New NLRB Member’s Past Statements on Joint Employer Raise More Questions than Answers

Earlier this week, Lauren McFerran was confirmed by the Senate Committee on Health, Employment, Labor, and Pensions to the National Labor Relations Board in a party-line vote. The Board, which is expected to decide the Browning-Ferris Industries of California, Inc., et al case before the end of the year, is in the position to reinterpret labor law in a way that could undermine the franchise model. Despite nearly 40 years of legal precedent has established franchisors and franchisees as independent businesses, McFerran’s response to several Questions for the Record reveal a more activist slant in her views on the Board’s ability to establish joint employment.

The central questions of the Browning-Ferris case is whether the Board should adopt a new joint employer standard. Though the previous standard for joint employment has been control over another business’ hiring, firing, and scheduling practices, NLRB General Counsel Richard Griffin recently recommended that franchisors be considered joint employers of franchisees even if they had no control over these areas.

If applied on a broader scale, this policy could fundamentally alter the franchise relationship as franchisors would be forced to either limit franchisee autonomy to reduce legal liability or provide less support franchisees in order to avoid falling under the new standard. The franchise relationship is so effective because it leverages the strengths of two independent businesses. Franchisees provide on-the-ground management of a location and franchisors protect and enhance brand standards through research and marketing, making neither outcome desirable.

Although Congress is responsible for writing legislation, McFerran’s answers to questions submitted to her following her confirmation hearing indicate that she believes the NLRB has broad authority to reinterpret the law, effectively changing it.  When asked if she was concerned by the potential uncertainty created by upending long-standing precedent, McFerran responded “I believe that reversal of precedent does not necessarily create uncertainty, if such reversal is explicit and carefully considered and the Board’s interpretation of the law going forward is clearly articulated.”

Michael Lotito, Co-Chair of Littler Mendelson’s Workforce Policy Institute, argued that such an attitude could have a disastrous effect on American businesses:

“Franchisors and franchisees have contracts that last for decades in some instances. They are based on the fact that both are independent businesses.  As such, their employees are separate.  For many years, the NLRB has so held.  If the Board changes the law, the Board is inserting itself into the very structure of the franchise industry.  The Board is essentially amending the franchise agreement to say:  SURPRISE the employees of the franchisee and franchisor are one and the same, so forget the fact you are independent businesses.  No governmental agency should have that kind of power to arbitrarily disrupt established business relationships that account for 8.2 million jobs.   Therefore, Ms. McFerran’s answer is at best, incomplete, and at worse just plain wrong.”

The Board’s aggressive actions have attracted a great deal of Congressional scrutiny. In September of 2013, Senate Majority Leader Mitch McConnell (R-KY) and Senator Lamar Alexander (R-TN), Chairman of the Senate Committee on Health, Education, Labor, and Pensions, introduced the NLRB Reform Act. The bill would transform the Board from a politicized advocate for union interests to an impartial arbiter of labor disputes, adding an additional seat to the 5-person Board and ensuring a permanent even split of Republican and Democratic Members. The legislation would also reduce the ability of the General Counsel to reinterpret established law, as well as set firm standards for timely decision making and responses to inquiries.

It’s About Community, It’s About Being a “FAN”

Thanksgiving is just around the corner and it provides an opportunity to share precious time with our families in our communities.  As businesses reach out to their respective communities during this holiday season, they are also involved in activities and movements that benefit their neighbors all year.

And how do franchise businesses benefit their neighborhoods? Franchise small-business owners hire and promote people from within the community, contribute to local economic and social stability, as well as serve as entrepreneurial role models.  One close friend who was a franchisee for a decade was passionate about helping young people remain in school and helping them to understand the significance of a strong work ethic, being responsible and respectful.

There is a movement taking hold in the franchise community that helps to promote small businesses in their local communities.  It’s called the Franchise Action Network or FAN.  The audience:  lawmakers in every state capitol and the message: how important the franchise industry is to their state and communities.

Now comes the most important part of this movement: It’s you!!! As a franchise small-business owner, you make the best possible representative because you are local and can tell exactly how legislative or regulatory actions can help or hinder the growth of your business. Check out FAN Maine in action below.

You can help explain that franchising involves more that quick-service restaurants, and includes everything from soup, Soupman Inc., to nuts, Cornwell Quality Tools Company, and everything in between:  from Jiffy Lube to The UPS Store, from Abrakadoodle Remarkable Art Education to the Gap, Inc. and from Gold’s Gym to Camp Bow Wow to list just a very few.

Locally owned franchises are America’s hidden small treasures. IFA asks your support to get involved; visit www.FranchiseActionNetwork.com today to sign up and get involved. After all, Thanksgiving is only one day per year.  Your franchise small business is making a difference every day; let your legislators know how!

 

 

 

 

Veterans and Franchising – A Thriving Combination

The crowds have left the first Concert for Valor conducted in the nation’s capital that united us for an evening of music, comradery and sincere thanks to your military service men and women, but another concerted effort continues.

According to a new IFA survey, more than 50,000 veterans have found employment in the franchise industry over the past year and more than 400 veterans have become local franchise business owners.   Since 2011, the franchise industry has hired and recruited more than 203,890 veterans, military spouses and wounded warriors — including 5,608 new veteran franchisees.


“Franchise businesses realize that creating employment and small-business ownership opportunities for veterans, military spouses and wounded warriors is not only the right thing to do, but it makes good business sense,” said IFA President & CEO Steve Caldeira, CFE.


The survey, conducted by Franchise Business Review, found that: 52,333 veterans have found employment opportunities in the past year across 13,446 business locations.

  • 62 participating franchise brands successfully recruited 416 veterans as new franchisees during the same period, and an additional 350 veteran franchisee candidates are currently under consideration.
  • 70 percent of the franchisors surveyed indicated they had hired a veteran or the spouse of a veteran in the past year.
  • The most popular industries among veterans coming into franchising include Automotive (16 percent), General Services (17 percent), Food (14 percent), Residential/Home Services (14 percent) and Business Services (9 percent). Of the franchisees surveyed, 98 percent believe that veterans are a good fit for employment within their businesses.

The study surveyed a variety of industries and company sizes to capture a representative sample of the franchise industry and results reflect a continuing commitment in the franchise community to provide career opportunities for veterans.  Find more study results here and visit www.vetfran.com for program updates.

 

 

A Closer look into Bloomberg’s: “Many Franchisees Get Nothing for Their Investment”

 

A recent Bloomberg BusinessWeek story, “Many Franchisees Get Nothing for Their Investment,” did not paint a full picture for those looking to fulfill a dream of business ownership through franchising, a business model that has been successful for the last 50 years and continues to grow and create jobs for millions of Americans.

The blanket statements made in the article revealed a lack of understanding about how franchise agreements actually work. For example, the author alleged that in all situations involving the turnover of a franchised business, franchisees are unlikely to recover their investment. But this assertion is far too broad. Turnover refers only to the change in the license agreement or contract between the franchisee and the franchisor. For example, the franchisor can terminate the license agreement when the franchisee fails to comply with system standards, or when the franchisee decides not to open additional stores that had been agreed upon in the original contract. Many franchisees do see a return on their investment and some even pass their franchised businesses on to family members.

To make this claim, the article relied heavily on biased reporting by a blogger at BlueMauMau that inaccurately equated “turnover” with the overall performance of the franchising industry, stating that “122 franchises leave for every 100 newly opened franchises.”

The BlueMauMau report inflated the numbers by counting transfers of ownership as “departures”. This is a mischaracterization. In fact, a better measure of franchising industry performance would count more than 46,000 transfers as businesses that continued to operate during this time period under new ownership. When the transfers are added to the 135,000 new outlets that opened, the total number of franchised businesses operating from 2010-2013 is 181,000. This means the number of franchise agreements that were terminated, reacquired, not renewed, or ceased operations for other reasons was approximately 118,000, or about 40,000 per year.  It is a big over-simplification to claim that so-called “turnover” equates with business failure.  In some cases, franchise owners decide to pursue other business opportunities or to retire.

Regardless, any statistic about business performance during this period should be put into a broader context of what has happening in the U.S. economy at the time. Recent data suggested that in 2011 alone, 575,000 businesses – not just in franchising – ceased operation. Additionally, the Bureau of Labor Statistics estimates an average annual failure rate of 45% of all business startups in a five year period. Using this national benchmark, 40,000 franchise departures per year, or an overall rate of 10 percent per year, compares very favorably with other businesses.

Another misconception about franchising repeated in the article is that franchisees are not independent, local business owners. In fact, franchisees do own their businesses. They pay taxes, wages to their employees and permits and fees to local, state and federal agencies. These local business owners have an employee identification number from the IRS and take their profits out of their businesses the same way other business owners do.

There is no guarantee of success when going into any business, including franchises. To be sure, franchise businesses are not immune to failure for the same reasons that other businesses fail – recessions, poor financial planning, lack of management, or personal issues.  Prospective franchisees should plan carefully, consult with a franchise attorney, and thoroughly investigate franchise opportunities before making a decision to invest. However, inflating statements about “high turnover rates” does not do justice to the franchise business model that has created a way for tens of thousands of Americans to pursue the dream of business ownership.  Franchise businesses continued to grow during the worst recession since the Great Depression, at survival rates much higher than other businesses. Today, they continue to create jobs and livelihoods for millions of Americans.

Thanking Our Veterans for Their Service

Our nation is preparing to honor the numerous contributions and sacrifices our men and women who are serving or have served in our armed forces to guarantee our freedom.  Our thanks come in many forms and extends before and beyond Veterans Day.  But as we prepare to celebrate and remember these heroes, many franchise companies are offering their own special thanks.  Here are only a few examples of activities franchise companies are planning for Nov. 11.

  • Baskin-Robbins will donate 10 cents from each ice cream scoop sold in its U.S. locations to the United Service Organizations to support troops, military families and veterans on Veterans Day.
  • Edible Arrangements kicked off its new partnership with Iraq and Afghanistan Veterans of America, an organization for new veterans and their families.  A promotion from Nov. 3 through Nov. 12 will raise money for IAVA and the franchise will participate with the organization in “VetTogether” events at VA hospitals in cities nationwide.
  • Every Pie Five Pizza restaurant nationwide is inviting active-duty, reserve and retired service members to enjoy a free pie on Veterans Day. Service members simply show a valid government/military ID to receive a customized pizza.
  • Home Franchise Concepts’ Budget Blinds brand and national non-profit Home for Our Troops that builds specially-adapted homes for severely injured veterans who served in Iraq and Afghanistan, will provide window coverings in 10 homes across the country between Nov. 1 and Dec. 31,  and will donate window coverings in more than 120 houses within the next three years. HFC is also raising $150,000 that will go to HFOT within the three years of the partnership.
  • JDog Junk Removal & Hauling is offering one free quarter-trailer pick up, which is up to 90 cubic feet of items, to disabled military veterans who book on Veterans Day.  With locations in Pennsylvania, Florida, Michigan, Texas and Missouri, veterans and their families in these areas can rid their homes or businesses of unwanted goods.
  • Maui Wowi Hawaiian is doubling its special discount to prospective franchisees with military experience seeking to own a Maui Wowi franchise. This Veterans Day special is available now through Dec. 31, 2014 and provides a 20 percent discount off of its franchise fee for qualifying military veterans.
  • Orange Leaf Frozen Yogurt will offer retired and active-duty military personnel a free cup of froyo, up to 11 ounces, on Veterans Day. To claim the offer, customers should provide proof of military service or come dressed in their military uniform.
  • Sport Clips Haircuts locations across the country will host the company’s annual Veterans Day haircut event during which $1 per haircut service will support “Help A Hero” scholarships for service members and veterans.
  • Wayback Burgers is saying “Thank You” to more than 19,000 veterans and active duty military personnel on the Port Hueneme Naval Base in California. Veterans and active duty military personnel on the base can choose any item on the Wayback menu for free, no purchase necessary, during normal business hours on Nov. 11.
  • Woody’s Bar-BQ offers men and women in the military that have served and continually serve the United States by giving away a gift certificate for a free barbecue entrée worth $7.99 or less on Veterans Day.

Visit www.vetfran.com for news on what IFA and our member companies are doing to provide opportunities in franchising to our nation’s veterans and their spouses and to find a list of participating companies.

 

 

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