They are also buying the use of the franchisor's brand. And it's therefore in the franchisor's interest to keep tabs on the franchisees and make sure they don't screw up and tarnish the brand. But in no way does that make the franchisor the employer of the franchisee's employees! Sheesh!
From the franchisor’s perspective, the franchisee is a source of both capital investment and managerial talent. Or should be. In many fields, after a few years the franchisee begins to suffer severely from “What have you done for me lately?” syndrome.