What’s the impact of the SCOTUS decision on franchise businesses?



While there’s no hiding from the fact that many jumped the gun on yesterday’s Supreme Court ruling, it’s never been a secret that this costly, onerous, cumbersome and unworkable law would have an incredibly negative impact on the franchise industry. Those realities are now becoming even clearer amid yesterday’s decision.

Franchise businesses create jobs faster than other businesses due to the structured and scalable business model that encourages multiple establishment ownership, and they have a growing role in the small business landscape in this country. However, their future is put at risk by the disincentives the Affordable Care Act places on new establishment formation, the hurdles it places on prospective franchisees to own a franchise, and the costly reporting and recordkeeping requirements it imposes on smaller franchise owners. A study done by The Hudson Institute found that 3.2 million jobs at franchise businesses are put at risk by the employer mandate.

But don’t take it from me…take it from IFA members, including:

Tasti D-Lite CEO Jim Amos, who told FOX Business yesterday, “I think for small business in general, and franchise businesses in particular, it will cost jobs and increase costs…particularly as it relates to the employer mandate, franchisees who own one location and might have a desire to expand to multiple locations, they might choose not to invest.”

Or take FASTSIGNS CEO Catherine Monson’s view, who argues in a Washington Post oped this morning, “Employers play a central role in the nation’s health care system. Our company and our franchisees should be able to make their own choices in health care – these decisions should not be made by the government. As we look to expand our franchise system throughout the country, the decision creates increased uncertainty in our long term business planning by forcing me as an employer to choose between absorbing rising premiums or paying mandated penalties.”

As IFA President & CEO Steve Caldeira told CNBC, “This decision sustains the uncertainty they currently have…The impending costs of health care do not give business owners confidence to open that extra store or to hire more people and create the economic output our country needs.”

While the IFA has consistently and passionately fought to repeal and replace the law, in the current political environment, repeal is unlikely until the political dynamic in Washington changes. However, the Court’s ruling does put in play the possibility the Senate could consider repeal of the law under the reconciliation process (making the elections even more important). For this reason, the health care issue will be front and center for the 500+ IFA members who will be in Washington September 10th-12th for our legislative fly-in and throughout our grassroots engagement during the upcoming July 4th and August recess periods.

Court decision places jobs at risk in franchise industry

The U.S. Supreme Court this morning ruled the Affordable Care Act constitutional, upholding the key provision of the law in a 5-4 decision: the individual mandate provision. Be sure to register for IFA’s tele Town Hall tomorrow with Cong. Tom Price to hear about what the decision means for franchise businesses going forward.

Following this morning’s decision, IFA President & CEO Steve Caldeira released the following statement:

“We are deeply disappointed by the High Court ruling to uphold the Affordable Care Act, which places undue burdens on the franchise small business community. While it may have been ruled constitutional, the law is unworkable, unaffordable and wrong for our country’s small business owners.

“By upholding the law, 3.2 million jobs at franchise businesses continue to be put at risk due to the employer mandate provision, which forces franchise employers with more than 50 full-time equivalent employees to pay penalties, thereby discouraging and disincentivizing the creation of new jobs.

 “The Affordable Care Act, and specifically the employer mandate, does not provide solutions to the cost and access issues it set out to address, but rather hurts the employees it aims to assist. IFA will continue to work with Congress to repeal the employer mandate and start over with a health care reform effort that enacts reforms that provide access to care at an affordable cost for franchise small businesses and their employees.”

How will the Supreme Court decision on Health Care affect the franchising industry?

Join a Tele-Town Hall Friday at 11:30 a.m. EST

The Supreme Court will be ruling on the constitutionality of the individual mandate and several other issues regarding the health care law on Thursday at 10 a.m. In response to that ruling, the IFA will host its first-ever tele-Town Hall on Friday at 11:30 a.m. Join us by filling out the registration form to have the service call your phone when the tele-Town Hall begins. This feature requires a direct dial and will not work if you have an extension.

IFA President & CEO Steve Caldeira will moderate the Town Hall and will be joined by Rep. Tom Price (R-Ga.), one of the leading health care policy experts in Congress. Judith Thorman, IFA’s Senior Vice President of Government Relations & Public Policy, will explain how the decision will impact the legislative agenda this year and how the decision is likely to play at this year’s Public Affairs Conference and in the upcoming elections. Anne Phelps, Principal at Washington Council Ernst & Young and a health care policy expert, will also participate in the call and provide insight into the ruling on the Affordable Care Act and the implications for our members. At the end of the Town Hall, we will conduct a moderated Q&A session for IFA members.

Colorado Gov. John Hickenlooper visits with IFA staff

Colorado Gov. John Hickenlooper visited with IFA staff last week in Washington, D.C. as part of his outreach to trade groups whose members contribute to the economy in his state (franchise businesses are responsible for supporting 319,000 jobs and 17,000 franchise establishments in Colorado). IFA Pres. & CEO Steve Caldeira thanked Gov. Hickenlooper for his recent support to oppose a paid sick leave ballot initiative in Denver which would have negatively impacted franchise businesses and provided an overview of IFA’s work to create better bank-ready franchise borrowers through its ongoing Credit Access Campaign.  

Gov. Hickenlooper was keenly interested in several recent news stories in Colorado about the IFA’s work to hire and recruit veterans to become franchise business owners through Operation Enduring Opportunity.  He applauded IFA’s leadership in this area and urged us to continue working to hire and recruit veterans as the wars in Iraq and Afghanistan draw down. With more than a million troops scheduled to return in the next several years, Gov. Hickenlooper has made it a priority of his administration to address the problem of homeless veterans, who face additional hurdles in their return to civilian life.

WIN wins veterans with FOX News Spot

WIN Home Inspection’s Keith Mathias and IFA’s VetFran coordinator Beth Solomon took to the airwaves of Detroit’s FOX2 News to raise awareness about opportunities for veterans in franchising as the National Veterans Small Business Conference and Expo June 26-28 at Cobo Center gets underway, expected to attract over 10,000 veterans this week. With unemployment rates stuck over 16 percent in this region hard-hit by the recession, franchise leaders from 40 IFA member companies will participate in the first-ever Franchising Pavilion and the Conference’s Hiring Fair, where over 200 companies including the “big three” automakers will offer jobs.

“When they take off their uniform, some servicemembers are looking for a job, but others want to own their own businesses,” Solomon told FOX2 reporter Amy Adams. “Franchising lets them be in business for themselves — but not by themselves.” She noted that Aaron’s, FASTSIGNS, NAPA Auto Parts, WIN Home Inspection, Two Men And a Truck, Lenny’s, Home Instead Senior Care and The UPS Store are some of the franchise brands offering special incentives to veterans.

WIN Home Inspection’s Mathias told FOX2’s Adams that WIN has committed $1.2 million dollars in financing and created a “WIN for America” program waiving franchise fees. So far, about 25% of WIN’s franchisees are military veterans. Mathias and Marketing Director Jimmy Rocchetta estimate that 25% percent of the veteran franchisees have veteran employees. “Veterans hire veterans,” said Rocchetta.

The company has taken a grass-roots approach to marketing, combining earned media with making personal connections through veterans in their networks. WIN is also working with The Value of a Veteran on a Texas state program that provides funding for business training.  “It’s no secret within corporate America that military training sets a career course, and most veterans excel in the workforce,” says WIN’s President Steve Wadlington. “Our military veterans regard core values, commitment, and teamwork, thus making them ideally positioned for success within WIN Home Inspection.”

Within an hour of Mathias’ appearance on FOX2, the company recorded five new leads at its Madison, AL headquarters.

“We’re getting high-quality leads,” said Rocchetta. “This is working well for us.” Veterans Affairs Secretary Eric Shinseki and White House Joining Forces Executive Director Brad Cooper hit the conference Thursday.

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