Author Archives: Matt Haller

IFA Continues Immigration Reform Listening Tour with Business Leaders in Arizona

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Franchise industry leaders held a roundtable discussion on the topic of franchising’s role in the economy and the impact the recently introduced immigration reform bill could have on franchise businesses today at the Westin Kierland Hotel & Resort in Scottsdale, Ariz., in conjunction with the Restaurant Leadership Conference, a gathering of 1,700 restaurant industry participants.

IFA Pres. & CEO Steve Caldeira opened the roundtable by reacting to the recently introduced immigration reform bill by saying, “the Senate Gang of Eight bill includes many of the priorities of the IFA’s goals for immigration reform, including a mandatory e-verify system and a new W-visa program that allows employers to access foreign workers for lesser-skilled jobs, but only after Americans have had the opportunity to fill those jobs first.”

“We see the pendulum swinging on this issue in the direction of having more positions available than we can fill with workers right now, even with a still relatively high rate of unemployment,” said Don Fox, President of Firehouse Subs.

It isn’t just restaurants that are facing difficulties finding workers to fill the forecasted demand for growth in their franchise businesses. Peter Tourian, the founder and CEO of SYNERGY home care, part of the growing non-medical in-home care industry, said immigration reform can help fuel the necessary demand for workers in his growing enterprise. “With 10,000 baby boomers turning 65 everyday, the demand for non-skilled care in our industry will continue to grow as this industry grows in the coming years.”

One of the priorities of IFA’s immigration agenda is the inclusion of a federal e-verify system that protects employers who may unknowingly hire illegal employees as a result of worker fraud. Several of the roundtable participants shared their concerns with the current e-verify program, which is mandatory in Arizona and would be mandatory nationwide as part of the Gang of Eight bill.

“There must be safeguards in e-verify to ensure that companies like mine who do the right thing by hiring legal workers are not held liable due to shortfalls in the system,” said Scott Novis, founder and CEO of GameTruck Licensing.

Aslam Khan, the largest franchisee of Church’s Chicken, implemented e-verify at his restaurants last year. “We want to do the right thing and hire legal workers, but as a result we lost many of our best workers who came back as undocumented.”

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The event was part of IFA’s integrated advocacy campaign taking place across the country to ensure the franchise industry’s voice is heard in the immigration reform debate. Participants in the Arizona roundtable included Don Fox, CEO, Firehouse Subs, Aslam Khan, CEO, Falcon Holdings (Church’s Chicken, Jack in the Box, Long John Silver, A&W and Schlotzsky’s franchisee), Scott Novis, CEO, GameTruck Licensing, Eddie Goitia, CFO, Tilted Kilt Pub and Eatery, Steve Chavez, Senior VP of Franchise Operations, Native New Yorker Franchising and Peter Tourian, CEO, SYNERGY HomeCare.

Making franchising’s voice heard on immigration

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As the immigration reform debate heats up in Washington ahead of the anticipated release of the Senate “Gang of Eight” legislative framework next week, IFA is making the voice of franchising heard to ensure the industry has the workers it needs as it continues to grow in the years ahead as part of any guest worker program that is included in the legislation.

On Wednesday, IFA Pres. & CEO Steve Caldeira penned an op-ed with Jerry Howard, CEO of the National Association of Home Builders, that appeared in The Wall Street Journal, arguing for a market-based guest worker program:

“Elegant political deals, anchored by common principles agreed to by business and labor groups often at odds, may bring cheers in Washington. But the real key to success will be a final immigration measure that is comprehensive in nature. That would mean ensuring that the government isn’t put in the position of picking winners and losers, and that the legislation is appropriately aligned with the constantly changing needs of small and large businesses.

An employer’s access to lower-skill workers participating in the visa program should be triggered after a check with the domestic labor market. If Americans want the jobs that employers need to fill, they would be first in line to get them and there would be less need for foreign workers. But the need will always exist to some degree, and a guest-worker program that permits a market-based supply of lower-skill workers is essential. Without such a program, no immigration reform bill will be worthy of the name. With one, the framework will be set to power the most prosperous economy in the world.”

The piece serves as a great reminder of the economic impact of the franchising industry to the overall economic recovery, and how a guest worker program that works for our businesses will help power the economy, which continues to create jobs at rates faster than other businesses.

Also on Wednesday, IFA was quoted in this POLITICO story that noted the concern of IFA and other leading business groups with the emerging details of a the potential legislative framework of the immigration reform package coming from the Gang of Eight and negotiated by the U.S. Chamber of Commerce and the labor unions.

International Franchise Association CEO Steve Caldeira also told POLITICO he is concerned about the size of the program and economic indicators used as triggers.

“Obviously we would like to see a number higher than 20,000 workers at the start of the program,” said Caldeira. If Americans want the jobs that employers need to fill, they would be first in line to get them and there would be less need for foreign workers.”

The POLITICO story led to an appearance on Thursday evening by IFA President & CEO Steve Caldeira and ImmigrationWorks USA CEO Tamar Jacoby on FOX Business’ Cavuto program to discuss whether or not the “deal” negotiated by the Gang of Eight is sufficient.

In the segment, Caldeira and Jacoby expressed praise for the Senate negotiators and the business and labor groups involved in crafting the current framework.

“We believe in the basic principles negotiated by the Gang of Eight and the Chamber and Labor, but we believe it does not go far enough as it relates to guest worker program. The caps that you just mentioned on the program account for not even 1/10 of the workers we’ll need in franchise industry as well as construction industry…In our industry, we added 150,000 jobs last year, we forecast 162,000 jobs this year, but we can’t find the workers to meet the forecast of demand moving forward.

As the debate evolves in the coming weeks and months over immigration reform, IFA will continue to engage in an integrated lobbying, grassroots, media outreach and member engagement campaign throughout the country to ensure the franchise industry’s voice is heard. This campaign included a roundtable at last week’s Franchise Update Multi-Unit Conference in Las Vegas and at the upcoming Restaurant Leadership Conference in Arizona. The Las Vegas outreach resulted in a story in the Las Vegas Review-Journal featuring comments from Aslam Khan, George Zografos, and IFA VP for Government Relations & Public Policy Jay Perron, as well as an April 1 Las Vegas Review-Journal opinion piece by IFA member Patrick Walls, the president of Capriotti’s Sandwich Shops.

Franchisee Buy-in was Key to Turnaround of Hardee’s, Carl’s Jr.

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At IFA’s 53rd Annual Convention on Feb. 19, Andrew Puzder, CEO of CKE Restaurants, franchisor of the Hardee’s and Carl’s Jr. restaurant chains, told 3,600 attendees that getting buy-in for his unconventional approach to compete with larger restaurant change was a critical component of his turnaround strategy. It has been a guiding principle which has propelled the brands to 3,300 restaurants, with growth for ten consecutive years, including during the recession, and operations now in 28 countries.

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“We have a simple philosophy at CKE Restaurants:  If the franchisees make money, we all make money.  We believe we’re the most franchise friendly company around.  For over 10 years, we’ve had a Carl’s Jr. and a Hardee’s franchisee on our corporate Board of Directors,” said Puzder.

Puzder talked about how Hardee’s and Carl’s Jr. bucked the conventional wisdom in the early 2000’s with the rollout of the $6 burger for $3.99. The franchisees in the system were very concerned consumers wouldn’t pay $4 for a burger, particularly during a time when most restaurant chains were selling smaller burgers for less money.  Yet by testing the burger in a corporate store in California and demonstrating to the franchisees in the system that the product sold “off the charts,” the brand was able to roll it out nationwide.

“Being able to prove the concept in company owned markets and having the franchisees involved from the beginning were essential to making this product a success,” said Puzder.

The CKE advertising strategy also bucked the conventional wisdom. By involving franchisees in the decision-making process and explaining the rationale for targeting “Young, Hungry Guys” with famous models like Paris Hilton, the franchisees “generally, if reluctantly, went along”.

Puzder said their advertising strategy to compete with brands spending exponentially more dollars on television was to break through the clutter and generate earned media. The numbers and results speak for themselves. According to Puzder, a Kim Kardashian ad got 330 million earned media impressions, Kate Upton got over 1.5 billion in 210 countries and Nina Agdal is close to a billion.

What are main street franchise owners saying about the proposed minimum wage hike in the State of the Union?

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While the President’s State of the Union address touched on a number of priorities of the franchise industry, such as the need for comprehensive tax and immigration reform, many franchisees are concerned that President Obama’s proposal to raise the minimum wage at this time would be a job killer.

After the speech, IFA President & CEO Steve Caldeira released the following statement:

“The franchising community welcomes the president’s call for action in Congress to address challenges with our immigration system and the complexities in the tax code. IFA stands ready to work with Members of Congress to enact these much-needed reforms for America’s 825,000 franchise businesses to accelerate job creation in our industry.”

Franchise businesses have been hit hard with constant incremental cost increases that make it more difficult for them to expand and create new jobs, such as Obamacare compliance costs, tax increases, hikes in commodity and energy prices and the lack of available capital. All of these policies and external factors are chipping away at the profit margins of America’s 825,000 franchise establishments, which support nearly 18 million workers.

This morning, we asked a few of IFA’s members what they thought about the proposal to raise the minimum wage, and here is what they said:

“The vast majority of employees in my business who make the minimum wage are not full- time employees. Requiring me to pay a high-school student, who I am training to be a worker in our society, a minimum wage of $9 will crush my business. 

“If my employees have a great work ethic, then I immediately pay them more.  This is a simple ‘market’ decision. If they are poor performers, then paying them $7.25 or $9 per hour will make no difference in their performance, but it will erode our ability as small-business owners to make a profit and therefore open new locations.”

Sean Falk a multi-unit franchise owner of Salsarita’s Fresh Cantina, Great American Cookies, Mrs. Field’s Famous Brands and Pretzelmaker

“Raising the minimum wage will not deliver customers with more money in their pockets. It will continue to discourage small businesses from hiring or even keeping minimum wage personnel.  Increasing the minimum wages does not help stimulate business.”

Earl Wertheim, Franchise Developer, The UPS Store

U.S. Chamber says economic growth should be “front and center” in 2013; tax reform can “turbo-charge” growth

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This morning, IFA was fortunate to have a front row seat at the annual “State of American Business” event at the headquarters of the U.S. Chamber of Commerce, the world’s largest business association located across Lafayette Park from the White House. The event, which brings together representatives from trade associations representing all sectors of the U.S. economy, sets the tone for the annual lobbying agenda for the business community.

U.S. Chamber President Tom Donohue

Chamber President Tom Donohue laid out a series of pro-growth priorities sure to excite anyone in the franchise industry who is frustrated with the ongoing pace of the recovery. According to Donohue, the American Jobs and Growth Agenda would generate stronger economic growth by producing more American energy, expanding American trade, modernizing our regulatory system, and reforming our immigration and visa policies. The agenda also emphasizes the urgent need to address the fiscal crisis with a bold plan that slows the growth of runaway spending, reforms entitlement programs, and overhauls our tax code. According to IHS Global Insight, franchise businesses have been on a slow, but steady, recovery from the recession, and now stand poised to accelerate growth plans if more confidence could be instilled in the economy for existing and prospective franchise investors. As such, Donohue’s comments and the Chamber’s agenda in the year ahead should be welcome news to franchisees, franchisors or prospective franchise investors.

“Economic growth cannot solve all of our problems, but without growth, we will not be able to solve any of them,” said Donohue. “The imperative of economic growth should not be an afterthought. It must be job one. The over-riding objective of this ambitious plan is to generate stronger economic growth in order to create jobs, lift incomes, and expand opportunity for all Americans. America needs big solutions so it’s time to put the smallness of politics aside. We call upon all of America’s leaders in and out of government to put country first.”

Specifically addressing the need for comprehensive tax reform, which is a top priority for IFA, Donohue cautioned lawmakers against using tax reform as a vehicle to continue their reckless spending habits. “Tax reform is not a substitute for spending restraint. It must be done after or concurrent to spending cuts. The right kind of tax reform will turbo-charge our growth, create jobs, and generate more revenues for government at all levels” He warned that the tax increases recently levied on small businesses as a result of the end-of-year fiscal cliff deal will hold back growth in the first part of the year.

“As illustrated by the Chamber’s latest survey of small business members, there is significant uncertainty over health care, regulations, taxes, and deficits,” he said. The Chamber’s Small Business Survey results echo IFA’s latest member survey, which showed the uncertainty of numerous regulatory and public policy challenges were holding back growth.

In IFA’s survey, 64 percent of franchisors report the Affordable Care Act will create some significant uncertainty in long-term planning and healthcare reforms will create significant uncertainty in long-term planning for 71.6 percent of franchisee respondents. More than 10 percent agreed with the statement: “We are no longer confident that our business model is profitable.”

The Chamber forecasts growth of 1.5-1.75 percent in the first half of 2013, with growth accelerating to as high as 2.5 percent in the second half of the year. But Washington “deadlines” in the coming weeks and months, such as the need to raise the debt ceiling and pass a budget, may overshadow growth and will continue to shake the confidence of the business community.

On the bright side, if Congress can address these policies, it will likely accelerate job creation and franchise development across the nation. According to IFA President & CEO Steve Caldeira, franchise growth remains slow due to the rising tax burden placed on small business franchisees and the out of control spending by Washington on entitlement programs.

“While we are pleased the industry continues growing at faster rates than other sectors of the economy, we could be growing much faster, creating more new jobs and businesses, if Washington addressed the tax, spending and regulatory uncertainty plaguing the small business community in a meaningful way,” Caldeira said during the recent unveiling of IFA’s 2013 economic forecast for franchising.

To read or watch the full speech, please click here.