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.

 

 

 

IFA’s 2015 Board Members Discuss What’s Ahead for the Franchise Industry

You don’t have to wait until IFA‘s Annual Convention in Las Vegas next month to find out what some of the franchise industry’s leaders think this year holds for their businesses and the industry overall. Below are excerpts from some of the 2015 Executive Committee members. Find their full comments, along with their board colleagues, in January’s Franchising World magazine. In the meantime, here’s a quick peek:

Melanie Bergeron, CFE
Chairwoman of the Board
TWO MEN AND A TRUCK/INTERNATIONAL, Inc.
Chairwoman

While I am optimistic for TWO MEN AND A TRUCK, I am very concerned about the political landscape for franchising. In the coming year we are going to need to continue the battle to protect our franchise business model from the local, state and federal levels. Please consider joining the Franchise Action Network if you haven’t already.

Aziz Hashim
President and CEO
NRD Holdings, LLC
Vice Chairman

The resilience of the franchise industry and the U.S. entrepreneur will once again shine in 2015. As the economy muddles through this unprecedented period of uncertainty, as well as consumer demographics and demands changing ever so rapidly, few industries will be as adept to managing change as the franchise industry.

Shelly Sun, CFE
CEO and Co-Founder
BrightStar Franchising, LLC
Treasurer

Looking toward 2015, the franchise industry as a whole will experience modest growth, hampered by the concern over the National Labor Relations Board joint employer impact. Without the constant impediment of government regulation, 2015 should be a solid year for the industry.

Liam Brown
President, U.S. and Canada
Select Service and Extended Stay Lodging and
Owner and Franchise Services
Marriott International
Secretary

We expect new franchise development activity to continue at a strong pace. Interest rates remain low and the industry is performing at historic highs, enabling strong underwriting of new franchise projects.

Steve Joyce
President and CEO
Choice Hotels International
Immediate Past Chairman

There have been solid gains in household employment and improvement in the labor participation rate. Job and wage forecasts indicate modest growth, which makes us optimistic for the year ahead.

Jeffrey Tews
Multi-Unit Franchisee
BrightStar Care of Madison, WI
Franchisee Forum Chairman

Providing a quality experience has created a very positive reputation in a business that relies upon trust.

Catherine Monson, CFE
CEO
FASTSIGNS International, Inc.
Franchisor Forum Vice Chairwoman

To preserve the proven, successful franchise business model, everyone in franchising must commit to grassroots advocacy/government relations involvement.

Ryan Cunningham
President
Javelin Solutions
Supplier Forum Chairman

Franchisees will need to think outside the box to find new locations, considering redevelopments of older projects, moving into newly gentrified neighborhoods or buying out mom and pop retailers.      

New Year, New Challenges, New Resources

The franchise industry, a principal job and business generator, experienced a variety of challenges in 2014 and some of them are likely to carry over into 2015. Among the issues were the redefinition of the franchisor-franchisee relationship as joint employers and assaults on the industry in the form of minimum wage increases.

You’ll soon learn what our 2015 board of directors have to say about these and other issues affecting the industry in a feature article that is part of the January issue of Franchising World magazine.  And as is the association’s practice, it will meet these challenges head on.  Educating its members, as well as lawmakers and policymakers is a primary activity.

IFA launched a new website for franchisees that provides key guidance on labor and workforce issues. The Franchise Labor & Workforce Hub serves as a resource for franchise business owners looking to learn more about current labor and workforce challenges facing employers, as well as best practices for compliance.  Members can get involved to protect the business and the franchise model by joining the Franchise Action Network.

Another important area for the association is increasing the focus on franchisee engagement. One way to foster engagement is through the introduction of a new communications tool.

The Franchisee Rundown,” a new monthly franchisee-focused IFA newsletter that was recently launched, was created to ensure that franchisees will receive a steady flow of accurate information about the industry they’re helping to build and expand.

Working together, franchisees, franchisors and suppliers can remind our audiences of the value and numerous contributions made by the franchise industry to local communities nationwide.

 

 

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

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