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

Lawsuit would block pro-union poster requirement in franchise businesses


A new lawsuit filed this week would block an ill-advised rule by the National Labor Relations Board (NLRB) requiring employers to post so-called “employee rights” posters in their workplace.

The lawsuit, originally filed by the National Association of Manufacturers and joined this week by the Coalition for a Democratic Workplace (CDW), of which IFA is a member, involves the National Labor Relations Board’s recently published rule, which would force employers in approximately 6 million workplaces in multiple industries, including franchising, to post “notices” that are little more than government-mandated advertisements for unions. The suit asserts that the Board does not have authority under the National Labor Relations Act to promulgate such a rule.

 “These rules will only hinder the ability for franchise business owners to continue to be job creators in their local communities,” said IFA President & CEO Steve Caldeira. “Over 825,000 franchise businesses account for 18 million jobs across the U.S. and these requirements will only distract from their ability to create jobs if employees are only allowed to hear from labor unions and not their employers.”

The rule prompting the lawsuit by CDW and the NAM is scheduled to go into effect on Nov. 14. Rep. Scott DesJarlais, R-Tenn., introduced the Employer Free Choice Act that would repeal the new NLRB mandate issued in August.

To view a copy of the complaint, click here.

Posted by Matt Haller, IFA Director of Communications

  Following more than 200 visits with bipartisa


Following more than 200 visits with bipartisan members of Congress during the International Franchise Association’s 12th Annual Public Affairs Conference this week, IFA applauded Senator Orrin Hatch (R-Utah) and Reps. Charles Boustany (R-La.), Pat Tiberi (R-Ohio) and John Barrow (D-Ga.) for a renewed push for passage of legislation to repeal the employer mandate provision of the health care law, citing new data from the IFA and the Hudson Institute that 3.2 million jobs will be put at risk by the law.

Sen. Hatch is the sponsor of S. 20, The American Job Protection Act, which includes a repeal of the Patient Protection and Affordable Care Act  provision requiring employers with more than 50 full-time employees to offer affordable health insurance or pay a penalty of $2,000 per employee.  The House equivalent, H.R. 1744, is sponsored by Reps. Boustany, Tiberi, and Barrow, and passed the House earlier this year.

A recent study by the Hudson Institute for IFA concluded that, without significant changes to the health care law, 3.2 million full-time employees at tens of thousands of franchise businesses will be at risk of losing their jobs. The report also found that many franchisors and franchisees, who often own groups of establishments, such as restaurants, hotels, retail and service businesses, will be at a “comparative disadvantage” relative to other businesses with fewer locations and fewer employees. The law discourages franchisees from owning and operating multiple locations, when the combined employment exceeds 50 or more full-time workers. 

As part of IFA’s ongoing lobbying campaign to reach lawmakers and opinion leaders about the impact of the employer mandate, IFA joined at a press conference on Capitol Hill yesterday with the U.S. Chamber of Commerce, Sen. Hatch and Rep. Boustany, who reiterated IFA’s studyshowing the employer mandate threatens to put many small businesses at a disadvantage in competing with businesses that have fewer employees and are not subject to the same regulations. Meanwhile, an op-ed piece by Caldeira appeared in The Hill newspaper and, David Barr, a KFC multi-unit franchisee from Atlanta, Ga., and member of IFA’s Board of Directors,appeared on Fox Business yesterday to discuss the impact of the employer mandate on the job-creating abilities of his business and his colleagues in the franchise industry.

IFA’s number one priority for health care is to ensure that health insurance is more affordable for franchised businesses and their employees. For a decade, the IFA has supported legislation that would enable small employers to band together through national associations or franchise systems to purchase health insurance. IFA also supports proposals that strengthen consumer-oriented, affordable health insurance options.

Posted by Matt Haller, IFA Director of Communications