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.

Congressional Subcommittees Investigate ACA Employer Reporting and Individual Tax Credits

Yesterday the Health and Oversight Subcommittees on House Committee on Ways and Means conducted a hearing surrounding tax subsidies under the Affordable Care Act.  Health Subcommittee Chairman Kevin Brady (R-TX) and Oversight Subcommittee Chairman Charles Boustany (R-LA) convened the joint hearing to discuss the income verification system used to determine individuals’ eligibility for tax credits to purchase insurance, and to address reports of incorrect tax credit payments being issued and later reclaimed by the Internal Revenue Service (IRS).  The panel of witnesses included experts in health and tax policy including Douglas Holtz-Eakin, President of the American Action Forum and Katie Mahoney, Executive Director of Health Policy for the U.S. Chamber of Commerce.

Much like the sentiment towards the law itself, the views expressed in the joint hearing were split among partisan lines.  In opening remarks, Chairman Brady and Chairman Boustany expressed deep concern with the lack of accountability and efficiency with the current income verification system and eligibility requirements for tax credits.  Chairman Brady noted that, “Today, eight months after the start of open enrollment and well over a month after the extended open enrollment ended, the income and eligibility verification system is not completed.  And the burden and the cost of that failure will fall on the American people.  That is simply unfair and unacceptable.” Without proper income verification, individuals in some cases are receiving incorrect tax credits, which they are then required to repay months later when filing tax returns.  In order for the verification system to function correctly, massive amounts of data is required to be submitted by employers.  However, due to delays in the employer mandate, the regulations around employer reporting requirements have also been delayed.  During her testimony, Katie Mahoney from the U.S. Chamber of Commerce acknowledged that it is absolutely necessary for more flexibility for employers to come into compliance with the regulations of the ACA.

The International Franchise Association has submitted comments regarding employer reporting requirements to the IRS and Department of the Treasury as part of a coalition striving to increase flexibility for employers.  Accurate employer reporting is crucial to the success of other parts of the ACA, but it must be implemented responsibly and without disrupting employers who have already seen large cost increases because of the employer mandate to provide health insurance to employees.  In addition to pushing for changes to the definition of full-time employee, the IFA will continue to protect franchise business owner’s interests from the potentially harmful effects of the ACA requirements.

IFA Takes Legal Action to Preserve the Franchise Model

 

 

Last week, Seattle’s City Council passed an ordinance that raised the minimum wage to $15, the highest in the United States. Large employers, defined as businesses with 500 or more employees, have three years to implement the payroll change while small businesses have up to seven years. However, independently-owned franchised businesses are being unfairly categorized as large employers under the new ordinance. There are more than 600 franchisees in Seattle, who own 1,700 franchise locations and employ 19,000 workers.

IFA’s President & CEO Steve Caldeira spoke out against this discriminatory proposal and announced plans to file a lawsuit against the City of Seattle. He asserted that “hundreds of franchise small business owners are being punished simply because they chose to operate as franchisees” during his statement directly following the vote.

Click here to stay updated on how the Seattle Minimum Wage Plan is affecting the franchise industry. Below is a small sample of the national press coverage IFA has received on the issue, for a full list of media coverage please visit our website.

NATIONAL:

The Huffington Post: ABC News Panel Debates Raising Minimum Wage

Forbes: Minimum Wage Hike Feels Good Now, But Will Lead to Long-Term Pain

The New York Times: Seattle Approves $15 Minimum Wage, Setting a New Standard for Big Cities

The Wall Street Journal: Seattle’s Very Big — and Very Complex — Wage Jump

Associations Now: Franchise Association Promises Lawsuit Over Seattle Minimum Wage Law

Associated Press: Seattle hikes minimum wage; will others follow?

The Wall Street Journal: Seattle City Council Approves $15 Minimum Hourly Wage

Reuters: Seattle approves hike in minimum wage to $15 per hour

USA TodaySeattle raises minimum wage to $15 an hour

The Washington Post: Seattle to enact $15 minimum wage

NPRSeattle Ordinance Gradually Increases Minimum Wage To $15

Gawker: Seattle Is Soon to Have the Highest Minimum Wage in America

ABC News Radio: Seattle City Council Approves Legislation to Raise Minimum Wage to $15

Examiner: Seattle latest state to increase the minimum wage

Associated PressSeattle’s $15 Minimum Wage: Questions And Answers

PJMedia: Seattle Declares War On Small Business With $15 An Hour Minimum Wage

BBC News: Seattle Votes For $15 Minimum Wage

Associated Press: Seattle City Council OKs Minimum Wage Increase To $15 An Hour, Making It The Nation’s Highest

LOCAL:

Los Angeles Times: Seattle raises minimum wage to $15 an hour, highest in U.S.

The Seattle Times: Seattle City Council approves historic $15 minimum wage

KIRO 7: Seattle To Get $15 Minimum Wage — Nation’s Highest

City & State NY: Mayor De Blasio Backs Proposal To Raise Local Minimum Wage

MyNorthwest.com: Franchise Group To Sue Over Seattle’s $15 Minimum Wage

New York Daily News: Mayor de Blasio Says President Obama’s $10.10 Minimum Wage Is Not Enough

Seattle Post Intelligencer: Seattle Enacts $15 Minimum Wage, A Phased In Big Dream

Q13 Fox: Seattle City Council unanimously approves $15 minimum wage plan

Puget Sound Business Journal: Franchise Group Plans To Sue Over Seattle’s Minimum Wage Rules

Complex City Guide: Seattle To Officially Increase Minimum Wage To $15 Per Hour

Puget Sound Business Journal: Seattle Council Approves Minimum Wage Boost

ELECTRONIC COVERAGE

Fox BusinessSubway franchisee serves Seattle

Fox BusinessFighting Seattle’s new minimum wage

Fox & FriendsFranchise group is planning to sue over Seattle wage hike

Seattle Minimum Wage Coverage-KING

Seattle Minimum Wage Coverage-KCPQ

Seattle Minimum Wage Coverage-KOMO

Seattle Minimum Wage Coverage-KIRO

Minimum Wage Report-CNN

Minimum Wage Report-MSNBC

Kshama Sawant Interview-KCPQ

570 KVI with Steve Caldeira

OTHER NOTABLE ARTICLES:

Inter Press Service: Low-Wage Workers Butt Heads With 21st Century Capital

Morning Sentinel: Harold Meyerson: Studies Show Raising Wages Creates Jobs

 

Yes, Council Member Sawant – Franchises Are Small Businesses

 

 

Franchising is far more than just fast food. In trying to argue that Seattle franchises are not small businesses, Seattle Council Member Kshama Sawant points to a “Good Jobs Seattle” study that only examines ownership of McDonald’s, Burger King, and Wendy’s. But what Council member Sawant fails to realize is that the franchise industry is made up of 100 business lines as diverse as hotel, real estate, and tax preparation services, which offer entrepreneurs opportunities to start and grow their own business at all levels of investment.

Some franchise owners are small with only one or a few franchise units and – yes – certainly some are larger. However, to classify all of Seattle’s franchise businesses, which provide 19,000 jobs to the Seattle area, as large corporations would misrepresent the many single and multi-unit owners in the city that face the exact same challenges as Seattle’s other small businesses.

What’s more, by equating all franchises to large corporations, as Sawant argues, franchise businesses would be at a disadvantage to other small businesses in Seattle. Under Seattle Mayor Ed Murray’s proposal, businesses with fewer than 500 employees would have seven years to adjust to the new $15 minimum wage, while large businesses and “all franchises associated with a franchisor” – regardless of employee count – would be forced to do so in just 3 years. For some franchisees, this amounts to labor costs 50 percent higher than their non-franchised competitors.

As Seattle Council members debate a “fair” minimum wage for Seattleites, let’s not forget that the employers paying these higher wage should be treated fairly as well. Rather than picking winners and losers among business owners operating under different models, wage increases should be applied equitably to all of Seattle’s employers.

This piece of the proposal is discrimination against Seattle’s small businesses at its worst. Small business owners should not be punished for choosing to be part of a larger “name brand”. All small businesses, like Seattle’s franchisees, should be celebrated for their sense of entrepreneurship, passion and motivation. Don’t frame franchisees for building their small business using a proven model to provide a service to Seattle’s citizens.

Tell the City Council and Mayor Murray that Seattle franchisees own the store, not the chain. Franchises don’t want special treatment, just the same as others.

House Panel Passes Six Business Tax Provisions

Today, the House Committee on Ways and Means held its first markup of tax legislation in several years to consider six separate pieces of legislation.  All six bills would make certain expired or expiring tax provisions permanent, including tax incentives important to businesses of all sizes.    Although the votes on the measures were mainly party-line votes, these measures (frequently called “tax extenders”) are among many that lawmakers from both parties have been supportive of in the past to boost economic growth and development, especially among small businesses.

One bill, H.R. 4457, would permanently extend the limit on Section 179 small business expense write-offs to $500,000.  Since the previous tax extender expired at the end of 2013, the current write-off is only $25,000.  This provision, which the Committee approved by a 21-14 vote, is among the most important tax extenders for franchise small businesses, and IFA has consistently advocated for its inclusion in tax extenders packages proposed in recent years.

Another measure, known as the “CFC look through” rule, addresses the treatment of payments between related controlled foreign corporations, and allows multinational companies to more easily move money between foreign subsidiaries.  The Committee passed this measure by a vote of 22-14.  A third bill, which passed by a vote of 21-13, addresses the tax implications of companies converting to Subchapter S, or “pass-through,” tax status.  The Joint Committee on Taxation (JCT) estimates that the six measures will cost a combined $310 billion over a 10-year period.