Matthew Hollek, a Subway franchisee in Ballard, a neighborhood in Seattle, joined KIRO talk radio host Jason Rantz in studio on June 24th to discuss the franchise business model, how it compares to independent small businesses and why he is fighting to get businesses like his classified as a small business.
Previously, Hollek had published an op-ed in the Seattle Times against the Seattle ordinance which discriminates against franchises and improperly treats them not as the small, locally owned businesses they are, but as large, national companies. “Punishing small business owners who went into franchising is simply unfair in the new minimum wage law,” Hollek wrote. He continued the conversation on last week’s radio interview.
Hollek explains that Subway only provided him with an operational scheme. Everything else was up to him to figure out. “Outside of (brand) consistency, everything is on me,” he told Rantz. Hollek emphasizes the fact that he is exactly the same as every other small business anywhere in the nation. The only difference is that he is affiliated with a branding company, Subway.
According to Hollek, by passing this ordinance and based on the structure of the franchise model, corporate won’t be negatively affected the way the independently-owned stores will be. “The very people that Seattle City Council member Kshama Sawant has been targeting, may actually make money, yet the small business people operating the stores will suffer,” said Hollek. Sawant’s response to this claim previously has been that franchisees should renegotiate their contracts. Hollek explains that he just doesn’t have that ability, nor does he believe that he or the franchisors should be obligated to change a business model that has continued to demonstrate growth over the last 50 years.
The IFA has firmly opposed the ordinance and has filed a lawsuit since it passed on June 2. IFA claims that Seattle’s new minimum wage law unconstitutionally discriminates against franchisees by categorizing them as big businesses even when they are small and independently owned. Hollek stood by this assertion in the radio interview saying, “I don’t have a problem with the law as long as it is implemented on an even playing field.”
The radio segment can be heard on KIRO’s website here.
I was talking with someone recently who wasn’t totally familiar with IFA’s
blog. Officially, it’s described as:
“A blog with news and views from the International Franchise Association representing more 825,000 franchise businesses across 300 business lines, providing for nearly 18 million jobs and generating over $2.1 trillion to the U.S. economy.”
For busy franchise executives, it’s a haven for quickly finding information on a variety of topics affecting their businesses and the franchise industry. Take a quick tour and you’ll find posts that detail a recent ruling of the National Labor Relations Board that would negatively affect franchisees, learn the five reasons why you should attend the IFA Public Affairs Conference in September or how CKE Restaurants CEO and IFA board member Andrew Puzder, CFE, drove home the message about the harmful effects of joint-employers status on franchising before a recent U.S. House of Representatives’ panel. Use the search button to find those topics of particular interest to you and your business.
Recently posted articles include the association’s lawsuit against Seattle for equal treatment, IFA’s recent reports on lending and the economic outlook, as well as credit tax subsidies under the Affordable Care Act, among many others.
And while you’re reviewing the posts, take a few minutes to vote on the most critical issue for the franchise industry today from a list of five selections!
In the coming days, the National Labor Relations Board (NLRB) Division of Advice may issue a ruling that will have devastating consequences to franchisees, the mom and pop small business owners of America’s 770,000 neighborhood restaurants, hotels, print centers, realtors and flower shops that employ 8 million workers.
The case currently before the NLRB’s Division of Advice alleges McDonald’s Corporation is a “joint employer” of its franchisees’ employees, despite longstanding legal and contractual terms that clearly demonstrate the opposite is true. Franchisees are independent operators, who simply choose to go into business using a franchise model. Franchisees have separate employer identification numbers with the IRS. Franchisees hire and fire their own employees. The franchisor has brand standards that maintain the quality of products and services, but the brand standards do not include franchisee employment practices and policies.
This legal opinion would upend years of legal precedent, leading thousands of small business owners – locally owned franchise businesses– to lose control of the operations they worked hard to build, threating to put them out of business. With franchise businesses responsible for one out of every eight jobs, 3.4 percent of U.S. gross domestic product and growth rates that have created jobs and new businesses at twice the rate of other business types following the recession, the consequences of this decision on a still-recovering U.S. economy will be immense.
As the NLRB Division of Advice gives its guidance in the McDonald’s case, franchise businesses on every Main Street in America should be wondering what this decision means for their small businesses in the future.
This September, hundreds of franchise business leaders will gather in Washington, D.C. at the most important advocacy event of the year: IFA’s Annual Public Affairs Conference. Here are five reasons you need to be there:
PROTECT YOUR BUSINESS
Members of Congress want to know how legislative issues impact YOUR bottom line. At IFA’s Public Affairs Conference, you’ll have the opportunity to meet directly with your members of Congress and their staff.
NETWORK WITH YOUR PEERS
Not only do you get to make a difference on Capitol Hill, but let’s not forget the great networking opportunity that the Public Affairs Conference provides. The Public Affairs Conference gives you a great opportunity to engage your peers and share best practices as you look to grow your businesses.
The Leadership & Franchisee of the Year Awards Dinner recognizes outstanding franchisees and leaders among their industry peers. The Taste of Franchising brings together lawmakers, policymakers and their staff for a relaxing evening surrounded by mouth-watering dishes donated by sponsors to top off the day’s activities.
LEARN MORE ABOUT FRANPAC
IFA’s FranPAC, our non-partisan, voluntary political action committee, creates an opportunity for eligible IFA members to help support candidates for federal office who will promote a legislative and regulatory climate favorable to franchising.
BE AN INFORMED ADVOCATE FOR FRANCHISING
Our members are the best voices for our industry. Getting involved in IFA’s advocacy efforts during the Public Affairs Conference will help drive our effectiveness on Capitol Hill and within state legislatures all year round. IFA will make sure you are equipped with the most up-to-date information about issues that affect your businesses.
Register now! Franchising needs your support.
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.
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.