New Study: Franchise Businesses Suffer Most Under $15 Minimum Wage Increases

Increasing the minimum wage has long been a popular tactic for liberals in the political sphere seeking “fairness” for workers.  To the casual observer, the idea that someone should earn a so-called “fair wage” appeals to their moral conscience without immediately conjuring up the economic impact of such actions on a large scale.

While there has recently been a national debate about raising the current federal minimum wage from $7.25, Congress has rebuffed those efforts, based largely on evidence from the nonpartisan Congressional Budget Office that 500,000 workers would lose their jobs, wiping out any improvement in wage levels for those entry-level workers who remain in the workforce. In response, an increasing number of states and cities are being pressured by liberal activists to raise their own minimum wage.

Most localities have passed new wages based on economic and cost of living conditions. However, in some places, a unique and potentially damaging characteristic of some wage proposals has a trend to include a provision requiring families in local communities who own franchises to pay wages higher and faster than those paid by non-franchise businesses.

Take the city of Seattle or the state of New York for instance. Each passed an increase in the minimum wage to $15 per hour, both discriminatory in their own way.  In Seattle, the legislation considers independently operated franchisees as ‘large employers’ because they contract with a brand, and subsequently forces them to implement the increase faster than local, non-franchise businesses. Meanwhile, in New York, Gov. Cuomo unilaterally targeted quick service restaurants through a “Fast Food Wage Board” which consisted of no small business owner representation. This wage increase required those families who operate a local restaurant with 30 or more locations nationally to pay a $15 minimum wage, and leaving other businesses at the more modest $9 state-wide minimum wage.

Perhaps the most perplexing notion in both cases is that wages were raised under the auspices of fairness.  What could possibly be fair about requiring one family who owns a small business to implement a wage at a faster pace than another, or leaving those employees who DON’T work for these businesses at a lower rate.

To address the impact of this new trend in policymaking, new research from the Employment Policies Institute (EPI) overwhelming disproves the notion that franchise businesses could absorb an increase in the minimum wage easier than non-franchise businesses.  According to the study, franchise businesses would be impacted more, with over two-thirds of franchise small business owners saying that they would be forced to reduce staff or reduce hours to compensate, compared to roughly half of non-franchise businesses.  Additionally, 54 percent of franchisees said they would likely use more automation, compared to just 37 percent of non-franchise businesses.

“This study confirms that local franchise businesses, who form the fabric of their communities, should not be unfairly targeted for higher labor costs than non-franchise businesses,” said IFA Director of State Government Relations and Public Policy Jeff Hanscom. “Arbitrarily forcing higher labor costs on franchise small businesses will reduce employment for those who need it most, while stripping neighbors of their ability to own a small business.”

As policymakers around the country continue to face pressure from local activists seeking to raise the minimum wage to exorbitant levels, it is clear they should avoid choosing winners and losers.

With the unemployment rate hovering above 9 percent, media attention continues to swirl about the

With the unemployment rate hovering above 9 percent, media attention continues to swirl about the impact government regulations are having on job creation, particularly to small business. 

On Saturday, IFA board member and KFC franchisee David Barr appeared on FOX & Friends Weekend to discuss the impact to his business of the employer mandate provisions in the health care law.

Barr said the law will force his company, which employs more than 400 workers at 21 franchise restaurants, to move some employees from full-time to part-time work, or to share employees with other employers in order to avoid paying the penalities associated with the new law. The story told by Barr is echoed across the spectrum of the franchise industry and is particularly relevant for multi-unit franchisees.

The Wall Street Journal noted the impact of the health care law on franchise businesses in a story on their Small Business page, citing IFA’s recent report that 3.2 million jobs may be put at risk as a result of the new law. 

The crux of the burden, the IFA report claims, will be on franchise owners who expand to multiple locations, bumping the number of employees up each time a new establishment opens. If employers don’t offer health insurance and reach 50 or more full-time employees between their locations, the law requires them to pay a $2,000 penalty for each employee, with an exemption for the first 30 workers. In other words, a firm with 49 employees that adds one more worker would have to pay $2,000 times 20 employees, or $40,000, according to the IFA study.

Diana Furchtgott-Roth, the author of the study commissioned by the Hudson Institute, has also published several articles highlighting the findings of the study and its impact on job creation in the franchise industry. All of these articles are available on the IFA’s Health Care Resource Center

Posted by Matt Haller, IFA Director of Communications

IFA rolls out stepped-up VetFran campaign


As President Obama visited the Washington Navy Yard Aug. 5 to announce new steps to help America’s veterans find jobs due to an unemployment rate more than 12 percent, the IFA is calling on members of Congress to support the reintroduction of legislation to boost small business ownership by veterans at this critical time.

President Barack Obama shakes hands with Joint Chiefs Chairman Adm. Mike Mullen after speaking Friday at the Washington Navy Yard in Washington about efforts to prepare veterans for the workforce. (AP Photo/Carolyn Kaster)

“As tens of thousands of service men and women return from deployment in Afghanistan and Southwest Asia, expanded opportunities are needed to ensure veterans and their families are able to transition to the civilian economy,” said IFA President & CEO Steve Caldeira in, a BizJournals property.

IFA has launched a renewed campaign, backed by additional funding support from the IFA Board of Directors, to assist U.S. veterans at this unprecedented time. IFA’s VetFran campaign will help returning service members access franchise opportunities through training, financial assistance, and industry support.

 IFA recently joined with the International Military Community Executives Association (IMCEA) at an annual workshop for military foodservice and facilities leaders in San Antonio, TX. IMCEA is the only international organization that exists specifically to advance the professional development of U.S. military services managers around the world.

Following the meeting, IMCEA President Fred McKenney thanked the IFA for its support and offered praise for the IFA’s VetFran program.

“IMCEA has a fundamental mission of networking and connecting our military community to worthwhile opportunities with industry and IFA is a natural match,” said McKenney. “The strategy of recruiting our foodservice military members to pursue career opportunities in the franchise environment is brilliant. The initiative takes advantage of the military training, their ability and willingness to follow very specific standards and their experience operating in a structured operational environment. I believe we have only begun to scratch the surface on growing a relationship that will benefit our veterans and the franchise industry.  I look forward to expanding our relationship with IFA in the future and am excited about the potential rewards.”

Over 400 IFA franchisor member companies participate in VetFran, offering financial incentives, training and mentoring to prospective veteran franchise small business owners. Since the program’s inception, nearly 2,100 veterans have become franchise owners and thousands more are successful in franchising as executives, managers and staff.

At its upcoming Public Affairs Conference, Sept. 13-14 in Washington, D.C., the IFA will honor veteran franchisees and offer a unique program led by IFA VetFran Committee Chair Mary Kennedy Thompson, (USMC, Ret.), a former franchisee and President & CEO of Mr. Rooter of the Dwyer Group. IFA will host a luncheon keynote featuring Eric Greitens, former Navy SEAL and head of The Mission Continues. Greitens wrote the New York Times bestseller The Heart and The Fist, which IFA will distribute at no charge to all Public Affairs Conference attendees thanks to a sponsorship by Guidant Financial.

At the Conference, IFA will also launch a new VetFran website to help veterans find franchise opportunities and to build support for the “Help Veterans Own Franchises Act,” which will be re-introduced by Rep. Aaron Schock (R-IL) and Sen. Bob Casey (D-Pa.) in September. An ad campaign featuring veteran franchisees who have taken a path to small business ownership through VetFran will be launched in Washington, D.C.-based publications such as National Journal to support the reintroduction of the legislation. 

The bill establishes a tax credit for franchise businesses that offer veterans discounted initial franchise fees, training, and other support. The tax credit would amount to 50 percent of the total franchise fee discount offered by the franchisor to the franchisee and would be capped at $25,000 per unit. The legislation also provides a tax credit to veterans who become franchisees, equal to 25 percent of the remaining franchise fee.

This week, the IFA travels to Texas A&M University, where Mary Kennedy Thompson will lead a franchising workshop at the Entrepreneurship Bootcamp for Veterans with Disabilities (EBV) for post-9/11 veterans with disabilities resulting from their service to our country. The EBV was launched at Syracuse University, and now includes Texas A&M University, UCLA Anderson School of Management, Florida State University’s College of Business, The Krannert School of Management at Purdue University, the University of Connecticut’s School of Business and the E. J. Ourso College of Business at Louisiana State University.

“Our veterans fought for us,” said Caldeira. “Now we need to fight for them. The IFA and the franchising industry are committed to this critical effort for our veterans and our nation.”

IFA has also formed a partnership with the U.S. Army Reserve to help broaden employment opportunities for reservists by including franchise ownership as a career option and funneling veteran franchise prospects toward VetFran. Further, VetFran is officially endorsed by the U.S. Dept. of Veterans Affairs’ Center for Veterans Enterprise, which helps promote small-business ownership for veterans. 

Posted by Beth Solomon, IFA VetFran campaign coordinator

Quick-service restaurant franchises are hot spots for presidential candidates


Link: Quick-service restaurant franchises are hot spots for presidential candidates

There are more 152,665 quick-service franchise restaurants in the United States (according to the IFA’s 2011 economic forecast) and seemingly every American has their personal favorite, whether it’s McDonald’s, Taco Bell or newcomer Five Guys. According to an article in the latest QSR Magazine, politicians are certainly part of this rule, rather than the exception. 

As the article mentioned, Republican presidential candidate Rep. Michelle Bachmann (R-Minn), the leader in many Iowa caucus polls, recently made a swing through the state, finding time to stop at a Pizza Ranch restaurant in Carroll, Iowa, and visit with dozens of supporters. 

While its certainly not breaking news that candidates on the go are likely to stop into quick-service franchises like Pizza Ranch to grab a quick bite and mingle with potential voters, it does serve as a reminder of the opportunity these events create for franchisees to educate policymakers about the unique attributes of franchising—that each franchise establishment, while operating with the strength and support of a well-known and respected national brand, are actually owned and operated by local entrepreneurs and small business owners. 

If you’re a franchisee, take a moment the next time a politician stops by for a visit, whether he or she is a presidential candidate or your town’s mayor, to pose for a photo and tell them your story about the benefits franchise small business ownership has afforded to you. It’s all about awareness and advocacy, and there is no better spokesperson for our industry with lawmakers than those who own local businesses and create jobs in their communities. And if you happen to get in an opportunity to tell them about the onerous provisions in the new health care law, the need for more certainty out of Washington with regard to taxes and over burdensome government regulation, then all the better.

Posted by Matt Haller, IFA Director of Communications

Washington Post: May jobs report sheds light on uncertainty by franchise small business owners


Link: Washington Post: May jobs report sheds light on uncertainty by franchise small business owners

Reporting on the dismal monthly May jobs report released by the Labor Department, The Washington Post quotes two franchise small business owners who say uncertainty causes fear, which in turn stagnates job growth. 

From the article:

Employers from coast to coast describe a situation in which tepid economic growth alone isn’t enough to prompt them to add to their payrolls. Sales have been rising, but slowly and tenuously. Doubts about the future have continued to chip away at confidence and prevented many business people from taking the leap of faith required to expand and hire new workers.

“Everybody is so fearful right now because of the uncertainty about the future,” said Bill Hall, who owns five Dairy Queen franchises around Fort Worth. “It’s a problem that’s impacting all of us. That uncertainty and that fear is the number one reason you’re not seeing job growth. . . .Everybody is in a situation where they’re afraid to make a move. Unfortunately, that’s caused everything to come to a standstill.”

Even businesses that have taken on new employees — the private sector has added jobs for 14 straight months — have done so with some trepidation.

Aziz Hashim, president of an Atlanta-based company that owns scores of Popeyes, Checkers and Domino’s Pizza franchises in Georgia, California, Arizona and Florida, said his firm added four new restaurants last year and is on pace for five this year. But he said a lack of clarity about government policy and doubt about the direction of the economy has held him back from more aggressive expansion.

“We have been expanding, but we could be expanding faster,” he said. “There’s no question that we could be doing more, but we have to be very careful because we can’t adequately project” what lies ahead.

Posted by Matt Haller, IFA Director of Communications