Connecticut Bill Would Effectively End Franchising in the State

 

 

Last month, HB 5069, an Act Concerning Low Wage Employers, was introduced into the Connecticut State House by Reps. Riley (D-46), Albis (D-99) and Mushinsky (D-85).  Recently, it was passed out of the Labor Committee in a party-line vote and has yet to be moved to a new committee.  The bill would make the unprecedented move of obligating franchisors to pay taxes on the employees of franchisees, despite the two being completely separate business entities.  Intended to act as a surreptitious increase to the state’s minimum wage, HB 5069 would effectively end franchising as we know it in Connecticut.

The franchise industry has been a steady contributor to growth during the economic recovery, both nationally and in Connecticut.  There are roughly 8000 franchised establishments in the state, accounting for more than 100,000 jobs and $12.6 billion in annual economic output.  This economic engine cannot continue with such unreasonable government interference into the franchise relationship.

Connecticut businesses are already being pressed hard by the impending implementation of the Affordable Care Act’s employer mandate and the proposed increase to the federal minimum wage currently being considered by Congress.  This bill would redefine the franchise relationship, holding franchisors accountable for employees of franchisees, ignoring the decades of legal precedent establishing that these two entities are not joint employers.

Franchise businesses in Connecticut, as well as their employees and the customers who depend on them for essential goods and services, would be devastated if this bill were to pass.  Franchisors in the state would be faced with large new costs, making them more reluctant to extend opportunities for new locations.  Although the legislation would almost certainly face legal challenges were it to pass, challenges that would likely be successful, it could do significant damage to Connecticut businesses in the short time before it is overturned.

If you have any questions about this critical issue, please contact IFA’s Dean Heyl by phone at 202-236-5985 or dheyl@franchise.org.  If you are interested in joining IFA’s grassroots coalition against this bill, please contact IFA’s Erica Farage at 202-662-0760 or efarage@franchise.org.

IFA Members come together for IFA’s Second Annual California Franchising Day at the Sacramento Capitol

On March 4, IFA brought together over 25 member franchisors and franchisees for our second annual Franchising Day at the California State Capitol in Sacramento. Among the brands represented were, California Closets, CKE Restaurants, The Entrepreneur Authority, Franchise Services Inc., FranNet, Glass Doctor, Home Instead Senior Care, Interim HealthCare, IHOP, McDonald’s, Mr. Rooter, Plumbing Md, ARCO ampm, Instant Imprints, The UPS Store, Marriott, Yum! Brands, Schlotzsky’s and more.

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The wide array of brands and industries represented at the event helped drive the message to policymakers that franchising has a significant economic impact in California, which continues to thrive in the current regulatory climate due to the partnership that exists between franchisees and franchisors.

Mark Justice, EVP & COO, MR. Stax, Inc., an IHOP franchisee based in Valencia, echoed the importance of being engaged in IFA’s advocacy efforts. “An eye-opening experience! Not only did we influence and educate our state’s lawmakers about the franchise business model, we walked away with a better understanding of the political process in California.”

Attendees heard from several Committee Chairs and leadership from both parties in the morning as well as Nancy McFadden, a top advisor to Governor Jerry Brown, before breaking into smaller groups for more than 40 meetings with individual legislators throughout the afternoon. The meetings were a resounding success.

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Chris Mesker of The Entrepreneur Authority in Sacramento explained, “It was clear to me that our legislators were interested in learning how franchising is really geared for the small business owner vs. large corporation. Getting the opportunity to educate them on the business model and economic impact was a huge step in having them understand how vital we are to the fabric of California. The impact we made was very apparent. It was a great day and I can’t wait to be involved moving forward.”

During the meetings, attendees shared stories about their businesses and the importance of  franchise businesses in California and the nearly one million jobs they create. In a proactive approach, IFA and its members made the most of their time with legislators, advocating on behalf of this proven business model.

“Without the face-to-face legislative interaction with the IFA and its members, many legislators and their staff would have no exposure to franchising and a limited understanding of this small business employment engine,” said Don Conger, of Financial Services, Inc., the franchisor of Sir Speedy and TeamLogicIT, among other brands based in Mission Viejo.

Driving this message home was Don Higginson of The UPS Store in San Diego. “The jury is out on franchising. This business model has been around nearly 50 years now and has flourished under the current regulatory system.”

In conjunction with the event, an op-ed by IFA President & CEO Steve Caldeira and Mr. Rooter of Sonoma County franchisee Saunda Kitchen appeared in Fox & Hounds, entitled “Franchise Business is a Team Sport”. The op-ed provides a unique look into how franchising allows entrepreneurs to go into business for themselves, but not by themselves with the support of a franchise system.

Moving forward, IFA will continue its outreach and engagement in California inviting legislators to in-district meetings and roundtables this spring and summer.

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Businesses Need Comprehensive Tax Reform Now to Grow

IFA Pres. & CEO Steve Caldeira, CFE, and Business Roundtable Pres. John Engler summarized their insights on what it takes to help businesses thrive:  comprehensive tax reform.  The recent op-ed has appeared in publications across the United States and Canada.

“Modernizing and simplifying our outdated tax system, in a comprehensive manner for both large and small businesses is a necessary catalyst for more robust business investment, a stronger economy and a healthier job market with wage growth that creates more opportunities for all Americans,” they wrote.

The two business leaders agree that “Comprehensive tax reform should simplify the tax system and allow American businesses and their workers to compete and win both at home and abroad. And in today’s modern economy, small businesses compete and increasingly win globally; in fact, approximately 26 percent of globally engaged U.S. companies are classified by the U.S. government as small businesses.”

Read more here: 

Placements include:

Franchise ACA Roundtable: “Changing the definition from 30 to 40 hours would be tremendous”

 

 

“Changing the definition from 30 to 40 hours would be tremendous for us,” said Dione Heusel, vice president of human resources and training for Smoothie King Franchises, according to a recent article in The Advocate.

This was the clear conclusion at a roundtable discussion on the Affordable Care Act (ACA) and our efforts to return to the traditional definition of a full-time worker under the ACA. Kelly Rogers of Two Men and A Truck, Scott Taylor of Last In Concepts, David Lewis of Express Employment Professionals, and Dione Heusel of Smoothie King joined IFA’s Matt Haller and I this week at the International Franchise Association’s (IFA) 54th Annual Convention in New Orleans to discuss the challenges franchises face with the Affordable Care Act.

The ACA has effectively changed the definition of a full-time worker from 40 hours to 30 hours by stipulating that businesses with over 50 full-time equivalents (FTE) must provide health insurance to anyone working over 30 hours a week or pay a penalty. As outlined in a report by the Hudson Institute in 2011, this provision would prohibitively raise costs, putting 3.2 million franchise workers at risk of losing hours and wages. A follow up study by Public Opinion Strategies found that 31 percent of franchise businesses have already reduced worker hours. These concerns were echoed by all participants in the roundtable.

Taylor emphasized a shift among businesses to more explicitly manage their workforce so that full-time employees work 40 hours a week and part-time employees work no more than 30 hours a week to manage costs. “Businesses are going to spend an awful lot of time trying to manage hours,” he said. “While this might reinforce good disciplining among management, it’s also not what grows companies.”

Lewis agreed, stating that variable employees want flexibility on hours and would prefer to keep their current schedules. However, the ACA’s 30-hour rule makes flexibility impossible in low margin businesses that need to closely monitor costs.

Rogers also highlighted the disincentive the 50 FTE rule. According to her, some franchisees are working to stay under the 50 FTE threshold to avoid a significant cost increase, which will reduce economic and job growth.

The IFA has advocated for a return to the traditional definition of full-time and has supported bi-partisan bills such as Rep. Todd Young’s (R-IN) Save American Workers Act, Sens. Donnelly (D-IN) and Collin’s (R-ME) Forty Hours Is Full-Time Act, and Rep. Daniel Lipinski’s (D-IL) Forty Hours Is Full Time Act. These bills would reduce costs for employees and give them the flexibility to reward good work with more hours, avoiding a rigid bifurcated labor force that does not support growth.

Some say bills like Rep. Todd Young’s Save American Workers Act, which returns the definition of full-time to the traditional 40 hours a week, will cause employers to reduce hours for those working over 40 hours a week. All participants pointed out that they are already offer benefits to those working over 40 hours a week, not because they have to, but because it is a long-term investment in talent that is essential for growing their business.

“Every business wants to have the best talent,” emphasized Smoothie King’s Heusel. “We’re a growing brand, and we have to have ‘bench strength,’ meaning we rely on our full-time employees to develop the skills, proficiency, and knowledge we need to grow our business.”

Taylor even joked that if he reduced his full-time staff’s hours to avoid offering health care, somebody else at the table would just snatch them up.

While IFA and its members see the second delay in the employer mandate as somewhat helpful, it is not the permanent fix businesses need so they can invest confidently.

Specifically, Rogers found that while the delay might be considered helpful, Two Men and A Truck franchisees are waiting for clarity on final rules so that they can best understand their cost structure. “I’ve got people sitting on capital, waiting to go into new markets, but they’re afraid to do it,” she said.

See The Advocate’s full piece HERE.

President Obama Issues Executive Order to Raise Minimum Wage for Federal Contractors

Yesterday, President Barack Obama issued an Executive Order to raise the minimum wage for workers of federal contractors to $10.10 per hour.  The order follows the President’s commitment during last month’s State of the Union address, in which he vowed to act to raise the wage floor even without Congressional authorization.  The President’s Executive Order impacts hotels, restaurants, and personal services located on military bases and other federal facilities to which the order applies.

As Congress debates an increase in the minimum wage, the business community has been outspoken in its opposition to current proposals.  A Public Opinion Strategies survey concluded that more than two-thirds of franchise businesses and 50 percent of non-franchise businesses would make personnel decisions in order to adjust to an increased minimum wage.

An increase in the minimum wage might provide more take-home pay for workers, but it would ultimately hurt the very people it intends to help.  A minimum wage hike will jeopardizes entry-level jobs and make it more difficult for lower-skilled workers to move up the economic ladder.  It will also lead to increased automation of tasks formerly performed by a low-skilled workforce.

Click here to take action by telling your Senators and Representative to protect franchise businesses by rejecting an increase in the minimum wage.