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.

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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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.

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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