IFA Survey Finds Optimism About the Economy, but Concern Over Regulation and Joint Employer Issues

Last week’s blogpost helped point out data you could use from the Franchise Business Economic Outlook: 2015 with meetings with your elected officials and policymakers to make the case for franchising. Turning to IFA’s recent Franchise Business Leader Survey, you might find these results useful in discussing some overall issues affecting today’s franchise business leaders.

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Outlook for U.S. Economy

IFA members are more optimistic about the U.S. economy in 2015 compared to their survey responses last year.  More than one-half of the franchisors and franchisees and two-thirds of the suppliers believe the economy will be “better” in 2015, compared to only 40 percent of franchisors, 15 percent of franchisees and 35 percent of suppliers who had a positive outlook last year.

However, the survey shows that 97 percent of respondents believe that the joint-employer ruling, were it to take effect, would have a negative impact on their business, with 82 percent saying the impact would be “significant.”

The Franchise Business Leader Survey also reveals concern about the enactment of discriminatory increases in the minimum wage. More than 85 percent of franchisor and franchisee members believe that recent efforts by some cities and states to increase the minimum wage will negatively impact their business. In addition, more than two-thirds of franchisors and 85 percent of franchisees reported that their businesses have already been “negatively impacted” by the Affordable Care Act. Below you’ll find how franchisees and franchisors prioritize issues affecting them:

Concerns

Visit IFA’s Franchise Labor & Workforce Hub, a new website for franchisees to provide key guidance on labor and workforce issues and join IFA’s Franchise Action Network to learn how to have a direct, positive impact on the future of the franchise industry.

 

FAN in the States

On Tuesday, October 14, IFA staff Erica Farage and Chris Krueger, and a local Philly Pretzel Factory franchisee, Herv Breault took the Franchise Action Network (FAN) to the State Capitol in Harrisburg, Pennsylvania. The event, which comes after recent industry events in Philadelphia, was a continuance of IFA’s engagement in the state.  As a veteran, Herv has achieved his pathway to small business ownership through franchising.

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The group had a productive day of Member and senior staff level meetings with the Pennsylvania Delegation. IFA met with the following offices: Senator David Argall, Senator Shirley Kitchen, Representative Cherelle Parker, Senator Tim Solobay, and Senator Mike Stack. Concluding the day, IFA met with the Policy Director of Tom Wolf, candidate for Governor. Mr. Wolf is currently leading in the polls and projected to be the next Governor of Pennsylvania.

The takeaways were clear – the FAN needs to be heard in every state capitol and lawmakers want to hear from you, the franchise small business owners. Educating lawmakers at the state level is an important part of the FAN and its days like this that allow the lawmakers to learn how important the franchising industry is to their state and communities.  Through the FAN, franchise small business owners can promote, educate and protect the franchise business model and help tell the franchising story to these decision makers. Locally owned franchises are America’s hidden small businesses, IFA asks your support to get involved, please visit www.FranchiseActionNetowrk.com to sign up.

Specifically in Pennsylvania, the IFA will be working with the state delegation offices and our local members to organize a “FAN, Franchising in your State” day in Harrisburg. These events help educate policy makers on what franchising is and the important role franchising plays to the state economy.

If you would like to get involved with legislative meetings in your state, please contact Erica Farage at efarage@franchise.org or Chris Krueger at ckrueger@franchise.org.

IFA Addresses Threats to the Franchise Model at MUFSO

On Oct. 7, the 55th annual Multi-Unit Foodservice Operators Conference, better known as MUFSO, concluded in Dallas. MUFSO is the most comprehensive executive conference in the restaurant industry and IFA sponsored a session titled, “Franchising Under Attack: Get Informed & Learn How to Take Action!”

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The session provided an overview from industry leaders and legal perspectives on all the franchise legislative and policy issues facing the industry. It also explained how to get involved through the recently launched IFA Franchise Action Network (FAN).

Panelists included Patrick Doyle, president & CEO, Domino’s Pizza Inc.; Aziz Hashim, president/CEO, NRD Holdings, CEO/chairman, Impact Investments; Michael Lotito, co-chair and shareholder, Littler’s Workplace Policy Institute; Steve  Romaniello,  CFE, managing director, Roark Capital; and Matt Haller, senior vice president, media relations & public affairs, IFA, who served as moderator.

The session got underway with Hashim, Doyle and Romaniello echoing points on the state of the industry under attack. Hashim noted he has “never seen this kind of wave,” regarding the industry threats with Romaniello adding, “Make no mistake, the industry is under attack and it is broader and deeper than most people think.” Doyle was hopeful “that rational people will make rational decisions, but a lot is at risk right now for the industry that could impact millions of business owners and jobs.”

Haller guided the conversation next to last week’s veto by Governor Jerry Brown of harmful franchise relationship legislation in California. The veto of SB 610 represented a true victory for franchise small business owners and employees throughout the state, the culmination of a two-year strategic campaign by IFA and California FANs.  “The reason people choose to be franchisees are brand promise and operations, franchising success rate is higher.  Legislation like this would weaken brand consistency which would lead to more failures,” Doyle commented.

Hashim added that SB 610 would have been, “government interfering in business contracts and have unintended consequences,” noting that, “special interest is at play trying to cause a rift between franchisees and franchisors.” Romaniello spoke to the energy surrounding the IFA opposition campaign:  “we have made a greater effort to engage franchisees, there are more common interests than ever before, and also a common enemy,” and continuing that “the Franchise Action Network is a tool to engage on a more granular and local level, as state and local issues are now a focus to be pro-active on, and California is a great example.” Lotito gave the opposition perspective on what SEIU is spending on this fight, how well its messaging is organized and the real challenge in this debate.

The next issue of discussion was the National Labor Relations Board recent ruling on joint employer. Lotito walked the group through the full impact of the proposed joint employer standard and what it means for the industry. Hashim noted that the ruling “profoundly changes the franchise model. Worst case, everything becomes corporate-only stores, which threatens the basic foundation of franchising. Franchisees are independent entities that hire, fire, promote and set wages.”

The panel closed with a call to action from all the panelists that there is no choice but working together to protect the industry and engaging lawmakers with the franchise business community.

For more information about the Franchise Action Network or to sign up, please visit www.FranchiseActionNetwork.com.

For any questions or inquiries, please contact Erica Farage at 202-662-0760 or efarage@franchise.org.

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.