posted Pursuant to a Judgment of the United States Court of Appeals Enforcing an Order of the National Labor Relations Board.' 186 BIG BEAR SUPERMARKETS NO. 3 APPENDIX NOTICE To EMPLOYEES POSTED BY ORDER OF THE NATIONAL LABOR RELATIONS BOARD An Agency of the United States Government The National Labor Relations Board having found, after a hearing at which all parties were given an opportunity to present evidence and argument, that we violated the National Labor Relations Act, we notify you that: WE WILL NOT refuse to bargain collectively with Retail Clerks Union, Local 1222, Retail Clerks International Association, AFL-CIO, and Amalgamated Meat Cutters Local No. 229, Amalgamated Meat Cutters & Butcher Work- men of North America, AFL-CIO, as the exclu- sive bargaining representatives of our employees in the units set forth in our collective-bargaining agreements with these Unions, including the unit employees at the La Mesa store. WE WILL NO ' unilaterally change wages, work- ing conditions, or terms of employment estab- lished by our collective-bargaining agreements with these Unions by refusing to apply the terms of our collective-bargaining agreements to our employees in the separate units at the La Mesa store. WE WILL NOT refuse to furnish Local 1222 with the names and addresses of employees included in its bargaining unit at the La Mesa store. WE WILL NOT transfer employees of the La Mesa store to other Big Bear markets because of their union representation. WE WILL NOT in any other manner interfere with, restrain, or coerce our employees in the exercise of their rights guaranteed in Section 7 of the Act. WE WILL recognize and bargain collectively with Retail Clerks Union, Local 1222, Retail Clerks International Association, AFL-CIO, as the exclusive representative of the employees at the La Mesa store in a unit of all hourly employ- ees working in the job classifications enumerat- ed in our collective-bargaining agreement with that Union, effective from July 28, 1975, to July 30, 1978, at our retail grocery and meat markets in San Diego County, and will apply the collec- tive-bargaining agreement with the Union to the unit employees at the La Mesa store, retroactive to November 15, 1976. WE WILL recognize and bargain collectively with Amalgamated Meat Cutters Local No. 229, Amalgamated Meat Cutters & Butcher Work- men of North America, AFL-CIO, as the exclu- sive representative of the employees at the La Mesa store in a unit of all hourly employees working in the job classifications enumerated in our collective-bargaining agreement with that Union, effective from November 8, 1976, to No- vember 4, 1979, at our retail grocery and meat markets in San Diego County, and will apply the collective-bargaining agreement with the Union to the unit employees at the La Mesa store, ret- roactive to November 15, 1976. WE WILL make the employees at the La Mesa store in the aforesaid units whole for any losses they may have suffered since November 15, 1976, as a result of our not applying the collec- tive-bargaining agreements to them, with inter- est. WE WILL supply Local 1222 with the names and addresses of employees included in its bar- gaining unit at the La Mesa store, as requested by it. WE WILL offer employees of the La Mesa store whom we transferred to other Big Bear markets because of their union representation immediate reinstatement to their former positions or, if those positions no longer exist, to substantially equivalent positions, displacing if necessary any employees assigned to those positions since No- vember 15, 1976, without prejudice to their se- niority or other rights and privileges. WE WILL make whole the employees we trans- ferred from the La Mesa store, and any other bargaining unit employees at the stores they were transferred to who may have been laid off or had their hours of work reduced, for any loss- es they may have suffered as a result of our transferring the union-represented employees from the La Mesa store, with interest. BIG BEAR SUPERMARKETS #3 DECISION STATEMENT OF THE CASE ROGER B. HOLMES. Administrative Law Judge: The unfair labor practice charge in Case 21-CA-15605 was filed on April 4, 1977, by Retail Clerks Union, Local 1222, Retail Clerks International Association, AFL-CIO, herein called the Charging Party Retail Clerks. The Regional Director for Region 21 of the National Labor Relations Board, herein called the Board, acting on behalf of the General Counsel of the Board, issued on May 25, 1977, a complaint 187 DECISIONS OF NATIONAL LABOR RELATIONS BOARD and notice of hearing in Case 21-CA-15605 against Big Bear Supermarkets #3, herein called the Respondent. Thereafter the Respondent and Richard Holmes, who was contended to be operating the La Mesa, California, store as the alter ego of the Respondent, each filed separate answers to the complaint. The unfair labor practice charge in Case 21-CA-15703 was filed on May 9, 1977, by Amalgamated Meat Cutters Local No. 229, Amalgamated Meat Cutters & Butcher Workmen of North America, AFL-CIO, herein called the Charging Party Meat Cutters. The Regional Director for Region 21 of the Board, on behalf of the General Counsel, issued on June 9, 1977, an order consolidating cases, consolidated amended com- plaint, and amended notice of hearing in Cases 21-CA- 15605 and 21-CA-15703. The General Counsel's consoli- dated complaint alleges that the Respondent has engaged in unfair labor practices within the meaning of Section 8(aX)(1), (3), and (5) of the National Labor Relations Act, as amended, herein called the Act. The Respondent and Richard Holmes once again filed separate answers in which each one denied the commission of the alleged un- fair labor practices, and each one raised certain affirmative defenses. The hearing was held before me on September 8, 1977, at San Diego, California. The consolidated complaint al- leges only Big Bear Supermarkets #3 as the Respon- dent-which pleading is consistent with the contention ad- vanced by the General Counsel and both Charging Parties that Richard Holmes is, in fact, the alter ego of Big Bear Supermarkets #3 in his operation of the La Mesa store. It is not contended, for example, that Richard Holmes is the successor employer to Big Bear Supermarkets #3 at the La Mesa store. Instead, the legal theory, on which the consoli- dated complaint is predicated, is straightforward and clear that this case is being tried on an alter ego theory. At the hearing, Richard Holmes was permitted to inter- vene and to participate fully in these proceedings. As indi- cated in the answers previously filed by Richard Holmes and the Respondent, it is their contention that Richard Holmes is not the alter ego of Big Bear Supermarkets #3. As stated at the outset of the hearing, and reiterated here for those persons who were not present at the hearing, I am not related to the Intervenor, Richard Holmes. It is a mere coincidence of having the same last name. Counsel for the General Counsel, the attorney for the Charging Party Retail Clerks, the attorney for the Charg- ing Party Meat Cutters, the attorney for the Respondent, and the attorney for the Intervenor each filed very persua- sive briefs by the due date of November 14, 1977. Those briefs have been read and considered. On December 6, 1977, counsel for the General Counsel filed with me a motion to strike portions of Respondent's brief. The portions sought to be stricken include Appendix 3 attached to the brief and certain parts of the argument in the brief which pertain to that multipaged document. Ap- pendix 3 purports to be certain marketing information compiled by the advertising department of the San Diego Union and The Evening Tribune newspapers. Counsel for the General Counsel correctly points out that the docu- ment was not introduced in evidence at the hearing. On December 13, 1977, the attorney for the Respondent filed a response to motion to strike portions of Respon- dent's brief in which it was urged, inter alia, that the mate- rials contained in Appendix 3 were matters which were subject to judicial notice pursuant to Rule 201(b) of the Federal Rules of Evidence, and further that judicial notice may be taken at any stage of the proceeding in accordance with Rule 201(f) of the Federal Rules of Evidence. I have reviewed Rule 201 and the legislative history per- taining to that particular rule. (See the compilation pre- pared at the request of the Federal Judicial Center, Federal Rules of Evidence for United States Courts and Magistrates, Approved January 2, 1975, Effective July 2, 1975, with Notes by the Federal Judicial Center, Pertinent Advisory Committee Notes and Relevant Legislative History, West Publishing Co. (1975).) I am not persuaded that the marketing survey results meet the standards set forth in section (b) of Rule 201 "either (1) generally known within the territorial jurisdic- tion of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." As to the first criterion, it seems to me that the marketing information would not be a matter "generally known" in the greater San Diego area, but instead, that it would be a matter of special knowledge to advertisers in the grocery business and to the publishers of the two daily newspapers which prepared the survey. As to the second criterion, it has not been shown that the accuracy of the information can be readily determined by resort to sources whose accuracy cannot be reasonably questioned. I note that the Board has taken judicial notice of certain regulations of the city of Chicago, but declined to take judicial notice of certain other matters requested by the charging party in Yellow Cab Company, 229 NLRB 1329, fn. 2, (1977), where the Board stated: The Charging Party has requested the Board to take judicial notice of (I) certain new city of Chicago regu- lations affecting the taxicab industry which were pro- mulgated after the close of the hearing in this case, (2) certain facts which are on record with the office of the Chicago Commissioner of Sales, Weights and Mea- sures, and (3) a bulletin issued by Respondent Check- er and a newspaper advertisement which announce a program of free hospitalization insurance to be fur- nished by Checker to its lessee drivers. We hereby take judicial notice of the newly promulgated city of Chica- go regulations, as these are properly within the prov- ince of judicial notice. We decline, however, to take judicial notice of the other requested items, as these are not matters which can properly be judicially no- ticed. After considering the foregoing, I have decided that counsel for the General Counsel is entitled to have her motion to strike granted in these circumstances. Accord- ingly, the motion to strike by the General Counsel is hereby granted. Upon the entire record in this proceeding and based upon my observation of the demeanor of the witnesses, I make the following: 188 BIG BEAR SUPERMARKETS NO. 3 FINDINGS OF FACT I. JURISDICTION The Respondent has been at all times material herein a corporation engaged in the operation of retail grocery mar- kets in San Diego County, California. At least until on or about November 15, 1976, the Respondent owned, operat- ed, and managed a retail grocery and meat market at 8745 Broadway in La Mesa, California. In the normal course and conduct of its business opera- tions, the Respondent has annually derived gross revenue in excess of S500,000, and the Respondent has annually purchased and received goods, materials, and supplies val- ued in excess of $50,000 directly from suppliers located outside the State of California. Upon the foregoing facts admitted in the pleadings and upon the entire record in this proceeding, I find that the Respondent has been at all times material herein an em- ployer engaged in commerce within the meaning of Section 2(6) and (7) of the Act. I. THE LABOR ORGANIZATIONS INVOLVED It was admitted in the pleadings that both Charging Par- ty Retail Clerks and Charging Party Meat Cutters have been at all times material herein labor organizations within the meaning of Section 2(5) of the Act. Accordingly, I find those facts to be so. II. THE ALLEGED UNFAIR LABOR PRACTICES A. The Issues The principal issue raised by the pleadings is whether Richard Holmes, the Intervenor, is the alter ego of Big Bear Supermarkets #3, the Respondent, in the operation of the La Mesa store. If a preponderance of the evidence establishes that fact, then the issues are whether the Respondent violated Sec- tion 8(aXl), (3), and (5) of the Act: (1) by refusing since on or about November 15, 1976, to bargain with Charging Party Retail Clerks and Charging Party Meat Cutters as the collective-bargaining representatives of separate units of Respondent's employees at the La Mesa store; (2) by refusing to honor and abide by the terms of the collective- bargaining agreements between the Respondent and those two Unions with respect to the units of employees at the La Mesa store; (3) by withdrawing recognition from those two Unions as the collective-bargaining representatives of the employees in the separate units at the La Mesa store; (4) by unilaterally transferring the employees at the La Mesa store to other stores of the Respondent within the multi- store bargaining units; and (5) by refusing since December 1976 to furnish to Charging Party Retail Clerks certain information requested by that Union; to wit the names and addresses of employees at the La Mesa store who were working in the bargaining unit represented by the Charging Party Retail Clerks. B. The Witnesses In alphabetical order, the following persons appeared as witnesses at the hearing in this proceeding: Samuel F. Daly is a business agent for the Charging Par- ty Retail Clerks. Gerald C. Holmes has been secretary-treasurer of the Re- spondent for the past 20 years. He is one of the members of the board of directors of the Respondent, and he holds approximately 5 percent of the shares of stock in the Re- spondent. No other member of his family owns stock in the Respondent. Richard Holmes is the Intervenor in these proceedings and the person alleged to be operating the La Mesa store as the alter ego of the Respondent. At the time of the trial, he was 31 years old. He worked for the Respondent during the years 1969 through 1976. He was employed as a clerk, an assistant manager, and as a manager for the last 4 or 5 years of his employment. First, he was the manager of Re- spondent's store Number 6, and then he became manager of the Respondent's El Cajon store for 2 years. His father is Gerald Holmes. Marc Lemieux is a business agent of the Charging Party Retail Clerks. John C. Mabee is president of the Respondent. He owns approximately 80 percent of the shares of stock in the cor- poration, and he is one of the members of the board of directors. Except for the years 1948-49, he has been in the grocery business since 1944. Chris Platten has been administrative assistant to the president of the Charging Party Retail Clerks since Janu- ary 1977. Previously, Platten had served as a business agent of that Union since November 1, 1975. Prior to that time, he worked as an employee of the Respondent from Sep- tember 1972 to November 1975. During that period of time, Platten primarily worked at the Respondent's San Carlos store, but he also worked at the Respondent's El Cajon, Claremont, and Adams Avenue stores. In addition, he worked at the Respondent's Jonathan's store in La Jol- la, California. Albert Stegman had been a business agent for the Charg- ing Party Meat Cutters for almost 3 years at the time of the hearing. Raymond T Theep is the attorney for the Respondent. He testified with regard to his preparation of the agreement between the Respondent and the Intervenor. Tom Vandeveld has been president of the Charging Party Retail Clerks since November 1975. The findings of fact in this section have been based upon the testimony of each one of the witnesses. C. Credibility Resolutions A significant number of the material facts in this pro- ceeding are not in dispute. The attorneys for the parties are to be commended for taking the time and exerting the extra effort to arrive at numerous stipulations of fact concerning many different 189 DECISIONS OF NATIONAL LABOR RELATIONS BOARD matters which were not seriously contested. Many of the findings of fact to be made herein will be based upon such stipulations by the parties, and also many findings will rest upon the substantial amount of documentary evidence which was introduced at the hearing. Although stipulations and documentary evidence pro- vide the basis for making numerous findings of fact, I will also rely extensively upon the testimony given by Mabee and by Richard Holmes throughout the decision. Whether they were on direct examination or cross-examination, it seemed to me that they were responding to the questions truthfully and without regard to whether their answers sup- ported or detracted from their legal positions. In particular, Mabee demonstrated that he was a very knowledgeable witness concerning many matters, and that he was a res- ponsive witness who was not evasive in his answers, nor one who attempted to conceal the facts. Richard Holmes gave the impression of being a sincere witness who was honestly relating the facts. As in most trials, there were some conflicts among the witnesses in relating past events. In section H herein, I will rely upon the testimony of Mabee and Gerald Holmes con- cerning the question of whether there were layoffs and re- ductions in hours as a result of the transfer of the employ- ees from the La Mesa store. Their testimony on this point is consistent, and in view of Mabee's knowledge of his business, I find his testimony more persuasive than the general assertion that layoffs and reductions took place. In section I herein, I will primarily rely upon the detailed testimony of Richard Holmes on this subject, along with the testimony of Mabee and a stipulation of the parties. However, to the extent that their testimony is not inconsis- tent with the foregoing, I shall also rely upon the testimony given by Stegman, Vandeveld, Platten, Daly, and Lemieux. In section J herein, I will also rely upon the testimony of Richard Holmes. Although I did not have the opportunity to observe Fougeron testify, his stipulated version is not substantially different on any material matter, and, as indi- cated above, I find Richard Holmes to be a credible wit- ness. In these circumstances, I will base the findings of fact on the testimony of Richard Holmes. In section K herein, the versions given by Richard Holmes and Gerald Holmes are consistent. Of course, Ger- ald Holmes was not present at the entire conversation, but to the extent that he was present, his version supports the version given by Richard Holmes. With regard to each section, the source or basis for the findings of fact in that particular section will be stated at the end of each section. D. The Collective-Bargaining History The parties entered into the following stipulations on this subject matter: (a) Since at least 1957, and continuing to date, Re- spondent has been party to successive collective-bar- gaining agreements, the most recent of which is effec- tive from July 28, 1975, to July 30, 1978, with Retail Clerks Local 1222 as the exclusive representative for purposes of collective bargaining of Respondent's em- ployees in a unit of all hourly employees working in the job classifications enumerated in the aforestated current collective-bargaining agreement at its retail grocery and meat markets in San Diego County, which unit constitutes a unit appropriate for the pur- poses of collective bargaining within the meaning of Section 9(b) of the Act. (b) Prior to November 15, 1976, this unit described in paragraph (a) above included employees of Re- spondent's store No. 13 located in La Mesa, Califor- nia. (c) Since at least 1957, and at all times material herein, Local 1222 has been the representative for the purposes of collective bargaining of a majority of the employees in the unit described in paragraph (a) above, and, by virtue of Section 9(a) of the Act, has been, and is now, the exclusive representative of all employees in said unit for the purposes of collective bargaining with respect to rates of pay, wages, hours of employment, and other terms and conditions of em- ployment. (d) Since at least 1950, and continuing to date, Re- spondent has been party to successive collective-bar- gaining agreements, the most recent of which is effec- tive from November 8, 1976, to November 4, 1979, with Amalgamated Meat Cutters Local 229 as the ex- clusive representative for purposes of collective bar- gaining of Respondent's employees in a unit of all hourly employees working in the job classifications enumerated in the aforestated current collective-bar- gaining agreement at its retail grocery and meat mar- kets in San Diego, County, which unit constitutes a unit appropriate for the purposes of collective bar- gaining within the meaning of Section 9(b) of the Act. (e) Prior to November 15, 1976, the unit described in paragraph (d) above included employees of Re- spondent's store No. 13 located in La Mesa, Califor- nia. (f) Since at least 1950, and at all times material herein, Local 229 has been the representative for the purposes of collective bargaining of a majority of the employees in the unit described in paragraph (d) above, and, by virtue of Section 9(a) of the Act, has been, and is now, the exclusive representative of all employees in said unit for the purposes of collective bargaining with respect to rates of pay, wages, hours of employment, and other terms and conditions of em- ployment. The parties further stipulated that: On August 27, 1976, Mr. Max Osslo, Secretary- Business Manager for Amalgamated Meat Cutters Lo- cal No. 229, ("Local 229," herein) notified Employer, in writing, that the Union desired to terminate the Collective Bargaining Agreement between the Em- ployer and Local 229 as of its expiration date (Novem- ber 7, 1976). That, on or about, March 11, 1977, Employer en- tered into a successor Collective Bargaining Agree- ment with Local 229, which provided for, among other 190 BIG BEAR SUPERMARKETS NO. 3 things, retroactivity of all wage and fringe benefit in- creases to November 8, 1976. The documents which comprise the collective-bargaining agreements in effect at all times material herein between the Charging Party Retail Clerks and the Respondent were introduced into evidence as General Counsel's Exhibit 7. The documents which comprise the collective-bargaining agreements in effect at all times material herein between the Charging Party Meat Cutters and the Respondent were introduced into evidence as General Counsel's Exhibit 8. The subject of transfers of employees by the Respondent is set forth in article III, section H 2(a), (b), and (c) and section I of General Counsel's Exhibit 7. The subject also is covered in article XVI, section D, of General Counsel's Exhibit 8. While the agreements between each Charging Party and the Respondent create certain rights for the transferred employee and place some limitations on the Respondent, the agreed-upon provisions pertaining to such transfers do not require that the Respondent give advance notice to the Unions. For example, article III, section 1, of General Counsel's Exhibit 7 provides: I. OPERATIONAL TRANSFER. 1. It is recognized that to meet the necessities of the business and to advance the Employer's equal em- ployment opportunity program, transfer of employees, either within the geographical jurisdiction of a Union party to this Agreement or from the jurisdiction of one such Local Union to another such Local Union may be required. In such cases where such transfer is ef- fected by the Employer, the transferred employee will carry to such employee's new assignment all seniority, as defined above, acquired in the employ of the Com- pany. This transfer rule shall have application to both the available and self-restricted seniority lists. Trans- fers referred to in this Paragraph shall not require an employee to travel one way more than twenty-five (25) miles between the employee's residence and the new location. Reasonable tolerance of these limits shall be allowed for temporary transfers such as vacation relief and store openings. 2. These transfer provisions shall not be applied in an arbitrary, capricious, or discriminatory manner or for disciplinary purposes, and shall not be utilized as a device for creating hardship to the employee in order to force or provoke resignation. Article XVI, section D, in General Counsel's Exhibit 8 provides: D. An employee covered by this Agreement shall have the right to refuse a transfer to another location if the distance to travel one (I) way is more than thirty (30) miles between his place of residence and the new location. A refusal of a transfer by an employee cov- ered by this Agreement under any of these circum- stances shall not constitute a reason for discrimina- tion, layoff or discharge, except in the case of layoffs due to lack of work. The findings of fact set forth in this section have been based upon stipulations by the parties and documentary evidence. E. The Decision To Enter Into a Franchise Agreement for Operation of the La Mesa Store At the time of the hearing, the Respondent operated 21 or 22 Big Bear grocery supermarkets; 2 Jonathan's grocery stores in La Jolla and Rancho Santa Fe, California; 5 Cook's Markets in the Imperial Valley; I Marketplace; 9 Daisy Restaurants, and 15 Par Liquor Stores. Additionally, John Mabee's business interests included the operation of about 14 shopping centers with a couple of hundred ten- ants, and a construction business. There were between 1,200 and 1,300 persons employed by the Respondent at the time of the hearing. Approximately 80 percent of the shares of stock in the corporation were owned by Mabee. Gerald Holmes held about 5 percent of the shares of stock. About 15 percent of the shares were held by supervisors of the Respondent and one to three outside stockholders. Mabee, Ms. Mabee, and Gerald Holmes were identified as being members of the board of directors. Several factors entered into the decision to franchise the operation of the La Mesa store. Among these factors were the financial problems encountered by the Respondent at the La Mesa store in the 2 fiscal years preceding the deci- sion to franchise the store; the fact that the Respondent had closed some other stores and was reluctant to give up more of its market share; and the fact that Mabee himself owned the shopping center in which the La Mesa store was located. The size of the La Mesa store was significantly smaller than the average size of other supermarkets operated by the Respondent. Mabee said the La Mesa store had 14,800 square feet of space, whereas the average size of a new supermarket would range from 27,000 square feet to 50,000 square feet of space. The State of California took a considerable amount of the parking area available to customers at the shopping center in condemnation proceedings for a freeway. When Mabee originally purchased the land in 1950, there were 13 acres, but now there are less than 2 acres in the shopping center. One of the condemnations was in 1962 and another one was filed in 1974, with construction being completed in 1975-76. The impact of the loss of parking space and the continu- ing problem of not having good access into the center were reasons which Mabee cited as being factors in the loss of 25 percent of the sales volume at the La Mesa store. The most recent condemnation resulted in the closing of two other businesses at the center: a Fotomat and Der Wiener- schnitzel. Profit-and-loss statements for the La Mesa store re- vealed the following: August 1, 1973, to July 31, 1974-$1,580 profit; August i, 1974, to July 31, 1975-$52,507 loss; August 1, 1975, to July 31, 1976-$55,320 loss. Since there were 12 to 13 other tenants in the shopping center, Mabee believed that the loss of the Big Bear name would adversely affect the other tenants. In his opinion, the other tenants of the shopping center were relying upon the Big Bear store to draw customers into the center. Since Mabee owned the shopping center, this was another reason 191 DECISIONS OF NATIONAL LABOR RELATIONS BOARD for deciding to franchise the operation and retain the Big Bear name in his center. Mabee further explained that he was reluctant to relin- quish any more of the Respondent's market share since the Respondent had no other grocery store in that particular area. He stated that the Respondent had approximately I I percent to 13 percent of the share of the grocery market in San Diego County. Two other unprofitable stores had been sold previously by the Respondent in 1975. Unlike the La Mesa store, both stores were on leased premises, rather than in shopping centers owned by Mabee. One store was located at Menlo and El Cajon Boulevard, and the other was located in Del Mar. The Del Mar store was only about 11,000 square feet in size, and the Respondent built a new store about a mile and a half away. The old store was remodeled as a Jonathan's store but was not successful. It was sold about 4 to 6 months later. In addition, two Marketplace stores of the Respondent were closed and then two other Marketplaces were sold. Mabee described them as small units of only 5,000 to 8,000 square feet. The Marketplace stores were nonunion. The findings of fact in this section are based upon the testimony given by Mabee and upon documentary evi- dence. F. The Events and Discussion Pertaimng to the Franchise Agreement Because of their knowledge of the business, Mabee felt that the managers at the Respondent's stores would be the most qualified persons to handle the franchise of the La Mesa store. Mabee said that the annual salary of a store manager of the Respondent varied from $18,500 to $23,000. He expressed the opinion at the trial that an "out- sider" would need an exceptional amount of training for that task, and that such a person would be an "unknown quantity." In giving consideration to the store managers employed by the Respondent, Mabee narrowed the choice down to two possibilities for the franchise operation. One was Rich- ard Holmes, who was the son of Gerald Holmes and a manager of a high volume store of the Respondent, and the other was the store manager at the La Mesa store. Al- though the La Mesa store manager had about 15 years of experience with another independent grocer, he had only been employed by the Respondent for about I year at that point in time. Knowing that Richard Holmes was then the manager of a high volume store and knowing that he had multiple sclerosis, Mabee decided to make the offer to Richard Holmes. Mabee said that the whole transaction was discussed in advance with the board of directors of the Respondent and with the supervisors who also owned shares of stock in the corporation. That was done prior to his meetings and dis- cussions with Richard Holmes. In October 1976 Mabee met with Richard Holmes and Gerald Holmes to discuss the idea of Respondent's fran- chising the La Mesa store. There were subsequently three or four additional meetings just between Mabee and Rich- ard Holmes. As noted earlier, Richard Holmes had been the manager of Respondent's El Cajon store for about 2 years. Richard Holmes described the El Cajon store as being approximate- ly 20,000 square feet in size and having an annual volume of business of about $5 million to $6 million. In August 1975, Richard Holmes had been advised that he had multiple sclerosis. The symptoms became more sev- ere and began affecting his job performance as manager of the Respondent's El Cajon store, and ultimately resulted in his having to take a leave of absence from work. The Veter- ans Administration has rated his disability as being 30 per- cent. During discussions between Mabee and Richard Holmes, it was agreed that the profits would be divided on a 60-40 basis, with Richard Holmes receiving the 60 per- cent. Mabee was certain that he did not discuss with Rich- ard Holmes that he would not be bound by the Unions' contracts; however, after Richard Holmes made the deci- sion to operate on a nonunion basis, he so informed Ma- bee. At that point, Mabee started making plans for the transfer of the employees. After reviewing the profit and loss statement for the La Mesa store, and prior to his signing the franchise agree- ment with the Respondent, Richard Holmes said that he may have mentioned to Mabee that Richard Holmes had made the decision to operate the store on a nonunion basis. Richard Holmes stated at the trial that he knew that the La Mesa store had been a losing operation at the time he ac- cepted the franchise. About the first of November 1976, Theep was asked by Mabee to prepare a draft of an agreement between the Respondent and the Intervenor. Theep recalled that at that point in time Mabee gave him a list of items which had been agreed upon between Mabee and Richard Holmes. He stated that Mabee gave him no instructions regarding labor relations matters. Utilizing a 1966 copy of a Southland Corporation fran- chise agreement for a 7-Eleven store, Theep prepared a draft of an agreement. He said that he tailored the lan- guage from that copy, and he made what he viewed to be "major changes" concerning the provisions relating to: (I) rent; (2) advertising; (3) termination of the agreement; and (4) inventory. Theep said that he prepared three drafts of the agreement before it was signed on November 8, 1976. The parties stipulated that a physical inventory of the La Mesa store was taken on November 14, 1976. On Novem- ber 15, 1976, the escrow closed and Richard Holmes began operating the La Mesa store under business licenses in his name. Other than its normal hours of closure, the La Mesa store was not closed as a result of this transaction. The beginning inventory at the La Mesa store as of No- vember 15, 1976, was valued at $116,400.81. The reasons for the agreement on the $2,000 initial cash payment by Richard Holmes to the Respondent were sum- marized by Mabee as follows: (I) Mabee had known Rich- ard Holmes and his background for 20 years; (2) Mabee knew that Richard Holmes was a financially responsible person and a stable individual with assets; and (3) Mabee believed that "it would work itself out in a fairly rapid fashion for the dollar amounts involved." Richard Holmes said that he was his own sole support, 192 BIG BEAR SUPERMARKETS NO. 3 and he estimated his personal net worth as being in excess of $100,000. He pointed out at the trial that if the La Mesa store did not make a profit, he would have to bear the loss. On the other hand, if the La Mesa store showed a profit, then Richard Holmes would receive his share of the profits. He pointed out that he would pay income tax on his part of the profits. He contrasted his present situation with that of a store manager in one of the Respondent's stores. If the store made a profit, the store manager would probably receive a bonus. However, there was no bonus for the store manager if the store did not make a profit. If the store's operation resulted in a loss, however, the store manager did not per- sonally bear any portion of the store's operating loss. The original amount of the promissory note between the Respondent and Richard Holmes was $116,400.81. As not- ed above, his initial cash payment was $2,000. In addition to the payments for interest, Richard Holmes has made payments on the principal since that time in excess of $18,000. He stated at the trial that he had decided to apply his total net profits to payments on the principal amount, so that he could make the payments sooner than was re- quired. His record of payments was introduced as Intervenor's Exhibit I, which provides in pertinent part: date of amount pea nt due 11-20-76 12-15-76 1-13-77 1-15-77 2-15-77 3-15-77 4-15-77 4-20-77 5-15-77 6-15-77 7-15-77 7-31-77 $2,000.00 500.00 500.00 7,031.00 500.00 500.00 500.00 6,876.00 500.00 500.00 500.00 2,128.50 credited on int. prin. $476.67 476.57 447.18 446.96 446.74 417.87 417.52 417.18 $2,000.00 23.33 23.43 7,031.00 52.82 53.04 53.26 6,876.00 82.13 82.48 82.82 2,128.50 bal. of prin. unpaid $116,400.81 114,400.81 114,377.48 114,354.05 107,323.05 107,270.23 107,217.14 107,163.93 100,287.93 100,205.80 100,123.32 100,040.50 97,912.00 Thus, the balance due by Richard Holmes as of July 31, 1977, was $97,912.00. The findings of fact in this section are based upon the testimony of Mabee, Theep, and Richard Holmes, as well as upon documentary evidence and a stipulation of the parties. G. The Franchise Agreement The agreement between the Respondent and Richard Holmes is set forth in General Counsel's Exhibit 3. The agreement itself is 12 pages long and is typed double space on legal size paper. There is a 13th page for signatures. In addition, there are several attachments to the agreement. Rather than set forth herein the entire agreement, I have selected certain items from the agreement to be reproduced here with just the headings of the remaining items. Of course, the entire agreement has been read and considered. By setting forth certain portions of the agreement, I do not mean that I have ignored the remainder. The entire docu- ment is in evidence and anyone desiring to consult the other parts may simply examine General Counsel's Exhibit 3. The preamble to the agreement provides: THIS AGREEMENT is made and entered into this -- day of November, 1976 by and between RICH- ARD A. HOLMES. a married man hereinafter referred to as OWNER and DIG SEAR SUPER MARKET NO. 3, a California corporation, 5075 Federal Boulevard, San Diego, Cali- fornia 92102, hereinafter referred to as siG sEAR. BIG BEAR owns equipment and leases real property and improvements commonly known as Store No. 13 at 8745 Broadway, La Mesa, California 92041, suit- able for use as a general retail grocery and related sundries business. OWNER desires to lease said real property and the improvements thereon, described in Exhibit A ini- tialed by the parties and attached hereto, and the equipment installed therein, described in Exhibit B, initialed by the parties and attached hereto; and to secure a franchise agreement to use the tradename, trademark, labels and copyrights applicable to the slG BEAR name and the services of lIG BEAR in connection with the operation of said business. Thereafter, the first six subject headings are: (I) Descrip- tion and Term; (2) Master Lease; (3) Use; (4) Assignment; and (5) Maintenance and Repair. Portions of the agreement continue as follows: 6. RENT FOR BUILDING AND FIXTURES. a. It is hereby agreed that slG sEAR shall be entitled to receive the sum of one and one-half percent (I 1/2%) of OWNERS monthly Net Sales or the sum of Two Thousand Two Hundred Dollars ($2,200.00) whichever is greater, as monthly rent for the premises leased hereunder. b. It is hereby agreed that slG SEAR shall be entitled to receive the sum of 0.15% of OWNERS Monthly Net Sales or the sum of Two Hundred Twenty Dollars ($220.00) whichever is greater as monthly rent for the equipment leased hereunder. c. It is further agreed that slG sEAR shall be entitled to debit OWNER'S Open Account for said rentals. 7. FRANCHISE AND LICENSE. so G EAR hereby grants to OWNER the right and license to use, at the above described location, the lIG BEAR system and the tradename, trademark, labels and copyright applica- ble to said system. 8. TERM. The term of this Agreement shall coin- cide with the term of the real property and equipment leases hereinabove provided and the termination of one shall simultaneously terminate the other. 9. PERMITS AND LICENSES. OWNER covenants and agrees to comply with valid ordinances, regula- tions and laws of any municipal and governmental au- thority applicable to OWNERS use of the demised prem- ises at OWNER'S expense. OWNER shall obtain when required a Business License, Sales Tax Permit, State Employment Number, Health Permit, State and Fed- eral Beer and Wine Licenses, if available, and any and all other licenses or permits required by governmental authorities. All matters concerning licenses relating to 193 DECISIONS OF NATIONAL LABOR RELATIONS BOARD alcoholic beverages shall be processed through the De- partment of Alcoholic Beverage Control. BIC BEAR agrees to advance to OWNER sufficient sums to obtain said permits, which sums shall be debited to OWNER'S Open Account. 10. INVENTORY. OWNER'S discretion is not limited in purchasing products for inventory. BIG BEAR will supply OWNER with "house label" products and whole- saling services at customary wholesale rates. OWNER does agree to stock and to sell advertising goods at the advertised prices and to honor discount coupons con- tained in BIG BEAR advertisements. However, OWNER does acknowledge and agree that BIG BEAR has developed a unique and valuable system for the operation of supermarkets in San Diego Coun- ty, California and OWNER specifically obligates himself to carry such product lines as are customarily carried in the BIG BEAR system, and in such quantities as are reasonably necessary, in the sole judgment of BIG BEAR to meet customer demands for such products. Further- more, OWNER agrees that OWNER will obtain permission from BIG BEAR before OWNER changes any product line customarily carried in the BIG BEAR system. II. INSURANCE. BIG BEAR agrees initially to ar- range for the following insurance: a. Such insurance as is required by the Master Lease. If liability insurance is not required under the Master Lease, BIG BEAR shall procure liability insur- ance in limits of not less than $S100,000.00 for death or injury to one person, $300,000.00 for death or injury to more than one person and $25,000.00 for property damage. b. Fire and comprehensive coverage insurance (in- cluding fire, hail, windstorm, hurricane, tornado, van- dalism, malicious destruction and theft) on the equip- ment leased hereunder. c. Fire and comprehensive coverage insurance (as above) on OWNER'S inventory of stock in trade. OWNER'S Open Account will be debited for the cost of any such insurance obtained. If, in the opinion of BIG BEAR, the improvements on the demised premises are rendered substantially unfit for occupancy by any casualty, BIG BEAR shall have the option to terminate this agreement or to rebuild the demised premises, which option shall be exercised by notice in writing within 10 days of the happening of the casualty. Should BIG BEAR notify OWNER that it has elected to rebuild the improvements on the demised premises, this agreement shall entirely abate from the date such notice is given as provided in paragraph 24, and shall remain in abeyance until the day OWNER shall open for business to the public. If, in the opinion of BIG BEAR. the improvements on the demised premises are rendered only partially unfit by any casualty, BIG BEAR shall promptly and diligently restore said im- provements and this agreement shall not abate. 12. TAXES. OWNER shall pay, or cause to be paid pursuant to the Master Lease, all real property taxes due on the demised premises and improvements. OWNER shall pay all personal property taxes on their inventory and OWNER shall pay all applicable personal property taxes on the equipment leased herein. OWNER shall also pay all sales taxes applicable to sales made from the demised premises. BIG BEAR shall make the actual payments required of OWNER under this paragraph and shall debit OWNER'S Open Account for the cost thereof. OWNER shall also make his own provisions for both State and Federal Income Taxes. BiG BEAR will provide technical assistance to OWNER in this matter. 13. ADVERTISING. BIG BEAR shall, at its expense, contract for such advertising in connection with the BIG BEAR system as is deemed sufficient in its sole judg- ment. Nothing herein shall prevent OWNER from pur- chasing such suitable advertising as he may desire, at his expense, provided, however, such advertising as may be purchased by OWNER must be approved in writ- ing by BIG BEAR and shall not, in the sole judgment of BIG BEAR be inconsistent with or conflict with the pur- poses of advertising planned by BIG BEAR. Free mer- chandise, products and sums of money received from suppliers from advertising or promotional purchased for which OWNER is not charged, and advertising allow- ances received from suppliers shall be included in the general advertising budget of BIG BEAR. OWNER shall pay his store's pro-rata share of such advertising costs incurred by debiting OWNER'S Open Account based on the ratio that OWNER's Gross Gain bears to the Gross Gain of all stores in the BIG BEAR system. 14. OWNER'S OPERATION. It is the intention of the parties hereto that OWNER shall be an independent contractor and exercise control over the manner and means of the operation of his business. OWNER and his agents and employees shall under no circumstances be considered or construed to be agents or representa- tives of BIG BEAR and OWNER shall have no right or au- thority and shall not attempt to negotiate or enter into contracts or commitments of any nature in the name of or on behalf of BIG BEAR, to bind or obligate BIG BEAR in any respect whatsoever, to make any agreements or incur any debts or liabilities of any kind on behalf of BIG BEAR, to negotiate a change in the benefits of the insurance program or insurance coverage provided herein, to contract for or accept merchandise or ser- vices on behalf of BIG BEAR, or to alter any arrange- ments of BIG BEAR relating to the master lease, equip- ment leases, and maintenance and supplier agreements. OWNER shall have the sole right to employ and dis- charge such employees at his store as in his judgment may be necessary and such employees shall be em- ployees and agent of OWNER and not of BIG BEAR. OWNER agrees to exercise full and complete control over and have full responsibility for any and all labor relations, including the hiring, firing, disciplining, compensation and work schedules of his employees. OWNER shall pay the cost of any applicable state un- employment insurance, Social Security, payroll insur- ance, workmen's compensation insurance covering his employees, and any other similar expenses relative to OWNER'S relationship as an employer to his employees. 194 BIG BEAR SUPERMARKETS NO. 3 Said costs will be actually paid by BIc BEAR and debit- ed to OWNER'S Open Account. OWNER agrees to give his full time to the operation of the above described store under the BIG BEAR system, to record in the Cash Register at time of purchase all retail sales of merchandise including merchandise tak- en for personal use. 15. TERMINATION. OWNER may lose his franchise if he does not perform all terms and conditions of the Franchise Agreement and/or upon the occurrence of any of the following events: a. Agreement of the parties. b. OWNER fails to secure and keep currently effective such licenses and permits as are required herein. c. The filing of a voluntary or involuntary petition in backruptcy against OWNER is eminent, in the opinion of BIG BEAR; OWNER makes an assignment for the bene- fit of creditors; or, a receiver or trustee is appointed for all or substantially all of the assets of OWNER. d. The leased premises, in the opinion of BIG BEAR. are destroyed or rendered unfit for the operation of a convenience food store by fire, flood, windstorm or other casualty, or eminent domain. e. Failure by OWNER to request and receive any ap- provals required under this agreement to be obtained by OWNER. Thereafter follows the portion of the agreement under the heading "Accounting and Inventory." The next three subject headings are: (16) Definitions; (17) Opening Inven- tory; and (18) Owner's Investment. Portions of the agreement continue as follows: 19. OWNER'S OPEN ACCOUNT. BIG BEAR shall establish separate books of account for all of the transactions contemplated by this agreement. Said books of account shall be collectively referred to as OWNERS Open Account. OWNER agrees to deposit all sales receipts daily with BIG BEAR. and said receipts shall be credited to OWNER'S Open Account. BIG BEAR will pay for all expenditures required to be made in the operation of the business, and said expenditures shall be debited against this account. The unpaid bal- ance of OWNER'S investment shall be debited against this account which shall be entitled OWNER'S OPEN AC- COUNT. Such OWNER'S OPEN ACCOUNT shall also be debit- ed with all disbursements made by BiG BEAR on behalf of OWNER in accordance with this agreement and shall be credited with all gross receipts deposited with BIG BEAR by OWNER in accordance with this agreement. 20. ACCOUNTING SERVICE. 21. OWNER'S DRAW ON ANTICIPATED PROFITS. On a weekly basis, BIG BEAR shall remit to OWNER and shall debit OWNER'S Open Account with the sum of $425.00 for remittance to be made on the first Wednesday of the first complete week of operation and to end on the last Wednesday of operation, which amount may be changed on written request from OWN- ER and approval of BiG BEAR. The amount so charged against OWNER'S Open Account may not be reduced at the close of the fiscal year, or any quarterly account- ing period, by reason of the failure of OWNER to show a profit in the operation of the business. However, OWNER'S Open Account shall be debited with said re- mittances until the total thereof has been amortized. 22. BIG BEAR CHARGE. For and in consider- ation of the above described Lease, Franchise, license agreement, utilities and the services to be performed by BIG BEAR. OWNER agrees to pay BIG BEAR at the end of each quarterly accounting period, and BIG BEAR shall debit OWNER'S Open Account with a "BIG BEAR CHARGE" which shall be an amount of money equal to 40% of OWNER'S Net Operating Income. It is mutually agreed that in consideration of BIG BEAR'S having provided OWNER with an opening inven- tory, that OWNER agrees to pay BIG BEAR at the end of each quarterly accounting period, and BIG BEAR shall debit OWNER'S Open Account with a Principal Payment which shall be an amount of money equal to 509'0 of OWNER'S Net Profit until said initial inventory has been paid in full. It is hereby mutually agreed that contemporaneous- ly with the close of BIG BEAR'S fiscal year, there shall be an annual accounting whereby the profit and loss statement for OWNER'S store will be annualized with all of the other stores in the BIG BEAR system, and varia- tions in the quarterly statements will be debited or credited to OWNER'S Open Account as appropriate. When the net operating income for the store has been determined on an annual basis, then BIG BEAR shall pay to OWNER 60oc of the net operating income, less amounts taken, as provided above, for reduction of the Promissory Note for initial inventory, and less amounts reasonably necessary to continue operation of the store, and BIG BEAR shall debit OWNER'S Open Account the amount of the BIG BEAR CHARGE as provid- ed above. Exhibit C, attached hereto and by this reference in- corporated herein, provides the method of allocation and determination of all expenses incurred by OWNER. The subject headings for the next four portions are: (23) Final Accounting; (24) Assignment; (25) Notices; (26) Ef- fective Date; (27) Execution - Complete Agreement; and (28) Trading Stamps. The agreement continues: 29 SUPERVISION. BIG BEAR shall provide such su- pervision and technical assistance to OWNER in the op- eration of the business as may be reasonably necessary to establish the business, and in any event no less su- pervision than is provided to other markets in the BIG BEAR system. There are various attachments to the agreement. One such attachment is designated as Exhibit A and contains a copy of the lease between Mabee and the Respondent. It is 11 pages long and is typed single space on legal size paper. Another attachment is designated as Exhibit B and con- tains a list of the equipment. Exhibit C is on a profit and loss statement form with specific provisions typed in for each applicable item. For example, "Sales-Deposited Di- 195 DECISIONS OF NATIONAL LABOR RELATIONS BOARD rectly in Open Account." Also attached is an escrow settle- ment statement; a proof of publication of a Fictitious Busi- ness Name Statement, and an installment note. Other types of franchise agreements pertaining to seven other companies were introduced into evidence by the Re- spondent as Respondent's Exhibit 4. The other companies are: The Southland Corporation for a 7-Eleven Store; Con- venient Food Mart, Inc.; Alpen Pantry, Inc.; Judy's Foods, Inc.; Chicken Delight Division of El Centro Foods, Inc; Pop Shoppes of America, Inc.; and Marie Callender Pie Shops, Inc. The findings of fact set forth in this section are based upon documentary evidence. H. The Hiring of New Employees and the Transfer of Respondent's Employees to Other Stores About 250 applicants for employment at the La Mesa store were interviewed by Richard Holmes. He placed an advertisement in The Evening Tribune for applicants, and he conducted the interviews in a vacant building in San Carlos. The building was not one of Respondent's facil- ities. Richard Holmes made the decision as to which em- ployees would be hired. He did not offer jobs to any em- ployees who were working for the Respondent at the La Mesa store with the exception of the part-time janitor. Richard Holmes said that he was the one who made that decision. At the time of the hearing, there were 16 employ- ees at the La Mesa store. The parties also stipulated to the following facts: The number of employees of Big Bear Super Market No. 3 at the La Mesa Store prior to November 15, 1976, was 12. The number of employees of Richard A. Holmes at the La Mesa store after November 15, 1976, was 13. With the exception of the part-time janitor, none of the employees who were hired by Richard A. Holmes after November 15, 1976, were the same employees as were employed by Big Bear Super Market No. 3 prior to November 15, 1976, at the La Mesa store. In addition to the foregoing, the parties stipulated that: Those persons employed by the Respondent prior to November 15, 1976, at Big Bear Store No. 13 located at 8745 Broadway, La Mesa, California, were transfer- red to other Big Bear stores without being given the option of seeking continued employment at the La Mesa store after November 15, 1977. The parties further joined in the following stipulations: (a) The Respondent did not give notice to Amalga- mated Meat Cutters Local No. 229, Amalgamated Meat Cutters & Butcher Workmen of North America, AFL-CIO (herein called Local No. 229) that it was 'intemplating transferring employees represented by Local No. 229 at Big Bear Store #13 in La Mesa to other Big Bear Stores, and the Respondent did not notify Local No. 229 that these same employees had been transferred. (b) The Respondent did not notify Retail Clerks Union, Local 1222, Retail Clerks International Associ- ation, AFL-CIO (herein called Local 1222) that it was contemplating transferring employees represented by Local 1222 at Big Bear Store #13 in La Mesa to other Big Bear Stores and the Respondent did not notify Local 1222 that these same employees had been trans- ferred. According to Tom Vandeveld, president of the Charging Party Retail Clerks, he never received any notice from the Respondent, Gerald Holmes, or Richard Holmes that the La Mesa store had been sold or transferred, or that the employees previously at the La Mesa store had been trans- ferred to other stores. Instead, he said that he learned of these facts from the Union's business agents. The parties also stipulated that the Respondent did not give notice directly to the Charging Party Meat Cutters, prior to the events which took place in November 1976, of the Respondent's intent to alter the status of the La Mesa store in any way. Although Vandeveld stated that there were layoffs about November 15, 1976, in the other stores of the Respondent to which the La Mesa employees were transferred, Gerald Holmes recalled having conversations with Mabee prior to November 15, 1976, in which Mabee told him that there were to be no layoffs of employees or reductions in hours. Gerald Holmes acknowledged at the trial that he did not have personal knowledge whether or not this had occurred. Mabee, however, said that he was not aware that employ- ees had been laid off or had their hours reduced. The findings of fact in this section have been based upon the testimony of Richard Holmes, Vandeveld, Gerald Holmes, and Mabee, as well as stipulations by the parties. As to whether or not there were layoffs and reductions in hours around November 15, 1976, I find the evidence is insufficient to support such a finding. There is the general assertion that there were, but no specifics or details were supplied. Gerald Holmes recalled Mabee's instructions against having layoffs and reductions, and Mabee himself indicated that he was not aware of any. In other matters at the trial, Mabee was very knowledgeable about so many facets of the Respondent's business and related matters that it seems very unlikely that such layoffs and reductions, which were contrary to his instructions, would have es- caped his attention. I. The Operation of the La Mesa Store Under Richard Holmes With regard to labor relations and personnel matters at the La Mesa store, Richard Holmes makes the decisions concerning hiring employees, firing employees, setting wage scales to be paid the employees, scheduling the hours of work of the employees, and determining the working conditions for the employees. The employees are paid lower wage rates than those em- ployees who were working at the La Mesa store prior to November 15, 1976. While the Respondent's main office does the scheduling of the produce employees and the meat department employees in the Respondent's stores, Richard Holmes does that scheduling at the La Mesa store. In addition, he sets his own hours of work. Both his wife 196 BIG BEAR SUPERMARKETS NO. 3 and his mother work at the La Mesa store without pay. The Respondent has a rule against employing both a husband and a wife. According to Mabee's recollection, the rule had been broken only on one occassion. That was when a man and a woman, who were already employed in one of the Respondent's stores, got married. The Respon- dent requested that one of them leave its employ, but they declined to do so and took the matter to the Retail Clerks. After negotiations with the Retail Clerks, the Respondent backed down from its position that one of them must quit. and instead placed the husband and wife in different stores. During the first 3 weeks of operation under Richard Holmes, supervisors from the Respondent came in and helped in the produce and meat departments with technical knowledge. Since that time, supervisors from the Respon- dent come into the store less than once a week. Richard Holmes estimated that within a typical 2-week period all four such supervisors would be in his store. They are the grocery supervisor, the meat supervisor, the produce super- visor, and the deli supervisor. He said that they spoke with the produce man and the head meatcutter. However, Rich- ard Holmes testified that if a supervisor observed that a clerk in the store was doing something wrong, he would not tell that clerk that he was doing it incorrectly. Mabee stated that he had been to the La Mesa store only twice since Richard Holmes took over operation of that store. Richard Holmes said that he had the discretion as to whether to open the La Mesa store on holidays. He pointed out that a manager for the Respondent would not have such discretion. He acknowledged at the trial that he had not done so, but if he decided not to open on a holiday, it would be specified in the Respondent's advertisement. Advertisements in local newspapers for the La Mesa store have not been placed by Richard Holmes, but he said that he had canied promotions in the store as "manager's specials' for a period of 30 days or so. Restrictions are not placed on Richard Holmes with re- gard to his selection of suppliers. Additionally, he said that he could order anything he wanted to order, and that he had made specialty orders. He explained that as a manager in one of the Respondent's stores he could not have or- dered from certain suppliers without the approval of the headquarters office. For reasons of economy and conven- ience to himself, Richard :holiaes orders his produce from the Respondent's warehouse, although most of the time he prices the produce at his store higher than the Respon- dent's pricing guide. He also orders the meat for the La Mesa store through the Respondent's central office. Richard Holmes holds a license to sell beer and wine, and he purchases his beer and wine directly from Gallo and Italian Swiss Colony. The bills from those companies are sent to the La Mesa store and then forwarded to the Respondent's accounting department which Richard Holmes utilizes. All of the licenses necessary to carry on the business are held in Richard Holmes' name. With regard to fire and liability insurance, Richard Holmes pays premiums in his name to the Respondent and is covered under the Respon- dent's insurance package. Meetings for the store managers of the Respondent are held approximately once a month. Since November 1976, Richard Holmes has attended only one or two such meet- ings. He said, "If it is not relevant to me, I don't go." The determination as to whether charitable contribu- tions will be made by the La Mesa store rests with Richard Holmes. When he was a store manager for the Respondent, he said, such decisions were made at the Respondent's cen- tral office. Customers who use food stamps for purchases at the La Mesa store receive their change in scrip which is provided by the Respondent's main office. There are approximately 20,000 various products carried by the La Mesa store. Between November 1976 and the time of the hearing in September 1977, Richard Holmes estimated that he had made about 200 or 300 additions and deletions of products at the store. He deleted the Candy Kids line of products, which he acknowledged had also been eliminated from some of the Respondent's stores by Gerald Holmes. He also deleted the La Rosa and Cream- ettes line of spaghetti and lasagna which had been carried at the store. He pointed out that a store manager for the Respondent would have had to obtain approval before dis- continuing that line of products, which he said was still carried in the Respondent's stores. He also deleted a line of shoes at the store, and he changed ice companies. He added a Sparkletts water vending machine on his own voli- tion. As a store manager for the Respondent, he said that he could not have done so without prior approval. Richard Holmes pointed out that he receives the proceeds from the Sparkletts water sales. Richard Holmes added an extensive health foods line at the La Mesa store, and he added a fancy food section- primarily Japanese foods-to the store. He acknowledged at the hearing that he knew that three other stores of the Respondent had fancy food sections, and he knew of two such stores with health foods. However, he pointed out that when he was the manager of Respondent's Store Number 12 he did not use his discretion to add a health food line, but instead he asked permission of his grocery supervisor who, after some talking, agreed to adding a small section. In addition to the foregoing, Richard Holmes added cer- tain Knudsen products to the store which had not previ- ously been carried. He obtained shelving and revamped just about every shelf in the entire store. He also moved a flower display and he moved the card racks to another location within the store. He acknowledged that he had the same number of cash registers as before, and that the store was essentially the same inside as previously, with the added shelves and rear- rangements described above. Richard Holmes receives a copy of the Respondent's standard pricing manual for grocery items only. When he was a manager for the Respondent he followed the pricing manual, but now he does not always follow it. With regard to this subject, the parties entered into the following stipulation: The La Mesa store is the only franchise outlet of Big Bear. Richard Holmes operates the La Mesa store Monday through Saturday 9 A.M.-9 P.M. and Sun- 197 DECISIONS OF NATIONAL LABOR RELATIONS BOARD day 10 A.M.-7 P.M. which are the same hours of op- eration that the store maintained prior to November 15, 1976. These hours of operation are the hours of operation followed by all Big Bear meat retail grocery chains in San Diego County. Pursuant to the Franchise Agreement, Richard Holmes honors all advertised specials of Big Bear. Richard Holmes exercises his option to purchase Big Bear "house brand" products. After the agreement was signed and before Richard Holmes took over operation of the store, he advertised for employees in the newspaper, rented an office com- pletely separate and apart from Big Bear Markets for the purpose of interviewing employee applicants. He interviewed approximately 250 applicants and he hired 12 employees. He sets wages, hours and condi- tions of employment for each of his employees. He hires and fires his employees. His wages and fringe benefits are less than those provided in the respective collective bargaining agreements. Richard A. Holmes has elected to use the Big Bear Accounting System as provided in the franchise agree- ment, including deposit of receipts and payment of obligations by Big Bear Super Market No. 3, except that Richard Holmes maintains his own business pay- roll account from which he personally pays all of his employees. Richard Holmes submits weekly time cards desig- nating wages and hours to the Big Bear accounting department which computerizes the time cards and provides a print-out with all deductions taken out. Big Bear then issues a check for the amount of the wages reflected in the computer print-out, which amount is debited to Richard Holmes open account. Business Agent Stegman of the Charging Party Meat Cutters was familiar with the meat departments in the ma- jor chain supermarkets in the San Diego area. Most of the independent supermarkets in San Diego County purchased their meats locally, as did the Respondent. However, cer- tain markets, such as Safeway, Alpha Beta, and Food Basket, purchased their meats from their own facilities. The tools used by employees in the various retail meat markets in the San Diego area are basically the same. Each of the meat markets has a display for meats, a holding cooler, and cutting tables. The products handled are gener- ally the same, and the cuts of meat are similar. President Vandeveld of the Charging Party Retail Clerks said that he had visited the La Mesa store recently prior to the hearing. He observed that the signs, shelf tags, and grocery bags were the same as used in the Respondent's stores. He also noticed that green stamps were given to customers as was done in the Respondent's stores. During cross-examination by the attorney for the Re- spondent, Vandeveld gave the following testimony con- cerning stores within the jurisdiction of the Charging Party Retail Clerks: Q. Okay. Now, you say you have seven chains un- der your jurisdiction. Can you tell me what those chains are, please? A. Vons, Safeway, Alpha Beta, Food Basket, Fed- Mart, Gemco, Big Bear. Q. Okay. That is seven. Okay. Do you get into vari- ous stores of various chains on a regular basis? A. Yes. Q. So when you go into Vons-would you say you go into a Vons store once a week? A. Not that often probably. Q. Once every two weeks? A. More like once a month. Q. Okay. Safeway? A. Safeway more frequently. Q. Alpha Beta? A. Once or twice a month. Q. Food Basket? A. Once or twice a month. Q. And Big Bear? A. Big Bear probably once a week. I have a Big Bear right where I live and I shop there. Q. Okay. When you go into various Vons stores, do they sell meat? A. Yes. Q. They sell produce? A. Yes. Q. Do they sell general grocery items? A. Yes. Q. Do they sell non-foods? A. Yes. Q. Do they have their check stands in the front of the store? A. Right. Q. Do they have their doors in the front of the store? A. Yes. Q. Or maybe near the front, perhaps would be a better question. Do they have aisles? A. Yes. Q. With gondolas? A. Yes. Q. And shelving and that sort of thing? Do they have deli cases? A. Yes. Q. Do they generally cluster their deli cases in the vicinity of their meat counter? A. Yes. Q. When you go into Safeway, do they have all the things that Vons have? A. Well, you know, the food stuffs and so forth. Maybe they have different brands, but general mer- chandise is the same. Q. Okay. How about Alpha Beta? A. Same. Q. And Food Basket? A. Right. Q. And Big Bear? A. Same. Q. Okay. Do they all carry-with the exception of house brands, do they all carry pretty much the same products? A. Yes. Q. They all carry flour and eggs and milk and 198 BIG BEAR SUPERMARKETS NO. 3 meats and- A. Yes. Q. They all carry pretty much the same cuts of meat? A. Yes. Q. Okay. In terms of grocery lines-canned peas, frozen foods and things like that, do they all carry pretty much the same products? A. Yes. Q. Would it be fair to say then that supermarkets as an industry operate pretty much the same; they have the same equipment, freezers, gondolas and so on? A. Yes. Q. They have pretty much the same product line? A. Yes. Q. And the only real differences would be in per- haps house brands? A. Yes. Q. Would it be fair to say that the FedMart and the Gemco operations are somewhat different than the other chains in the country? A. Yes. Different from the supermarket, yes. Administrative Assistant Platten of the Charging Party Retail Clerks recalled a conversation with the store manag- er of the Respondent's San Carlos store which took place in 1973 or early 1974. Platten had inquired of the store manager regarding the manager's authority to move stock in the store from aisle to aisle, or from gondola to gondola. The store manager told Platten that he did not have wide- spread power of that nature without approval from a su- pervisor of that store, but that he had some discretion in placing items which he felt would be more profitable for the area in which the store was located. He contrasted his authority with what he perceived to be the straight sche- matic policy in the Alpha Beta stores in California. He indicated to Platten that items in any Alpha Beta store would be on the same shelf and on the same aisle. Platten gave other examples of situations where a store manager of the Respondent had exercised his own judg- ment in the store. He recalled one occasion where the per- son who later became the store manager of the San Carlos store made the decision as to where to set up a Halloween candy display. He also related that the store manager at the El Cajon store had a discussion with one of the frozen food distributors as to whether to purchase a "manager's special" to put in the end freezer display. Platten also said that the store managers had the discretion to go beyond the Respondent's policy in cashing checks. He stated that at the San Carlos store there was some revamping of sections about every 2 or 3 months while he was employed there. He recalled the revamping of the baby foods and diaper section at the store. According to Platten, the store managers instructed the clerks to substitute another product when advertised items ran out of stock. He also said that store managers placed damaged packages and dented canned goods into a "bar- gain corner." With regard to the pricing of products, Platten said that if the price list was lost, if the office was closed late at night, and if another store did not have the price listed in the Respondent's price book, then in those circumstances the store manager would assign a price to the item. He said that this happened especially with regard to Japanese food. Platten said that he had observed Sparkletts water cool- ers at two of the Respondent's stores. In addition, he said that the manager of the San Carlos store had changed ice distributors on two or three occasions. In 1975, Platten had a conversation with the store man- ager of one of the Respondent's Jonathan's stores. The store manager told Platten that he felt that he had more discretion at the Jonathan's store, and made the point to Platten that he had input on deciding that certain items would go into the Jonathan's advertisement. Business Agent Daly of the Charging Party Retail Clerks said that he visited the La Mesa store on a weekly basis from about May 1976 to November 15, 1976. Since that time, he has visited the store on two or three occasions- the last time being about 2 days prior to the hearing in this proceeding when he was in the store for 15 or 20 minutes. In Daly's view, there were no major changes in the phys- ical layout of the store. He said, for example, that the meat department, dairy department, and produce department were located in the same areas as before, He noticed that the signs outside the store were the same and that there were Big Bear signs inside the store. He purchased some items in the store and observed that Big Bear grocery bags were used. Business Agent Lemieux of the Charging Party Retail Clerks said that he had been in the La Mesa store in De- cember 1976. In his opinion, "everything was the same," and "there was no change at all." He said that he observed that the employees were also wearing the same color aprons as he had seen before. Charging Party Retail Clerks' Exhibit I is a 2-page ad- vertisement which appears in The Evening Tribune news- paper on September 7, 1977. The ad lists numerous items and the prices of those items at Big Bear supermarkets. Among the 22 store locations listed in the advertisement is "La Mesa, Highway 94, at Campo." The Respondent's Ex- hibit 2, which is also a newspaper advertisement, indicates that the special sale on the brand of beer advertised was not applicable to the La Mesa store. It was explained by Mabee that the Respondent's beer and wine warehouse does not supply those products to the La Mesa store. As noted earlier, Richard Holmes has his own beer and wine license and makes those purchases directly from suppliers to comply with the State of California law. The findings of fact in this section rest primarily upon the testimony given by Richard Holmes and Mabee and stipulation of the parties. However, to the extent that their testimony is not inconsistent with the foregoing, I have also based findings of fact upon the testimony of Stegman, Vandeveld, Platten, Daly, and Lemieux as noted above. In addition, the findings of fact rest upon the documentary evidence referred to in the foregoing paragraph. J. The Conversation Between Augustus Fougeron and Richard Holmes Richard Holmes had a brief conversation with Augustus Fougeron in late November 1976 at the La Mesa store. 199 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Fougeron is an International representative of the Charg- ing Party Meat Cutters. After Fougeron had introduced himself, Richard Holmes told him that he was the new owner. Fougeron inquired if Richard Holmes was going to continue to bar- gain with the collective-bargaining unit. Richard Holmes replied that he "planned on running an open shop." Augustus Fougeron did not appear at the hearing to tes- tify. However, the parties stipulated as to what his testi- mony would be if Fougeron had been called to testify, but with the caveat "without admitting the truth thereof." The parties stipulated as follows: The undersigned parties stipulate that (without ad- mitting the truth thereof) if called to testify Gus Foug- eron, International Representative of the Amalgamat- ed Meat Cutters & Butcher Workmen of North America, AFL-CIO, herein called the meat cutters spoke with Richard A. Holmes at Big Bear No. 13, in La Mesa, California. Fougeron asked what had hap- pened to the meat cutters represented by the Meat Cutters who had been working at that store. R. Holmes stated that he was the new owner of Big Bear Store # 13 and that Big Bear Supermarkets, respon- dent, had transferred all the employees in question to other Big Bear Stores. Fougeron then asked if R. Holmes was contemplating becoming a union store and Holmes replied that he was absolutely not going to become Union, and that he was going to remain non-union. The two versions of the foregoing conversation are not in substantial dispute on any material matter in this pro- ceeding. However, I found Richard Holmes to be a credi- ble witness on other matters, and I will accept his version of this conversation, and base the findings of fact on his testimony. K. The Conversation Involving Marc Lemieux at the La Mesa Store Marc Lemieux, a business agent for the Charging Party Retail Clerks, had a conversation with Richard Holmes at the La Mesa store. Lemieux approached Richard Holmes in the back room where he was working and asked to talk with him. The two then went to the office. Lemieux pre- sented a contract to Richard Holmes which indicated to him that, as a successor, he would have to continue bar- gaining with the Charging Party Retail Clerks. Richard Holmes told Lemieux that the contract had not been signed by him, but by the Respondent. Richard Holmes said that he would have to talk with his lawyer, although at the trial Richard Holmes stated that he did not have a lawyer at that time. He recalled telling Lemieux to see the Respondent's lawyer, but he did not recall whether or not he mentioned attorney Theep's name. At the hear- ing, Richard Holmes said that he did not recall ever using attorney Theep as his lawyer. About that time, Gerald Holmes came in and greeted Lemieux. Then, a person who worked in a nearby restau- rant came in to inquire about purchasing some flour at a discount. The man first spoke with Gerald Holmes and then with Richard Holmes, who declined to make the sale at a discount. Gerald Holmes left about the same time. Richard Holmes said that Gerald Holmes did not partici- pate in any part of the conversation about union represen- tation. Gerald Holmes recalled that in December 1976 he had gone by the La Mesa store in order to take his wife to lunch. While he was there, he went toward the back room to see whether Richard Holmes would be able to go to lunch with them. On his way, he ran into Lemieux. The two men exchanged greetings, and at that point a person from an Italian restaurant came in looking for flour. Because Richard Holmes was busy, Gerald Holmes said, he spoke with the man from the restaurant. Gerald Holmes denied that he stated, "Richard, you shouldn't sign this, it has all been taken care of by the lawyers," and he further denied mentioning Attorney Theep's name to Business Agent Lemieux. Lemieux's version is that he took three contracts in De- cember 1976 to Richard Holmes at the La Mesa store. He gave the contracts to Richard Holmes in his office to be signed. Richard Holmes told him that he did not know if he should sign them, whereupon Gerald Holmes told Lem- ieux that it had all been taken care of between the lawyers. At that point, according to Lemieux, they were inter- rupted by a person who was seeking to purchase a large quantity of sugar. Lemieux said that Richard Holmes checked a copy of the Big Bear price and order book. Lem- ieux recognized it as being like those he had seen in other Big Bear supermarkets. After the unidentified person de- parted, Gerald Holmes advised Richard Holmes that he should not sign the contracts. Lemieux said that he then asked Gerald Holmes who was the lawyer and that Gerald Holmes replied Mr. Theep, the lawyer for Big Bear. After considering the foregoing versions of this event, I have decided to base the findings of fact in this section upon the testimony given by Richard Holmes and Gerald Holmes for the reasons previously stated. L. The Request for Information by the Charging Party Retail Clerks The parties entered into a stipulation with regard to the following facts: In or about late December 1976 or early January 1977, a representative of Retail Clerks Union, Local 1222, (herein Local 1222) telephoned Richard Holmes at his office at the Big Bear store in La Mesa and requested that Richard Holmes supply Local 1222 with the names and addresses of the current employ- ees of the La Mesa store. Richard Holmes replied that he believed he had no obligation to supply such infor- mation to Local 1222 and that he believed that the supplying of such information would be an infringe- ment of his employees rights and that he would not supply that information. The findings of fact in this section are based upon the foregoing stipulation. 200 BIG BEAR SUPERMARKETS NO. 3 M. Conclusions In Crawford Door Sales Company, Inc., 226 NLRB 1144 (1976), the Board commented on certain factors where the Board generally has found alter ego status: The Administrative Law Judge also found that Re- spondent Cordes was not Respondent Crawford's alter ego because in his view identical corporate ownership is the sine qua non of alter ego status. We disagree. Clearly each case must turn on its own facts, but gen- erally we have found alter ego status where the two enterprises have "substantially identical" manage- ment, business purpose, operation, equipment, cus- tomers, and supervision, as well as ownership. See, e. g., Marquis Printing Corporation, 213 NLRB 394 (1974).... In sum, it is apparent that both Respondents at all times material were wholly owned by members of the Cordes family and never lost their character as a closed corporation. In these circumstances, we find that ownership and control in both enterprises is sub- stantially identical. In view of the foregoing, and the other factors which reveal common business purpose, management, operations, equipment, customers, and supervision, we find that Respondent Cordes is the alter ego of Respondent Crawford. Among the several factors commented upon by the Board in the Crawford Door decision is the matter of "su- pervision." I discuss that subject first because it seems to me that the facts in this case are very clear as to that mat- ter. In the franchise agreement, section 14 spells out specif- ically the authority which is to be exercised by Richard Holmes concerning his employees in his operation of the La Mesa store: OWNER shall have the sole right to employ and dis- charge such employees at his store as in his judgment may be necessary and such employees shall be em- ployees and agent of OWNER and not of BIG BEAR. OWNER agrees to exercise full and complete control over and have full responsibility for any and all labor relations, including the hiring, firing, disciplining, compensation and work schedules of his employees. Significantly, the testimony of Richard Holmes shows that he has exercised his authority with regard to supervi- sion and personnel matters. He did the initial interviewing of applicants for employment and made the decision as to who would be hired. He sets the wage scales for the em- ployees at the La Mesa store, and those wage rates are different from those previously in effect under the Respon- dent's operation of the store. He schedules the hours of work of the employees, and he determines their working conditions. Section 29 of the franchise agreement provides: "BIG BEAR shall provide such supervision and technical assis- tance to OWNER in the operation of the business as may be reasonably necessary to establish the business, and in any event no less supervision than is provided to other markets in the BIG BEAR system." As the testimony shows, those visits to the stores by various supervisors from the Respon- dent are more in the nature of "technical assistance" rather than day-to-day supervision of employees who work at the La Mesa store. In The Southland Corporation, d/b/a Speedee 7-Eleven, 170 NLRB 1332 (1968), the Board concluded that the fran- chisee in that case was an independent contractor, and, additionally, that the franchisor and franchisee were not joint employers. In weighing the facts as to the first issue of independent contractor status, the Board stated: Under the franchise agreement, exclusive control over labor relations is vested in the franchisee. Article 14 of the franchise agreement states in relevant part: "Owners (franchisees] agree to exercise full and com- plete control over and have full responsibility for any and all labor relations, including the hiring, firing, dis- ciplining, compensation and work schedules of their employees." Although Southland makes out the wage checks to employees, this is merely a convenience for the fran- chisees, who furnish Southland's computer with all rel- evant wage information, whereupon Southland rou- tinely makes out the checks in the appropriate amounts. The franchisee's account is debited accord- ingly. There is no evidence that Southland has ever exer- cised any control over any of the terms of employment of the store employees. Moreover, in addressing the second issue of whether the franchisor and franchisee were joint employers in The Southland Corporation, the Board stated at 1334: We have long held that the critical factor in de- termining whether a joint employer relationship exists is the control which one party exercises over the labor relations policy of the other. It is immaterial whether this control be actually exercised so long as it may potentially be exercised by virtue of the agreement un- der which the parties operate. In the instant case Southland neither exercises actual, nor possesses po- tential, control over the store's labor relations under the franchise agreement. It is undisputed that George alone and exclusively hires, fires, and in every other respect sets iie terms and conditions of employment of the store's employees. There is no evidence that the clear language of article 14 of the franchise agreement granting complete control over store labor relations to the franchisee has ever been disregarded by the parties or that Southland has ever sought to interpret the agreement in such a way as to vest in itself the right to influence George's labor relations policies. Considering the facts with regard to labor relations, per- sonnel matters, and supervision of employees, I conclude that those facts favor the finding that Richard Holmes is not the alter ego of the Respondent in his operation of the La Mesa store. Furthermore, the conversations which he had with Fougeron, Lemieux, and a representative of the Charging Party Retail Clerks who requested the names and addresses of his employees, are consistent with Richard Holmes' position of not being the alter ego of the Respon- dent. 201 DECISIONS OF NATIONAL LABOR RELATIONS BOARD Turning now to a consideration of the factor of the "business purpose," it is clear that the La Mesa store was a grocery supermarket both before and after November 15, 1976. Thus, in a strict sense, the purpose of the business remained the same; i.e., to sell groceries and other products at retail to customers. In addition, looking at the factors of "equipment" and "customers," it seems reasonable to conclude that these remained substantially as they had been prior to Novem- ber 15, 1976. The lease for the premises, which is attached to the franchise agreement as Exhibit A, and the descrip- tion of the equipment, which is attached to the franchise agreement as Exhibit B, are indicative that the basic "equipment" for doing business at the La Mesa store loca- tion remained substantially the same. The factor involving the "customers" is more difficult to ascertain in a retail enterprise. A manufacturer or a wholesaler, for example, would be expected to have a list of his customers. A retail grocery supermarket, on the other hand, would not be ex- pected to have such a definitive list. In these circumstanc- es, a basis for inferring that most customers continued to shop at the La Mesa store after November 15, 1976, as they had previously, is that the store continued in the same loca- tion without any interruption of business, and the store continued to use the Big Bear name and to be listed among the stores in the Big Bear advertisements. Furthermore, the fact that Richard Holmes was able to turn around the busi- ness from a loss situation to a profitable situation within a few months' time is some indication that former customers continued to shop at the store, although it could also mean that new customers were attracted to shop there. In examining the factor of "ownership," the basic ques- tion is whether the franchise agreement between the Re- spondent and Richard Holmes is a bona fide transaction or a sham. It is helpful to consider the matters which led to the Respondent's decision to franchise the operation of the La Mesa store. These have been set forth in section E herein, but, in summary, they concern the fact that the La Mesa store had suffered losses under the Respondent's op- eration in the 2 fiscal years preceding the decision to enter into a franchise; the desire on the part of the Respondent not to give up any more of its market share in the greater San Diego area; and the fact that Mabee owned the shop- ping center in which the La Mesa store was located and was concerned about the effect of losing the Big Bear name in drawing customers to the center. The testimony of Mabee was convincing and persuasive that these were the true reasons which led him to make the decision to franchise the operation of the La Mesa store. In a similar manner, Mabee's testimony was convincing with regard to his reasons for deciding to make the first offer to Richard Holmes. At the time Richard Holmes was the manager of one of the high volume stores of the Respon- dent, yet Mabee knew of the fact that Richard Holmes' multiple sclerosis had an effect on his continued perfor- mance as manager of that store. Not to be overlooked is the fact that Richard Holmes was the son of Gerald Holmes, who had been the secretary-treasurer of the Re- spondent for 20 years. Given these circumstances, it seems logical that Mabee would have decided to make the offer to franchise to Richard Holmes, but, more importantly, I conclude that the evidence does not establish that the se- lection of Richard Holmes as a franchisee was a subterfuge by which the Respondent would continue to operate the store. I have given consideration to the fact that the initial cash payment required of Richard Holmes was only $2,000. However, Mabee's testimony concerning this fully explains Mabee's rationale for that figure. He said that he had known Richard Holmes and his background for 20 years, and he knew him to be a financially responsible person and stable individual. Moreover, Mabee anticipated repayment of the promissory note fairly rapidly. The facts bear out Mabee's anticipation as Richard Holmes had repaid over $18,000 on the note as of July 31, 1977, in addition to the interest payments. Section 21 of the franchise agreement, entitled "Owner's Draw on Anticipated Profits," and section 22 of that agree- ment, entitled "Big Bear Charge," set forth the terms by which Richard Holmes may draw on his share of the profits and the provisions for 40 percent of the net operat- ing income to go to the Respondent. It is significant that Richard Holmes has applied his total net profits to the repayment of the principal on his promissory note to the Respondent. His repayment of that amount is an indica- tion that he is truly a franchisee and that the franchise agreement is not a sham. While a store manager of the Respondent receives a bo- nus if his store makes a profit, he does not personally share in the losses if the store sustains a loss. However, under the terms of the franchise agreement, Richard Holmes shares in the profits, if any are made, and also must bear the losses, if that results. The point is that his sharing in the profits or the losses is an indication that he is an owner, rather than an employee. Perhaps of less importance, but still a matter to ponder, is why Richard Holmes' wife and mother would commence working at the La Mesa store without any pay for their services unless Richard Holmes did, in fact, own his busi- ness. If the Respondent still owned and operated the La Mesa store, it would seem to be improbable that Richard Holmes' wife and mother would be working without pay. On the other hand, their assistance to him without renu- meration is logical if he owns his business. Considering the matters discussed above concerning the "ownership" factor, I conclude that factor favors a finding that Richard Holmes is not the alter ego of the Respon- dent. Next, I weigh the factors of "management" and "opera- tions." Section 14 of the franchise agreement states the in- tentions of the parties to that agreement: "It is the inten- tion of the parties hereto that OWNER shall be an independent contractor and exercise control over the man- ner and means of the operations of his business." The testi- mony of Richard Holmes is persuasive that he has carried out that intent of the parties, but, of course, within the terms of the agreement. Section 10, entitled "Inventory," does obligate Richard Holmes to stock items which are customarily carried in Big Bear stores and to stock such items in quantities which, in the sole judgment of the Re- spondent, are reasonably necessary to meet customer de- mands. In addition, Richard Holmes must stock and sell 202 BIG BEAR SUPERMARKETS NO. 3 advertised goods at the prices advertised by the Respon- dent and honor the Respondent's discount coupons. Sec- tion 13 of the franchise agreement gives the Respondent effective control over the advertising decisions. Notwithstanding these obligations to stock the items cus- tomarily carried in Big Bear stores, Richard Holmes has not been precluded from adding or expanding product lines. For example, an extensive health foods line was added, and so was a fancy foods section, primarily Japa- nese foods. Moreover, he has made some 200 to 300 addi- tions or deletions of products handled by the La Mesa store. Thus, while the franchise agreement obligates him to carry the basic Big Bear store products, it has not prevent- ed his exercising his judgment in adding, expanding, or changing other products. After considering the foregoing and the other facts set forth in Section I herein, entitled "The Operation of the La Mesa Store Under Richard Holmes," I conclude that the factors of "management" and "operations" favor the finding that Richard Holmes is not the alter ego of the Respondent. Finally, after considering the entire record and particu- larly the foregoing conclusions regarding the factors of su- pervision, ownership, management, and operations, I con- clude that a preponderance of the evidence does not establish that Richard Holmes is the alter ego of the Re- spondent in his operation of the La Mesa store, and that a preponderance of the evidence does not establish that the Respondent has violated Section 8(a)(1), (3), and (5) of the Act. Cf. Frank Naccarato, a sole proprietor, d/b/a Naccara- to Construction Company, el al., 233 NLRB 1394 (1977); Edward E. Schultz d/b/a Schultz Painting & Decorating Co., 202 NLRB II11 (1973); Sakrete of Northern California, Inc., 140 NLRB 765 (1963); and Charles T. Reynolds Sr. doing business as Charles T. Reynolds Box Company, 139 NLRB 519 (1962). I have given consideration to whether the Respondent's lack of direct notice to the Charging Party Retail Clerks and the Charging Party Meat Cutters regarding the trans- fer of employees from the La Mesa store to other stores of the Respondent violated Section 8(a)(l), (3), and (5) of the Act. The agreed-upon provisions between the Respondent and the two Unions have been set forth in section D herein entitled "The Collective-Bargaining History." As noted there, the provisions of the agreements do not specifically require that the Respondent give advance notice to the Unions, and in the circumstances here, where the Respon- dent ceased to operate the La Mesa store, I find that the lack of such notice did not violate the Act as alleged. Upon the basis of the foregoing findings of fact and upon the entire record in this proceeding, I make the fol- lowing: CONCLUSIONS OF LAW I. The Respondent is an employer engaged in commerce within the meaning of Section 2(6) and (7) of the Act. 2. The Charging Party Retail Clerks and the Charging Party Meat Cutters are labor organizations within the meaning of Section 2(5) of the Act. 3. The Respondent has not engaged in the unfair labor practices alleged in the consolidated amended complaint in this proceeding. [Recommended Order for dismissal omitted from publi- cation.] 203