Legal Challenge Against Part of Seattle Minimum Wage Law Moves Forward

The legal challenge against the discriminatory provisions of Seattle’s new minimum wage law is taking an important step forward. The International Franchise Association and Seattle franchisees last June filed a lawsuit in U.S. District Court to challenge the provisions of the new law that discriminated against small franchise businesses. Then in August, the IFA requested a preliminary injunction to stop the discriminatory provisions of the minimum wage law from taking effect.

U.S. District Court Judge Richard A. Jones has now set oral arguments on that request for a preliminary injunction for 9 a.m. PST on Tuesday, March 10.  This will be the first time that arguments will be made on the legal challenge to the new law in person.  The hearing will be before Judge Jones at the U.S. District Courthouse in downtown Seattle.

Paul D. Clement, a partner at the law firm Bancroft PLLC and a former U.S. Solicitor General, is expected to represent the IFA and the Seattle franchisees at the March hearing.  IFA and five Seattle franchisees sued Seattle in June seeking to stop the city from treating franchisees as large, national companies rather than the small, locally-owned businesses that they are.

Seattle’s ordinance requires large businesses, defined as those with more than 500 employees, to raise the minimum wage they pay their employees to $15 an hour over three years starting April 1, 2015. Smaller businesses get seven years to phase in the wage increase. But at the request of the Service Employees International Union (SEIU), the law treats a single hotel, print center, restaurant or in-home health care provider as if it employs more than 500 people due to its affiliation with a national chain, even if it only employs five people, thereby creating an uneven playing field.

The city’s ordinance willfully categorizes small, independently-owned franchise owners as big, out-of-state businesses, a violation of the Commerce Clause of the U.S. Constitution. The lawsuit argues that the Seattle ordinance defies years of legal precedent clearly defining a franchisee as an independent local business owner who operates separately from its franchisors that provide brand and marketing materials, based on the payment of an initial franchise fee and ongoing royalty payments to use the brand’s trademark.

Judge Jones is likely to decide on the preliminary injunction before the law takes effect on April 1. Regardless of the ruling on the injunction, the lawsuit against the franchisee provisions of the new law will continue.  

The injunction – and the lawsuit – seek to stop only the provisions of the new law that discriminate against franchise businesses. If the injunction is granted, the new minimum wage law still takes effect. Small franchise businesses, however, would adopt the $15 minimum wage on the same 7-year timetable as other small businesses, instead of the 3-year schedule currently required in the ordinance.     

To learn more about the preliminary injunction, read IFA’s motion for the injunction here, and the IFA’s further briefs on the injunction here and here.

What is the Franchise Industry Saying After the State of the Union Address?

IFA obtained input from key leaders within the franchise community about what they feel Congress and President Obama should do to support the business community. Here are excerpts, but you can find the full copy here.

Clint Ehlers
Franchisee, FAST SIGNS International
On NLRB Joint Employer Recommendation 

“I cannot imagine what I would do if I were stripped of my independence because a different business owner, hundreds of miles away, is facing a lawsuit that has nothing to do with me. Hopefully Congress will force the NLRB to reject this flawed recommendation.”  

Herv Breault
Franchisee, Philly Pretzel Factor 
On Proposed Minimum Wage Increases

“Congress should pass legislation that would give incentives for companies that hire military veterans, allowing veterans to pursue their leadership, teamwork and organizational experience.”

Nancy Bigley, CFE
CEO, Bottle & Bottega
On Federal Proposals to Increase Minimum Wage

“I have deep concerns about the proposed wage hikes being examined at the federal level. These dramatic wage increases are going to have a negative impact on small businesses, which already operate under thin margins. ”

Brooke Wilson
Multi-Unit Franchisee, TWO MEN AND A TRUCK®  
On the 30-Hour-Work-Week Requirement in the Affordable Care Act

“The 30-hour definition is a major change that could have far reaching consequences we have not yet begun to see and decisions like this will lead to an increase in part-time work throughout the American economy.”

Saunda Kitchen, CFE
Franchisee, Mr. Rooter Plumbing 
On the need for comprehensive Tax Reform

“America’s tax-code is not working for the economy and small-business owners like me are getting lost in the complex web. Comprehensive tax reform, aimed at creating a fairer and simpler tax code for America’s franchise small-business owners, is the best way to stay competitive and create more jobs.”


IFA Board Member Urges Return to 40 Hour Work Week


Today, the Senate Committee on Health, Education, Labor, and Pensions (HELP) held a hearing titled Examining Job-Based Health Insurance and Defining Full-Time Work. Among the witnesses testifying at the hearing was IFA Board Member Andy Puzder, CEO of CKE Restaurants Holdings, which owns the Carl’s Jr. and Hardee’s restaurant brands. In his testimony, Puzder explained to the Committee members that the Affordable Care Act’s redefinition of full time employment from the industry standard 40 hours per week to 30 hours was leading to a dramatic reduction in hours and take-home pay for part time workers.

“The logic for businesses is simple,” Puzder testified. “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 obligation to the five part-time employees, making part time employment less costly. I believe this has resulted in employers reducing hundreds of thousands of jobs to under 30 hours a week.”

Bipartisan legislation to correct this negative impact of the Affordable Care Act’s employer mandate, the Save American Workers Act, cleared the House earlier this year by a  vote of 252-172. IFA has made passage of this critical reform one of its priorities for 2015. The More Time for Full Time Initiative, a coalition of leading business groups started by IFA, played an instrumental role in lobbying Congress to support this legislation. Companion legislation, the Forty Hours is Full Time Act has already been introduced in the Senate with bipartisan support. A letter from the More Time for Full Time Initiative encouraging passage of the legislation was introduced into the record during today’s hearing by HELP Committee Chairman Lamar Alexander (R-TN).

A complete video of the hearing, along with written testimony from the witnesses, can be found here.

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.


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:


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.


Making the Case for Franchising Just Got Easier

Franchise businesses are expected to grow and create more jobs at a faster pace than the rest of the economy in 2015 for the fifth consecutive year.

You recently scheduled a meeting with your local lawmaker, or even better, have plans to have your elected official visit your brand’s headquarters or a local unit.  Everything is moving along great. Or perhaps you’re been invited to speak before a community group or professional organization about your franchise business. You know your brand (or brands if you’re a multi-unit, multi-brand franchisee) inside out, but how about getting some stats that highlight the overall franchise industry?

That’s where the Franchise Business Economic Outlook: 2015, released yesterday by IFA’s Educational Foundation and IHS Economics, can help.  According to the report, franchise businesses are expected to grow and create more jobs at a faster pace than the rest of the economy in 2015 for the fifth consecutive year.

Here are some key findings from the business outlook:

  • Franchise businesses will add 247,000 new direct jobs this year, a 2.9 percent increase to 8.8 million direct jobs, over last year. That is on top of the 235,000 franchise jobs that were added in 2014.
  •  The number of franchise establishments will grow this year by 12,111, or 1.6 percent, to 781,794.
  • Economic output from franchise businesses is estimated to increase by 5.4 percent over last year to $889 billion.
  • The gross domestic product of the franchise sector is projected to rise by 5.1 percent this year, which is faster than the 4.9 percent GDP increase forecasted for the economy as a whole. The franchise sector will contribute about 3 percent of the U.S. GDP in 2015.
  • The IFA Franchise Business Index— which is a mixture of employment, sales and credit conditions — also rose smartly, especially at the end of last year. In November, the index was up 3.1 percent compared to November 2013, the biggest year-over-year gain since the start of the Great Recession in 2008.
  • The outlook for growth among the different types of franchises will differ, with quick service restaurants ranking first and retail businesses ranking second in terms of increased employment.

Find the full IHS Economics report here and see the updated infographic here.




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