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

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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

In 2006, when Indiana small-business owner Scott Womack purchased a development agreement t

In 2006, when Indiana small-business owner Scott Womack purchased a development agreement to expand his IHOP franchise into Ohio, he had no idea Congress would pass a massive overhaul of the health care system four years later.

Today, one year after that legislative overhaul became law, Womack is very aware of Obamacare — and of its effects on his plans for growth.

Under the year-old law, Womack must provide health insurance to all full-time employees beginning in 2014. Right now, he employs nearly 1,000 full- and part-time workers and already offers insurance to his management staff. He simply does not know how he’ll generate the revenue to do more.

Womack estimates the cost of the law to his company will be 50 percent greater than his company’s earnings — in other words, beyond his ability to pay.

That’s not because his company of 12 IHOP restaurants in Indiana and Ohio is unprofitable. Quite the opposite, in fact. By industry standards, he’s doing well. But labor-intensive restaurants generate profits of just 5 percent to 7 percent per employee.

With fears about how he’ll afford to provide health insurance with those low profit margins, Womack is worried about his expansion plans in Ohio. He can’t exactly cancel his development agreement. But he’ll only be able to fund his new restaurants — and the construction, real estate and manufacturing jobs that would go along with them — if Obamacare is repealed.

“If the health care reform law is not repealed or if the employer mandate doesn’t go away, we’re going to have to take drastic action,” Womack explains.

From his perspective, the law represents Congress’ fundamental misunderstanding of important differences among industries. He’s frustrated that so few lawmakers sought input from people like him — but he’s doing what he can to speak up now to offer a glimpse into the law’s effects on small-business owners.

Posted by Matt Haller, IFA Director of Communications (with permission from The Heritage Foundation)

Franchising could be job growth fuel – Jeff Rosensweig, Atlanta-Journal Constitution

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Link: Franchising could be job growth fuel – Jeff Rosensweig, Atlanta-Journal Constitution

In his monthly column in the Atlanta Journal-Constitution, Jeffrey Rosensweig, professor of international finance and the director of the Global Perspectives program at Emory University’s Goizueta Business School, describes the power of franchising and the importance of figuring out solutions to the credit crisis, as clearly and concisely as anyone ever has. Here’s a preview…

In real estate, the key factors are “location, location, location.” In discussions about the national, state and local economy, the focus now is “jobs, jobs, jobs.”

As we look for ways to shift the recovery into higher gear, lawmakers, regulators and business leaders could take a closer look at an American business model that shows job-creation promise: franchising.

Franchising, including the indirect jobs it creates in its suppliers, currently accounts for roughly one in eight jobs in America. But this unique business model, as American as baseball and Baskin-Robbins, could lead to the creation of millions of new U.S. jobs in the next years — if we take steps to make sure it happens. Read more.

Posted by Matt Haller, IFA Director of Communications