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.

Denver franchise execs host first-ever “lending bootcamp”

Aside

Leaders of the nation’s small business credit access campaign arrived in Denver July 19 for Faegre & Benson’s first-ever “lending bootcamp” spearheaded by Faegre partner and IFA Supplier Forum board member Kevin Hein as part of the FBN’s annual dinner at the Denver Country Club.

IFA Credit Access Task Force Chairman and Dairy Queen franchisee Bill Hall, board members Shelly Sun, co-founder of BrightStar Care, Inc., and Darrell Johnson, President & CEO of FRANdata, headlined the event, drawing support from finance leaders such as U.S. Bank SBA Division President Julie T. Huston of San Diego, Mike Owen, COO of CDC Small Business, which has provided more than $8 billion in SBA lending. Huston and Owen represented the National Association of Government Guaranteed Lenders (NAGGL) and the National Association of Development Companies (NADCO), the trade association for the nation’s Certified Development Companies (CDCs), lenders certified by the U.S. Small Business Administration (SBA) to provide financing to small businesses through 7(a) and 504 programs.

The seminar of strategies and solutions to the financing dilemma included David Nayor, Executive Vice President of BoeFly LLC, the online lending source for franchising, and David Nilssen, founder of Guidant Financial, which offers tax-advantaged financing strategies for business leaders.

“This was an unprecedented event in Denver,” said Faegre’s Hein. “We are grateful for the impressive response to our ‘lending bootcamp’ and are proud to bring together the nation’s lending and franchise leaders to improve credit access for franchisors and franchisees.”

IFA President & CEO Steve Caldeira has led the effort to address franchising’s number-one issue, which will be the focus of this year’s IFA Public Affairs Conference Sept. 13-14 in Washington.

“It’s great to see leaders like Kevin Hein and Faegre taking the IFA’s Credit Access Campaign across the country,” said IFA Credit Access and Dairy Queen franchisee Hall. “Franchisees, franchisors and lenders are looking for this kind of leadership. The education and the networking are critical to help create the jobs our country needs.”

“As a franchisor, I know that all of us need to be engaged in innovative approaches to help our industry grow,” said Sun. “I am proud to be part of the effort.” Sun was quoted in The Washington Post days after the event on her views on the U.S. economic outlook.

Faegre & Benson’s annual Franchise Summit, led by partner and IFA Credit Access Working Group member Brian Schnell, takes place Aug. 11-12 in Minneapolis with a focus on accessing credit and financing solutions.

More information here.

As business groups such as the IFA, the U.S. Chamber of Commerce and The Business Roundtable

As business groups such as the IFA, the U.S. Chamber of Commerce and The Business Roundtable announced their support for efforts to raise the debt ceiling in order to ensure the economic certainty of the nation for America’s job creators and franchise small businesses, Jim Amos, the CEO of Tasti D-Lite spoke to MSNBC’s Chris Jansing this morning, moments before President Obama addressed the nation and called on lawmakers to find a bipartisan solution.

Asked by Jansing for his perspective about the impact a government default would have, not only on a big business, but also from the perspective of those small business owners who own Tasti D-Lite franchises, Amos called on the government to do everything it can, while also calling for a renewed focus on limited government, for the private sector to thrive. 

“If you are ideologically driven on the view that the public sector and government can solve these issues, then you’re going to make a certain set of decisions. If your view is that the private sector can participate, you will make a different set of decisions,” said Amos. “I think our country in the beginning was founded on principles that supported economic and political freedom or liberty. If you look at modern history, the greatest growth rates that we’ve had economically, they were driven by limited government.” 

The impact a government default would have on the ability of small business owners looking to expand, or prospective franchisees to obtain capital to purchase a franchise business, was also noted today by IFA President & CEO Steve Caldeira.

“Congress must raise the debt limit now to ensure the stability of our economy and prevent the credit markets from further volatility amidst an already difficult lending, public policy and regulatory environment for franchise small businesses,” said Caldeira. “If Congress allows a default on the obligations of the United States, it will have a dramatically negative impact on our economy and on the confidence of America’s small business owners and job creators.”

Posted by Matt Haller, IFA Director of Communications

 

VetFran launches recruiting effort, campaign to enhance veteran small business ownership

Aside

As tens of thousands of service men and women return from deployment in Iraq, Afghanistan and Pakistan starting this summer, the IFA will be lobbying Congress to re-introduce the Help Our Veterans Own Franchise Act (HVOF), to do our part to ensure that America’s brave young men and women returning from all corners of the world have opportunities to become entrepreneurs and transition to successful lives in the civilian economy.

For veterans, unemployment rose to 12.1 percent in May from 10.6 percent a year ago, so with President Barack Obama declaring June 22 that he will withdraw 33,000 troops from Afghanistan by September 2012, now is a critical time to ramp up the awareness of franchise business ownership as a path for America’s veterans returning home to go into business for themselves and put the skills they’ve learned in the battlefield to use owning and operating their own franchise business.

Last week in Washington, IFA’s senior team met with Mary Kennedy Thompson, President of Mr. Rooter (The Dwyer Group) at the IFA Office. Mary is a Marine Corps veteran, chairs the VetFran Committee, and is 110% dedicated to leading the IFA’s efforts to pass the bill and take VetFran to a new level of success.

The Help Our Veterans Own Franchises Act will offer franchisors a tax credit for recruiting veteran franchisees, and it will also offer veteran franchisees a credit on the balance of fees not covered by VetFran franchisors.

At its recent board meeting in Coeur d’ Alene, Idaho, the IFA Board of Directors approved additional financial resources to place a greater focus on VetFran and re-introducing the bill on Capitol Hill, including a paid media campaign to support the introduction of the bill in July and to further support this important effort.

VetFran was born out of the desire of the late Don Dwyer Sr., founder of The Dwyer Group, to say thank you to our veterans returning from the first Gulf War.  Reborn and re-energized by his daughter, Dina Dwyer-Owens after the Sept. 11, 2001 terrorist attacks, VetFran’s ranks have grown to include more than 403 franchise systems that voluntarily offer financial incentives to veterans seeking to become franchise small-business owners.  Through the VetFran program, more than 2000 servicemen and women have become franchisees and more are joining every month.

IFA will launch Operation Building Opportunity at the September 2011 IFA Public Affairs Conference. In a special reception in the Rayburn Foyer of the U.S. Congress, IFA will honor all those veterans who are franchisees, with special recognition of those who have recruited and assisted other veterans in successfully transitioning to franchising careers. The IFA will announce franchisor and franchisee partners in a reception to include senior military and veteran officials, along with Members of Congress, kicking off a multi-tiered education campaign to alert veterans and their families to Operation Building Opportunity.  

We need your help identifying current veteran franchisees as we launch this stepped-up campaign. We are also seeking stories, anecdotes, and photos of veteran franchisees. Please contact Jenna Weisbord at jweisbord@franchise.org to support this important campaign.

Franchise Industry Leaders to Address U.S. Conference of Mayors’ 79th Annual Conference

Aside

In the IFA’s ongoing effort to develop positive working relationships with the elected leaders at all levels of government, on Sunday, June 19th, IFA Chairman Jack Earle, Managing Partner of Earle Enterprises, LP, and IFA Board of Directors Member Catherine Monson, CEO of FASTSIGNS International, will address more than 500 mayors from across the country as part of the United States Conference of Mayors’ 79th Annual Conference.  They will be joined on the panel by USCM President, Mayor Elizabeth Kautz, from Burnsville, Minn., Mayor Anthony Foxx, from Charlotte, N.C., and George Cloutier, CEO of American Management Services, Inc. and widely respected small business expert.


The plenary session, titled “Mayors and Small Business/Franchise Owners – Building a New Strategy to Retain and Create Jobs in America”, will give presenters an opportunity to discuss how the franchise industry can be a catalyst for job creation as the nation recovers from the recession and the challenges franchise businesses have faced in securing adequate capital necessary to grow and create jobs to their fullest potential. 

In 2009, the U.S. Conference of Mayors passed a resolution supporting the role of small businesses in economic development.  The IFA and the U.S. Conference of Mayors have been working together since to educate mayors across the country about the importance of franchise businesses in local communities.

Posted by Wayne Weikel, IFA State Director of Government Relations & Public Policy