U.S. Chamber says economic growth should be “front and center” in 2013; tax reform can “turbo-charge” growth

This morning, IFA was fortunate to have a front row seat at the annual “State of American Business” event at the headquarters of the U.S. Chamber of Commerce, the world’s largest business association located across Lafayette Park from the White House. The event, which brings together representatives from trade associations representing all sectors of the U.S. economy, sets the tone for the annual lobbying agenda for the business community.

U.S. Chamber President Tom Donohue

Chamber President Tom Donohue laid out a series of pro-growth priorities sure to excite anyone in the franchise industry who is frustrated with the ongoing pace of the recovery. According to Donohue, the American Jobs and Growth Agenda would generate stronger economic growth by producing more American energy, expanding American trade, modernizing our regulatory system, and reforming our immigration and visa policies. The agenda also emphasizes the urgent need to address the fiscal crisis with a bold plan that slows the growth of runaway spending, reforms entitlement programs, and overhauls our tax code. According to IHS Global Insight, franchise businesses have been on a slow, but steady, recovery from the recession, and now stand poised to accelerate growth plans if more confidence could be instilled in the economy for existing and prospective franchise investors. As such, Donohue’s comments and the Chamber’s agenda in the year ahead should be welcome news to franchisees, franchisors or prospective franchise investors.

“Economic growth cannot solve all of our problems, but without growth, we will not be able to solve any of them,” said Donohue. “The imperative of economic growth should not be an afterthought. It must be job one. The over-riding objective of this ambitious plan is to generate stronger economic growth in order to create jobs, lift incomes, and expand opportunity for all Americans. America needs big solutions so it’s time to put the smallness of politics aside. We call upon all of America’s leaders in and out of government to put country first.”

Specifically addressing the need for comprehensive tax reform, which is a top priority for IFA, Donohue cautioned lawmakers against using tax reform as a vehicle to continue their reckless spending habits. “Tax reform is not a substitute for spending restraint. It must be done after or concurrent to spending cuts. The right kind of tax reform will turbo-charge our growth, create jobs, and generate more revenues for government at all levels” He warned that the tax increases recently levied on small businesses as a result of the end-of-year fiscal cliff deal will hold back growth in the first part of the year.

“As illustrated by the Chamber’s latest survey of small business members, there is significant uncertainty over health care, regulations, taxes, and deficits,” he said. The Chamber’s Small Business Survey results echo IFA’s latest member survey, which showed the uncertainty of numerous regulatory and public policy challenges were holding back growth.

In IFA’s survey, 64 percent of franchisors report the Affordable Care Act will create some significant uncertainty in long-term planning and healthcare reforms will create significant uncertainty in long-term planning for 71.6 percent of franchisee respondents. More than 10 percent agreed with the statement: “We are no longer confident that our business model is profitable.”

The Chamber forecasts growth of 1.5-1.75 percent in the first half of 2013, with growth accelerating to as high as 2.5 percent in the second half of the year. But Washington “deadlines” in the coming weeks and months, such as the need to raise the debt ceiling and pass a budget, may overshadow growth and will continue to shake the confidence of the business community.

On the bright side, if Congress can address these policies, it will likely accelerate job creation and franchise development across the nation. According to IFA President & CEO Steve Caldeira, franchise growth remains slow due to the rising tax burden placed on small business franchisees and the out of control spending by Washington on entitlement programs.

“While we are pleased the industry continues growing at faster rates than other sectors of the economy, we could be growing much faster, creating more new jobs and businesses, if Washington addressed the tax, spending and regulatory uncertainty plaguing the small business community in a meaningful way,” Caldeira said during the recent unveiling of IFA’s 2013 economic forecast for franchising.

To read or watch the full speech, please click here.

On Friday, Feb. 3, Bloomberg TV ran a jobs story “The Big Business of Franchises” featuring two

On Friday, Feb. 3, Bloomberg TV ran a jobs story “The Big Business of Franchises” featuring two IFA member companies, Valpak and Lucille Roberts, a women’s health center franchise. 

The segment, which aired just prior to the release of the Department of Labor monthly jobs report showing the economy created 243,000 jobs in January and the unemployment rate dropped to its lowest level in years of 8.3 percent, highlights franchising as a bright light in the still-challenging economic recovery. 

The segment summarizes IFA’s 2012 Economic Outlook for Franchise Businesses, which projects that after three years of decline due to the recession, franchise businesses are poised to grow approximately 2 percent in terms of establishments and jobs in 2012. 

Posted by Matt Haller, IFA Sr. Director of Communications

As Congress finally wrapped its back-and-forth debate last week about how long to extend the payr

As Congress finally wrapped its back-and-forth debate last week about how long to extend the payroll tax holiday (ultimately agreeing to a short, two-month extension with a promise to re-visit the issue in a conference committee in January, IFA President & CEO Steve Caldeira joined FOX News America Live Dec. 23 to discuss the outlook for franchise businesses in 2012. “Franchising remains a bright light in a still challenging public policy environment, but we are still nowhere near the growth rates experienced before the election” Caldeira said. 


Franchises are projected to add 168,000 new jobs and 14,000 new establishments in 2012 according to IFA’s 2012 Economic Outlook for Franchised Businesses prepared by IHS Global Insight, Caldeira told FOX’s Heather Childers. Yet they still face a host of other issues that are keeping growth rates below pre-recession levels, including the health care law’s employer mandate, uncertainty about tax rates and the continued difficulty accessing credit.


“The health care law continues to loom as a disincentive to job creation, particularly for multi-unit operators due to the employer mandate and 50 employee threshold for paying a penalty,” he told FOX’s Heather Childers. “Franchise small businesses need comprehensive tax reform that lowers the corporate and individual rates and provide certainty beyond 2012,” Caldeira said. 


Posted by Matt Haller, IFA Sr. Director of Communications

Infographic: Franchising in America

Link

Link: Infographic: Franchising in America

Synonymous with the enterprising American spirit, franchising’s phenomenal growth is a testament to the power of personal ambition. Franchising can be a richly rewarding pursuit, but it’s vital to understand the inner workings of—and outside influences on—this innovative industry. Franchising in America, an informative infographic developed by MDG Advertising, illustrates the road to economic recovery, spots the top trends and keys to new growth, charts the common challenges franchising faces today, and adds insight for the future.



Despite challenges, bankers upbeat about lending to franchise businesses

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As part of IFA’s ongoing campaign to get America lending again – to franchising – IFA leaders spent the past three days strengthening relationships with the nation’s top small business lenders during the National Association of Government Guaranteed Lenders SBA Technical Conference in Atlanta.

At the recent IFA Small Business Summit in Washington, one of the key takeaways was a renewed commitment by franchise businesses and lenders to forge stronger and deeper communications channels and to develop a better understanding of the challenges and opportunities facing lenders and franchise businesses.


From left, IFA Credit Access Committee Chairman Bill Hall (International Dairy Queen multi-unit franchisee) and NAGGL President & CEO Tony Wilkinson

“These new relationships not only enhance communication with key groups in the lending community, but speak to the value franchise businesses will receive through the IFA,” said Karen Spencer, CEO of Fran Systems, a franchise industry consultant.

Richard Bradshaw, Senior Vice President and Head of SBA lending at TD Bank, the fourth-largest deposit bank in North America, with over 2,000 branches, said he welcomes IFA’s involvement and approach to engaging directly with small business lenders through NAGGL.

“The tie-in with IFA was excellent, especially talking with some of the IFA members,” said Bradshaw. “The networking makes that next call so much easier. I’m very excited about some of the introductions and will be following up.”

The primary goal of IFA’s campaign is to get lenders more comfortable with lending to franchising. Educating them on the virtues of franchise businesses versus non-franchised businesses is central to that goal. 

“The thing that I like about the franchise business is that because of the FDD [financial disclosure document] you get so much information, said Bradshaw. “I’m not sure the banks realize that. Because of the FDD you have a ton of information as to how that store should perform.”

For their part, many banks had not previously considered franchise lending a specialty segment of their small business lending divisions.

“Bankers are here looking for new markets in which to make loans, and it was very encouraging to see the partnership between NAGGL and the IFA,” according to John Kimball, Senior Vice President and Manager of SBA Lending at Park Midway Bank in St. Paul, Minnesota.

As part of the partnership between the IFA and NAGGL, new communications and prospecting tools are in the works to help streamline the lending approval process between lenders, franchisors and new franchisees.

“New resources such as internet-based referral services are going to provide community banks with enhanced access to helping the franchise industry,” said Kimball.

The IFA projects that without improved communication and lending to franchise businesses in 2011, 80,000 jobs will not be created and more than 8,000 franchise establishments will not be opened. 

IFA speakers at the event included IFA Credit Access Committee Chairman Bill Hall, Second Vice Chairman Steve Romaniello, Multi-unit franchisee Aziz Hashim, IFA Educational Foundation President John Reynolds and FRANdata President & CEO Darrell Johnson. 

Lenore Krentz, Chief Financial Officer of franchisor FOCUS Brands, said she appreciated the efforts of NAGGL and the IFA to make sure franchise leaders met the lenders at the conference, including the use of bright-orange name tags for franchises and navy blue for the lenders.

“I looked for the blue tags,” she said. “I was there a short a time but made connections with three groups that there is potential to do business with. I think that’s impressive.”


From left, Aziz Hashim (multi-unit franchisee, Popeye’s, Checkers Drive-In Restaurants/Rally’s, Subway and Moe’s Southwest Grill), Tom Burke (Wells Fargo Small Business Lending), Eddie Tuvin, (Cohen & Company), Phil Wilkins (multi-unit franchisee, Smashburger) and John Reynolds, IFA Educational Foundation. 

Posted by Matt Haller, IFA Director of Communications