Federal Regulation Costs Challenge Small Businesses

Most franchisors and franchisees are well acquainted with the reality of how their businesses can be negatively affected by government regulation.  IFA, which represents these major contributors to the U.S. economy, applauded Calif. Gov. Jerry Brown for vetoing SB 610 that would have devastated the franchise community in California because “Franchising remains the most viable way to own and operate a small business for many Americans, and provides small-business owners with a chance to build equity for themselves and their families.” Although this bill would have only affected one state and those doing business there if it became law, it would have set a new, dangerous precedent.  Imagine the impact of such wrong-headed legislation at the federal level.

Now there is some solid evidence about the impact of a regulation-heavy federal government. A new National Association of Manufacturers report, “The Cost of Federal Regulations to the U.S. Economy, Manufacturing and Small Business” finds that:

  • In 2012, federal regulations cost $2.028 trillion (in 2014 dollars).
  • An average payroll of 21 percent or $233,182 represents the cost burden for an average U.S. business each year.
  • 88 percent of respondents consider federal regulations a leading challenge for them.

According to NAM President and CEO Jay Timmons in the report’s executive summary: “The analysis finds that the average U.S. company pays $9,991 per employee per year to comply with federal regulations. The average manufacturer in the United States pays nearly double that amount — $19,564 per employee per year. Small manufacturers, or those with fewer than 50 employees, incur regulatory costs of $34,671 per employee per year. This is more than three times the cost borne by the average U.S. company.” Learn more about the report.

Join IFA’s Franchise Action Network to defend the franchise model against harmful regulations and legislation. The FAN is a grassroots network that brings together the franchise industry to speak with one consistent, strong and collective voice on the issues facing our industry. On the website, you are able to keep up on current news and issues surrounding the industry, take action at the state and federal level and gain information on franchising and its economic impact across the Nation. By joining the FAN, you will become a critical part in educating and informing lawmakers at every level about the benefits of franchising.

U.S. Added 21,360 Franchise Jobs in August

U.S. private-sector franchise jobs increased by 21,360 during August, according to the “ADP National Franchise Report.” Restaurants and auto parts and dealers again led the way, with accommodations and business services showing healthy improvement as well. In fact, business services adds double its 12-month average of job gains.

Distributed to the public each month free of charge, the report measures monthly changes in franchise employment derived from ADP’s actual transactional payroll data.

The report is produced by ADP, a leading global provider of human capital management solutions, in collaboration with Moody’s Analytics, Inc. and is published by the ADP Research Institute.

Click here to access the ADP National Franchise Report Infographic.

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Visited IFA’s FranBlog Recently? Take a Tour

I was talking with someone recently who wasn’t totally familiar with IFA’s SSTF

blog. Officially, it’s described as:

“A blog with news and views from the International Franchise Association representing more 825,000 franchise businesses across 300 business lines, providing for nearly 18 million jobs and generating over $2.1 trillion to the U.S. economy.”

For busy franchise executives, it’s a haven for quickly finding information on a variety of topics affecting their businesses and the franchise industry. Take a quick tour and you’ll find posts that detail a recent ruling of the National Labor Relations Board that would negatively affect franchisees, learn the five reasons why you should attend the IFA Public Affairs Conference in September or how CKE Restaurants CEO and IFA board member Andrew Puzder, CFE, drove home the message about the harmful effects of joint-employers status on franchising before a recent U.S. House of Representatives’ panel. Use the search button to find those topics of particular interest to you and your business.

Recently posted articles include the association’s lawsuit against Seattle for equal treatment, IFA’s recent reports on lending and the economic outlook, as well as credit tax subsidies under the Affordable Care Act, among many others.

And while you’re reviewing the posts, take a few minutes to vote on the most critical issue for the franchise industry today from a list of five selections!

Franchisor Executive Addresses House Panel on Franchise Operations

Today, a panel of industry, labor and legal representatives gathered in the Rayburn House Office Building to testify before the Subcommittee on Health, Employment, Labor and Pensions of the House Committee on Education and the Workforce.  The hearing entitled, “What Should Workers and Employers Expect Next from the National Labor Relations Board?” concerned the NLRB’s propositions that may affect the business climate for businesses of all sizes, including many franchise businesses.  Of particular interest during the hearing was the issue of joint-employer status, which if applied to franchising would have drastic consequences.  As Subcommittee Chairman Phil Roe (R-TN) noted in his opening remarks, “A standard has been in place for 30 years to determine when two employers share immediate and direct control over essential terms and conditions of employment … This isn’t a new concept, so the board’s recent solicitation [for clarification on the definition of joint-employers] is highly suspect and strongly suggests it’s eager to abandon existing policies in favor of a new standard more favorable to union interests.”

While the Chairman’s concern was shared by many members of the Committee, it was the testimony from Andrew Puzder, CEO of CKE Restaurants (Carl’s Jr. and Hardee’s) and IFA Board Member that drove home the message regarding the harmful effects of joint-employers status on franchising.  During his testimony, Mr. Puzder articulated that the relationship between franchisors and franchisees is one of mutual benefit, but separate operation.  Ranking Member John Tierney (D-MA) posed a series of questions to clarify the relationship, “Do Franchisees generally hire people? … Same with firing? … Same with disciplining?” To all of these, Mr. Puzder delivered an affirmative yes, signaling that the franchisees truly do manage their own businesses at every turn.  To assert that franchisors completely mandate how franchisees run their businesses an insult to the thousands of entrepreneurs who have utilized the resources that the franchising model provides them to go into business for themselves.

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Mr. Puzder went on to note that labeling franchisors as joint employers would drastically alter the employment landscape.  While CKE and its franchisees are responsible for over 70,000 jobs in the United States, joint-employer status would require massive oversight on CKE’s behalf, meaning less autonomy for franchisees and increased costs for the franchisor to monitor the employment process and administrative overhead.  Not only would this convolute the hiring process and discourage expanding employment, but it would also take away the equity franchisees created in their own business.

Joint employer status is an important issue for those in the franchise community, which is why the International Franchise Association will continue to uphold the mutually beneficial business model of franchising.  Rather than cater to special interests and politically-motivated unions, the NLRB should protect hard-working business owners and the thousands that they employ.

Please click here to view today’s hearing.

Franchising Poised for Robust Growth in 2014

Franchise businesses continue to power up the U.S. economy and two just-released reports explain why.

FRANdata’s The Small Business Lending Matrix & Analysis finds that the industry’s perennial lending shortfall – the difference between projected loan demand and loan supply – will likely be cut in half this year, positioning the franchise industry for robust growth. IHS Global Insight’s Franchise Business Outlook reports that franchise industry growth has outperformed the overall economy for the past six years. Both reports are prepared for the International Franchise Association Educational Foundation.

“With seven out of 10 franchise business lines adding jobs faster than the private sector at-large, the franchise business model continues to provide jobs and entrepreneurship opportunities for workers and entrepreneurs in sectors as diverse as hotels, auto, business and personal services and restaurants,” said IFA Pres. & CEO Steve Caldeira, CFE.  “One reason for this success is that credit is steadily becoming more available for franchise expansion.”

Here are a few key findings:

  • Franchise demand from both new and existing franchisees is expected to exceed 73,800 unit transactions in 2014. This represents a 12.4 percent increase in demand over 2013 and an 18.8 percent increase over 2012. (FRANdata)
  • To satisfy this demand, franchise businesses will require $29.4 billion in lending. Of this demand, banks will make $28.1 billion available. These funds will provide financing for 70,500 unit transactions, which will create or maintain more than 1 million jobs and support $138 billion of annualized economic output. (FRANdata)
  • Franchise employment is expected to increase by 2.6 percent in 2014, faster than the 2.5 percent growth in 2013 and outpacing projected total employment growth in the United States by 0.8 percentage points. (IHS Global Insight)

Franchises are expected to add 221,000 new jobs in 2014. Moreover, with 2.6 percent employment growth, franchises are adding jobs faster in 2014 than 2013 and outpacing projected total employment growth in the United States by 0.8 percentage points. (IHS Global Insight).

Find an updated Economic Outlook Infographic and release for more details.