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.

CFDayQuote2_blog 4

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.

CFDayQuote1_blog (3)

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.

cfdayAlbum_blog (2)

NLRB Allows Deadline to Pass, Will Not Challenge Employee Rights Poster Ruling

Last May, the U.S. Court of Appeals for the D.C. Circuit ruled that the National Labor Relations Board (NLRB) had overstepped its authority and infringed upon employers’ free speech rights when it issued a regulation requiring employers to put up a poster in workplaces with an unbalanced and biased overview of employee rights under the National Labor Relations Act. The employer community prevailed in this suit, brought by the National Association of Manufacturers and the Coalition for a Democratic Workplace (CDW). It also prevailed in a suit brought by the U.S. Chamber of Commerce, in which the U.S. Court of Appeals for the Fourth Circuit denied the Board’s petition to reconsider its decision that the NLRB lacked the authority to require the poster.

Last Friday, the deadline for the NLRB to petition the U.S. Supreme Court to review the DC Circuit’s decision passed, effectively ending the debate on the issue that sparked outrage from the employer community.

“The IFA is pleased that the NLRB has declined to challenge the appeals court’s decision to invalidate the employee rights poster requirement,” IFA President & CEO Steve Caldeira said in a statement. “The NLRB was wise not to appeal a decision that swiftly and unambiguously rejected the Board’s aggressive overstepping of its authority in requiring an unbalanced workers’ rights notice that deprives employers of their free speech rights and misguides the workers it was designed to inform.”

Although the employer community is still at odds with the NLRB over other significant regulations and decisions, it appears that the threat of the employee rights poster has been neutralized. IFA remains committed in its advocacy for workforce policies that benefit both workers and employers, and stands prepared to protect the franchise business model from such ill-conceived and damaging labor regulations as those promulgated by the NLRB.

 

 

The Stories Behind The Numbers

 

 

The International Franchise Association (IFA) and the U.S. Chamber of Commerce’s new study brings hard data to the stories we’ve heard from franchisees throughout the country – Obamacare is raising costs, reducing jobs and slowing growth. Stephen Bienko, who owns 15 College Hunks Hauling Junk franchises, is but one example of the stories behind these numbers. He appeared on Bloomberg Surveillance this morning to detail the impact of the ACA on his business.

Bienko_Bloomberg_insider

Stephen Bienko Asserts That Part-Time Workers Who Want To Increase Their Hours And Go Full-Time Would Be Better Able To Do So Without Obamacare. “If it was not for the Affordable Care Act, yes, we would be making them full-time, 40 plus hours per week [and paying their healthcare benefits]. One of the biggest issues with the Affordable Care Act is the change of the 40 hour work week to 30 hours. Changing that status not only affects the financial reality, but it also affects the culture within a company.” (Stephen Bienko, “How Obamacare Impacts College Hunks Moving Junk,” Bloomberg TV, 11/13/2013)

Due To The Law, Bienko Is Having To Reduce Hours To Plan Ahead For The Employer Mandate. “I have already begun to reduce my employees’ hours, and that’s the way you have to do it as a small business owner, you have to plan ahead…The delay does nothing for us. We have to plan ahead…”(Stephen Bienko, “How Obamacare Impacts College Hunks Moving Junk,” Bloomberg TV, 11/13/2013)

As the IFA-U.S. Chamber study shows, Bienko is not the only one feeling the effects of the employer mandate. Below are more stories behind the numbers (see our fact sheet HERE for more, as well as highlights from the U.S. Chamber of Commerce HERE).

Fact #1: Twenty-nine percent of business decision-makers in franchise businesses report increasing costs due to the law.

Brooke and Les Wilson Of Two Men And A Truck Estimate Obamacare Will Result In $100,000 To $120,000 In Higher Costs. “Les said they already provide health and dental insurance for employees, but they’re expecting more of their employees to elect for coverage because of the individual insurance mandate. They’re estimating that they will see their health insurance costs increase by $100,000 to $120,000 per year after the full roll-out of the law. Les Wilson said he believes the ‘biggest obstacle’ for them may be primarily from rising costs of premiums from their insurer. ‘That’s going to be where a significant amount of costs come from…,’ he said. ‘I think it’s a knee-jerk reaction to the uncertainty.’” (Laura Oleniacz, “Durham Two Men And A Truck Franchisees Lobby Lawmakers,” Herald Sun, 9/23/13)

Mike Bidwell, President Of The Dwyer Group, Which Owns A Number Of Franchise Brands, Has “Never Talked To Any Business Owner That Has Been Enthusiastic” About Obamacare. “I have never talked to any business owner that has been enthusiastic about it,’ says Mike Bidwell, president of The Dwyer Group, a holding company for several service-based franchises, including Aire Serv and Mr. Rooter. ‘I have never seen anything that has resulted in such a unified negative response.’” (Kate Taylor, “Franchisees Fear Obamacare as Uncertainty Paralyzes Growth,” Entrepreneur, 10/1/13)

Fact #2: More than 50 percent of both franchise and non-franchise businesses with 40-70 employers plan to make personnel decisions to stay below the 50 full-time equivalent employee threshold.

Sean Falk, A Salsarita’s Fresh Cantina, Great American Cookies, Mrs. Field’s Famous Brands And Pretzelmaker Franchisee, Says The ACA May Force Him To Reduce Employee Hours To Keep His Doors Open. “Currently, I employ 43 full-time equivalent employees. If my business grows and I create more jobs, I will also drastically increase my costs due to the employer mandate. This has an undeniable impact on my bottom line and is making me reconsider opening new locations…Also, I may be forced to reduce my employees’ hours to less than 30 hours per week so that they do not acquire full-time status. With these challenges and changes, I fear that it may be a struggle just to keep the doors open on my 12 existing businesses.” (Sean Falk, Remarks At U.S. House Of Representatives Committee On Small Business, Washington D.C., 2/13)

Sam Ballas Of East Coast Wings Company Found That Franchisees With Three To Five Units Will See Huge Cost Increases With Obamacare – Forcing Those With Fewer Than Three Units To Stay There. “Mr. Ballas’s company studied the past two years of financial data from its restaurants, and modeled how many units a franchisee could own and remain profitable after covering full-time workers. The model showed that franchisees who operate in three or fewer stores are likely to remain under the mandatory insurance threshold, while an owner who manages five restaurants efficiently would have just enough scale to offset the cost of paying for insurance or the penalty.” (Julie Jargon, “Eateries Fear Health Law’s Bite,” WSJ, 5/14/13)

Mary Kennedy Thompson Of Mr. Rooter Plumbing Argues The 30-Hour Definition Of Full-Time Will Require Business Owners Like Her To Limit The Number Of Full-Time Hires. “As I travel the United States speaking with franchisees in markets large and small, the ACA is the top concern of those small-business owners. While the employer mandate was delayed, there are still serious concerns for small-business owners, in particular the requirement that employers with at least 50 full-time employees offer health insurance to those working at least 30 hours a week — as opposed to the traditional 40-hour workweek. Many ask how a 30-hour workweek ever came to be seen as full time. The impact of this future rule causes employers like me and my franchisees to not only limit the number of full-time employees hired, but also cut current employees’ hours to avoid that 30-hour threshold.” (Mary Kennedy Thompson, “Small Businesses Have Full-Time Problem With Affordable Care Act,” Waco Tribune, 10/13)

Bob Funk, President Of Express Employment Services, Which Provides Businesses With Temporary Work, Says That Obamacare Is A Boon For His Business But Bad For The Economy. “‘Obamacare has been an absolute boon for my business,’ he says as we sit in his new office headquarters near downtown Oklahoma City. ‘I’m making a lot of money thanks to that law. We’re up 8% this year. But it’s just terrible for the country. I see that firsthand every day.’ Why is the health care law good for Express but bad for the country? ‘Firms are just very reluctant to hire full-time workers,’ Mr. Funk says. ‘So they are taking on more temporary help, which is what we do.’” (Stephen Moore, ” Where The Jobs Are—And How to Get One,” WSJ, 9/20/13) 

Fact #3: A return to the traditional definition of a full-time worker will increase the ability of businesses to grow and give employees more flexibility on hours.

Stephen Bienko Of College Hunks Hauling Junk Argues That By Returning To The Traditional Definition Of Full-Time, Employers Would Be Provided Flexibility To Give Part-Time Workers More Hours And Pay Them More Wages. “For decades, employers have used a 40-hour workweek as a standard for workforce culture, and continuing this would eliminate the need to revamp longstanding employer personnel policies… For my part, I would be able to give my part-time employees more hours and pay them more wages without incurring additional costs.” (Stephen Bienko, Remarks At U.S. House Of Representatives Committee On Small Business, Subcommittee On Health And Technology, Washington D.C., 10/9/13)

Andrew Puzder, CEO of CKE Restaurants, Points Out That The Logic Is Simple – Making Full-Time Employment More Expensive Will Result In More Part-Time Work. “The logic for businesses is simple. If you have three employees working 40 hours per week they will produce 120 labor hours. Five employees working 24 hours per week also produce 120 labor hours. Employers must offer the three full-time employees health insurance or pay a penalty. They have no such obligation to the five part-time employees, making part-time employment less costly. Make something more expensive and employers will use less of it; make something less expensive and they will use more of it. This unintended consequence of Obamacare must be addressed. The bipartisan ‘Forty Hours Is Full Time Act’ introduced in the House and Senate earlier this year offers a viable solution.” (Andrew Puzder, Obamacare and the Part-Time Economy,” WSJ, 10/10/13)

Don Fox, CEO Of Firehouse Subs, Argues That The 30-Hour Definition Undermines The Flexibility Of Scheduling That Provides Employees Convenience And Opportunity To Earn More Money. “Put plainly, the ACA undermines the flexibility of scheduling that has helped ensure a quality dining experience for customers, not to mention provided employees the convenience of flexible schedules and the ability to earn more income as their time permits. Employees throughout the restaurant industry have embraced and enjoyed this benefit for decades, and they are about to lose it.  As it stands, the net effect of these requirements will be a limitation of the earning potential of the 13.1 million of American who work in the restaurant industry.” (Don Fox, “Obamacare’s Acute Affliction On Restaurant Workers,” Forbes, 9/12/13)

Read more about how Obamacare will hurt employers and employees at Free Enterprise.

Franchisees Sit Down with Adam Shapiro, from Fox Business, to Discuss Workplace Conflicts among Employees

With the current shutdown in Washington, Fox Business examines the problems that could arise in the franchise industry if people weren’t able to get along and work together. Two franchise owners discuss workplace conflicts among employees and how to handle and protect themselves from them.

giacobbe_eckel_foxbusiness

For franchise owners like Lynn Eckel, franchisee of Tom & Chee, hedging against workplace conflicts was a necessary action when she decided to purchase an insurance policy to protect herself from potential liabilities. Jon Giacobbe, franchisee of Subway, echoed this practice, stating “there’s all different types of liabilities you need to protect yourself from, for example it could be sexual harassment or discrimination.” “Typically what I would advise is seek out legal counsel; get some type of umbrella insurance that will cover you in your full scope.”

Both franchise owners stressed the practice of documentation when dealing with conflicts in the workplace, “Everything should be documented, you should have a personal file anytime you have an incident with any type of employee, just keep it in a file because that will actually be your backbone, if you actually need it.” said Eckel.

One simple and effective method to prevent workplace conflicts however, is where it all begins, during the hiring process, “If you have good screening, you do background checks, you can avoid possible problems and issues with employees down the road. So it really all starts with the hiring.” said Giacobbe.

To view the full video, please click here.

#FranStories: The Franchise Industry Is Weathering The Shutdown, But Concerns Are Growing

 

 

Entering its second week, the government shutdown continues to hurt the U.S. economy. Now, with the debt ceiling approaching, the International Franchise Association reiterates its call for Congress to pass a Continuing Resolution to fund the federal government and raise the debt ceiling. Dealing with our long-term entitlement challenges and our growing debt is critical, but the government shutdown and uncertainty over raising the current debt ceiling is hurting franchises today.

As reflected in the chart below, the Franchise Business Index, a gauge of the overall health of franchise sector, took a dive during the three-month debt ceiling crisis in 2011, falling in July, flat-lining in August and going negative in September.

Debt Ceiling FBI

“Franchise business owners want their elected officials on both sides of the aisle to put aside the partisan rancor and negative rhetoric so we can get this economy moving again,” said IFA President & CEO Steve Caldeira. “We have seen this happen before, and without question Congress and the administration’s inability to come to agreement on long-term economic policy puts downward pressure on job growth and franchise development in the franchise sector.”

We’ve collected stories from IFA Members to illustrate the impact on the ground. For franchises, heightened uncertainty, reduced consumer power, and tighter credit conditions will be headwinds for the sector if the shutdown continues. However, franchises, as they have done throughout the weak recovery, report that they are weathering the storm, finding ways to grow and create jobs.

Share with us your stories by email or twitter. Tweet at @Franchising411 or using the hashtag #FranStories.

Franchises and the shutdown:

David Leonardo, Chief Development Officer At Wild Wing Café in Florida, Is Seeing A Boost From Furloughed Workers Looking For An Escape, But Is Concerned About Impact On Spending If This Continues. “Amid the government shutdown, people are seeking an escape at times, and Wild Wing Cafe can be that for a lot of people — including government workers. We anticipate this trend in restaurant revenues continuing, however with government uncertainty, we know that can impact spending habit. We know people could hold back from going out if they don’t know what lies ahead — but we’re doing everything in our power to support their need for an escape from rigors of everyday life.”

Fact: With the shutdown, 800,000 federal workers are furloughed without pay. That’s 800,000 people with less money to spend on travel, food, services and goods from franchise companies. Further, with these workers at home, personal services such as home and lawn care are also taking a hit.

For Jennifer Jackson, Director Of Development For Hungry Howie’s Pizza in Michigan, The Shutdown’s Impact On The SBA Has Stalled The Launch Of A New Business. “The government shutdown has greatly impacted Hungry Howie’s Pizza franchisees, as there are not any loans going through the SBA. For example, we have a development deal in the Houston area, and are set to begin operating, but due to the government shutdown, our franchisee is unable to get approval on the Franchise Registry nor get the funding to begin the process.”

Fact: Access to loans is already a key concern for franchises with an estimated lending shortfall of more than 9 percent in 2013. The shutdown compounds this existing problem as every day the government is unfunded, $13 million in Small Business Administration (SBA) loans to small business are foregone.

Matt Patinkin, Owner Of Auntie Anne’s Pretzels in Illinois, Is Concerned About The Impact Of Increased Uncertainty On Customers. “The government shutdown creates uncertainty on the part of consumers.  The longer the shutdown continues, the greater this uncertainty becomes, and that causes our customers to hold back.  We’re a consumer driven society, so if that happens we all suffer!”

Fact: Even prior to the shutdown, self-reported daily spending dropped $11 to $84, the lowest level since February.

While Franchisees Have Solid Plans And Are Weathering The Shutdown, The Impact Of Cuts To Government Contracts Can Be Felt Several Layers Down According To Jeff Connally, CEO and President of CMIT Solutions in Texas, An IT Consulting Franchise. “We have more than a handful of franchisees in the D.C. market, many of which who have clients with government contracts. When a shutdown like this occurs, the trickle down impact can be felt several layers down. Our franchisees have been in regular contact with their clients, and we make ourselves indispensable, but this certainly adds pressure that our clients did not expect for this year. Our franchisees have a solid plan in place and are weathering this nicely. Hopefully this won’t be an issue for very long.”

Fact: The ripple effects of the government shut down have extended as far as Antarctica, where scientists who were set to begin studying the area are now on hold.

For Roger Murphy, CEO And President of Murphy Business & Financial Corporation in Florida, A Business Brokerage Franchise, Increased Uncertainty Reduces Business Transactions. “When there is uncertainty in the air, business transactions take a hit. This event, coupled with other factors at play now, i.e. the Affordable Care Act, make planning for buying a business even more difficult.”

Fact: From September 30th to October 6th, Gallup’s Economic Confidence Index experienced its largest drop since the week of Lehman’s collapse.

Stephen Dixon, Chief Development Officer Of Childrens Lighthouse Learning Centers in Texas, Hopes His Company’s Education And Child Services Help Furloughed Government Employees In Their Time Of Need. “Our franchisees across the country build deep, meaningful relationships with the families they serve. Franchisees certainly know when stresses such as government shutdowns keep people from working. Uncertainty is amidst, but we are always there for our families, helping when we can to make certain that our education childcare is available to them. Our franchisees appreciate their loyalty and return the favor in unforeseen circumstances such as these.”

Fact: In addition to the 800,000 federal workers furloughed without pay, another 1.4 million government workers may see paychecks delayed.

Call your Senators and Representatives and let them know how the government shutdown is impacting YOUR business and the franchise industry. Call (202)224-3121 and ask for your Members’ offices. Don’t know who your Members of Congress are? Find out here! Share with us your stories by email or twitter. Tweet at @Franchising411 or using the hashtag #FranStories.