Yesterday morning, Speaker of the House Paul Ryan (R-WI) delivered an address geared towards future generations and the promotion of policy debates, noting that Congress can play a vital role in restoring the American people’s faith in elected officials. During his speech, the Speaker noted the political climate in Washington has devolved from meaningful policy discussions and turned to a game of identity politics that often leaves the public yearning for more. Even worse, Ryan noted that Congress should be part of the solution, rather than part of the problem. This entire narrative comes full circle with the Speaker’s promise to focus on making America thrive again, especially for those who are most vulnerable.
The American people are frustrated, and Speaker Ryan’s address serves as an elucidating moment for Congress: start serving the people or run the risk of diminishing America’s future potential. For those in franchising, and small business owners in general, the message could not be more salient. Entrepreneurs serve as the foundation for America’s economy and opportunity. Franchising alone accounts for nearly 8.9 million jobs – with an expected growth to 9.1 million in 2016 – and nearly $900 billion in economic output. For a business model that is churning out jobs and income for so many, one would think those in Congress would be working to promote and protect the industry. Unfortunately, Washington bureaucrats and organized labor groups are orchestrating a strategy that will hamper job growth and threaten the dream of small business ownership for countless Americans over the coming years.
If Congress takes to heart the Speaker’s message detailing efforts to eradicate poverty and promulgate effective policy solutions, the franchise model is a perfect place to start. Take, for example, the National Labor Relations Board’s (NLRB) nebulous new “joint employer” standard. For years, franchisors were legally separate entities from franchisees until pro-union bureaucrats flipped the standard on its head. As a result, franchise small business owners are cast into an abyss of uncertainty. Last year, Sen. Alexander (R-TN) and Rep. Kline (R-MN) took the initiative to introduce the Protecting Local Business Opportunity Act, a bill aimed at restoring the traditional standard. Unfortunately, partisan jockeying on the legislation prevented a floor vote, despite the fact it passed the relevant committees. This legislation represents a clear opportunity for Congress to get back to policy making and facilitating avenues of advancement for America’s impoverished. Speaker Ryan has made his intentions clear; now it’s time for elected leaders in Washington to serve their constituents by promoting a business model that positively impacts millions of America’s success stories.
The jobs report released by the Labor Department June 3rd shows serious signs of an economic recovery that is sputtering. Nonfarm payrolls rose by 54,000 last month, the smallest jobs gain in nearly a year. Nearly 13.9 million Americans are out of work, and more than six million have been out of work for more than six months. The report shows that while the private sector has been adding jobs for more than a year, the pace has not been strong enough to return the unemployment rate to pre-recession levels. We’re not creating jobs fast enough!!
In the franchising world, we understand the importance of “pace” – it’s about time to market, it’s about scalability, it’s about fast, convenient service. Coming out of the 2001 recession, franchise businesses created jobs at three times the “pace” of other businesses. This year our research shows that the franchising industry has the capability to create 40,000 new businesses, including transfers, that could add more than 350,000-400,000 jobs to the economy, and support the creation of an additional 350,000-400,000 jobs indirectly.
As IFA member Bill Hall testified before the House Small Business Committee last week, “Small businesses that survived the recession…did so by squeezing every efficiency they could from their operations. Employees became more productive and worked longer and harder. Nonessential employees were cut. Investments and upgrades were delayed…What does this mean? For our industry, the continued lack of available commercial credit is putting a chokehold on our ability to expand to meet demand and create the jobs our country so urgently needs.”
IFA has proposed steps that can help franchisors and franchisees create jobs at a faster pace –
- Congress should examine the capital reserve requirements and regulatory scrutiny by the FDIC, the Fed and the OCC that may be unintentionally, unnecessarily and harmfully holding back credit access by small businesses.
- Congress should examine how SBA loan guarantees are considered by financial regulators. If regulators are not giving due consideration of SBA loan guarantees when capital reserves are calculated, this pressure can discourage or event prevent banks from lending to small business despite Congress’s intent to expand credit access.
- Congress should continue to support legislation like the Small Business Jobs Act, which IFA strongly supported, and which has been a lifeline to small businesses during and following the recession. The enhanced programs allowed the SBA to leverage over $500 million in taxpayer dollars into just under $12 billion in new loans to small businesses.
New jobs – and a faster pace of job creation – will come from entrepreneurial, small businesses in the service sector. The more the Obama Administration and Congress can do to reduce the regulatory burden on these businesses and to foster pro-growth policies, the faster the franchising industry can create jobs. And we are very good at “fast service”!
Posted by John Reynolds, President, IFA Educational Foundation