SBA Re-examines “Affiliation” Standards for Loans to Franchise Small Businesses

On Dec. 8, the U.S. Small Business Administration published a Notice and Request for Comment on Franchise Agreement Reviews, and Eligibility for Financial Assistance in the Federal Register (79 FR 72753, Docket Number SBA-2014-0014). The SBA, led by Administrator Maria Contreras-Sweet, has been incredibly active in providing loans to prospective franchise small-business owners, with numbers ranging as high as 18 percent of SBA’s total lending, encouraging entrepreneurship and job creation while facilitating the economic recovery. This comment process represents the opportunity to resolve any misconceptions that might exist regarding the independence for franchise small-business owners.

Given that the SBA’s evaluation of “affiliation” between business entities plays a critical role in determining eligibility for loan programs, these misconceptions could have a very real impact on future entrepreneurs looking to start franchise small businesses. By modernizing its rules for establishing “affiliation” to account for the prominence of the franchise business model, the SBA is ensuring that these businesses have the support and consistency they need to grow.

IFA strongly supported the opportunity to comment on this re-examination, sending a letter to Linda Rusche, director of the SBA Office of Financial Assistance, to praise the agency’s efforts to improve the efficiency of the small-business loan process and its willingness to listen to hear the industry’s point of view. The association is currently in the process of developing its official comments and has formally requested a 60-day extension of the deadline by which comments must be submitted, from Feb. 8, 2015 to April 9, 2015. Such an extension would better account for the breadth and diversity of business categories that would be impacted by any changes to franchise small-business loan eligibility.

 

Labor & Workforce Policy Updates

Dear IFA Members,

With the end of the year upon us, I wanted to take this opportunity to update you on a number of major issues we are addressing for the industry, particularly on the labor front.

On Dec. 19, National Labor Relations Board (NLRB) General Counsel Richard Griffin issued several complaints against McDonald’s franchisees and McDonald’s USA, naming the independent businesses as joint employers. These complaints stand in direct contradiction to the 1968 Southland case in which the NLRB held that franchisors and franchisees are not joint employers. In overturning settled law and over 40 years of consistent legal precedent, the McDonald’s complaints represent a grave threat to the franchise business model by a fiat from the NLRB’s unelected General Counsel. IFA is leading the charge to fight these complaints and will exhaust all legislative and legal means to protect franchising. We will be launching a broad-based lobbying coalition to promote franchising and push back against government overreach in 2015, and we encourage those interested in joining to contact us directly.

Immediately following the issuance of the Dec. 19 complaints, IFA led a joint media teleconference with executives from the U.S. Chamber of Commerce, National Restaurant Association and National Retail Federation to explain the negative impact that these unprecedented complaints would have on thousands of franchise small businesses. IFA and its business group allies strongly condemned the NLRB, pointing out the threat posed to franchise small business owners and their employees. This call received significant media coverage in every major publication including The Wall Street Journal, Bloomberg, and The Hill. Yesterday, twin op-eds in The Wall Street Journal and New York Times staked out the landscape ahead. The WSJ slammed the NLRB, saying the NLRB “tees up a radical rewrite of franchise law,” while The Times took the opposite stance, arguing McDonald’s should negotiate over the terms and condition of employment at its franchised restaurants.

While McDonald’s and franchise businesses are squarely in the crosshairs of the NLRB at the moment, all employers will be facing drastic changes to the definition of who an employer is, and therefore who maintains liability for the employees of the franchisee, when the other shoe drops in early 2015. That shoe is the Browning-Ferris decision, which is likely to adopt the General Counsel’s position that any employer who utilizes a franchise model, independent contractor, subcontractor or supplier network, will be liable for the employees of those businesses with whom it does business.

To help franchise owners comply with changes in labor law, IFA recently launched a new web site, labor.franchise.org, to provide key guidance to franchisees on labor and employment law challenges.

In the New Year, IFA staff will be reaching out to all of our members to engage you more directly in our efforts to protect the franchise model from these existential threats. We are also seeking franchisees and franchisors to participate more directly in our advocacy efforts through the Franchise Action Network, especially in your locality. If you would like to get involved to protect your business and the franchise model, we urge you to join the Franchise Action Network.

Best,
Matt Haller
Senior Vice President, Media Relations & Public Affairs

Networking at Your Fingertips

FranSocial-header

The value of meeting your franchise industry colleagues face to face can’t be duplicated.  However, networking digitally is the next best thing and IFA makes that possible via FranSocial.  The member-only IFA community enables you to ask any number of questions that affect your company and hear back from experts in the field.  How quick and easy is that?

Once you get online, how can you participate?  You can post a message or blog; share a file, a YouTube video or web link; or join a community.   Make a comment or share a blog related to the various communities to stay up to date and grow your list of contacts.  There are a number of communities that you can take advantage of such as:

  • Franchise Relations Dialogue Forum
  • Franchisee Forum
  • Marketing & Technology Forum
  • International Interest Group
  • CFE

In addition, you can access FranSocial anywhere you have your mobile device. Visit your device’s application store (iTunes, Google Play, Amazon) and search for the app named “MemberCentric” by Results Direct.  Sign up today!

Convention Time — Your Time to Connect, Innovate and Evolve

GIF_forhomepage_noearlybirdWhether you’re at franchise corporate headquarters, an individual small-business franchise owner or franchise supplier, you’re concerned with building your business, staying on top of federal, state and local regulations and attracting and retaining staff.  Are you making the most of one of the year’s best opportunities to tackle all three areas, and more, at one time?

If you aren’t yet signed up for the IFA Annual Convention, Feb. 15-18 in Las Vegas, there’s still time.  Sure, it’s hard to get away for a few days and yes, it does take time and money, but your return on investment is in terms of:

  • How many leading franchise experts will I meet over the course of the convention?  When will I have another opportunity to seek advice from executives from mature, emerging and cutting-edge franchises, as well as high-achieving franchisees and Supplier Forum members?
  • How many proven strategies will I learn from convention speakers that I can immediately apply to my franchise business?
  • What’s the number of general sessions, breakout meetings, roundtables and concurrent workshops that I can attend to augment my understanding of critical issues affecting my franchise business?
  • Do I have enough business cards with me to make the most of such networking events as the Hall of Exhibits, Taste of Franchising, receptions, the Franchise Party and breaks in between sessions?
  • How many Certified Franchise Executives™ program credits can I earn?
  • How inspired will I be from participating in Franchising Gives Back to contribute to a worthy cause for a local community?

Learn more about the convention and register today so you and your business can take the steps — connect, innovate and evolve — to excel.

 

 

 

Tap Into the Franchise Relations Dialogue Forum’s “Ask the Expert”

You were invited this summer to get in your questions for a new “Ask the Expert” series on the Franchise Relations Dialogue Forum of IFA’s member-only community FranSocial.  Now you can access responses from our newest expert, FASTSIGNS International CEO Catherine Monson, CFE.  Monson addresses a variety of topics, including leadership, engaging and supporting franchisees, franchising under attack and much more. Read her entire “Ask the Expert.”

Here are a few excerpts.

  • Leadership Through Major Systemic Change

Monson:  At FASTSIGNS, it has included changing our model from a passive, reactive walk-in retail model to a proactive business development model; moving away from more commodity products to higher margin products and services; and expanding our product and services model to include non-signage products, as well as digital signs.

  •  Engaging Franchisees

 Monson:  Each year since I have been at FASTSIGNS, we have conducted a series of regional meetings/town halls (typically in 12 to 18 cities) with our executives being the presenter and asking for input. I also conducted “Connect with Catherine” conference calls with the network every six weeks, offering all of our franchisees the opportunity to give feedback and input, ask questions, etc.

  •  Franchising Under Attack

Monson:  The world is full of opposing forces and opinions. If we want to preserve the proven, successful franchise business model, we need to fight for it. I don’t have a crystal ball and am not able to state, with certainty, how these things will end up. I do know that “politics is a contact sport” and many of the groups with opposing views to ours are more active, better organized, and in “more contact” with lawmakers and policymakers.

The first featured expert was Dwyer Group Executive Chairwoman Dina Dwyer-Owens, CFE, who responded to questions that included such areas as leadership, political challenges, compliance and balancing franchisee and end users’ needs. Here are a few brief excerpts.

  • Transitioning From Founder Leadership to Professional Leadership

Dwyer-Owens: Never lose sight of where you came from.

Having experienced that on a personal and professional level when my father and the founder of The Dwyer Group, Don Dwyer, died unexpectedly — it wasn’t easy. But there are lessons we learned that made us a stronger organization through that transition. We have never lost sight of Don’s mission, vision and values that he outlined when he created our company.

  •  Franchising Under Siege

Dwyer-Owens:   Franchising appears to be under siege of late from various state and federal agencies. From franchise relations laws to the opinion that franchises are not small businesses to employee/employer issues, franchising continues to be forced to defend its position as a strong business model with a clearly defined relationship between franchisor and franchisee. It appears there are just too many “decision makers” who do not understand what franchising is all about.

  • Balancing Franchisee and End User Needs

Dwyer-Owens:   We actually have three types of customers in my mind. We have the employee, which I consider the internal customer of The Dwyer Group. I believe that we should provide our employees with the proper tools, resources, training, constructive feedback when needed and sincere praise when earned so they will take great care of our franchisees. I believe we are responsible for providing our franchisees with the proper support, training, and guidance, etc. so they can properly serve the end user.

Visit FranSocial often for more on the Franchise Relations Dialogue Forum, other community updates and to join member-only discussions. The March issue of Franchising World will include an expanded version of this post.

 

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