Course Correction: Policy Platform Seeks to Boost Franchise Job Growth

March 31, 2017

By Robert C. Cresanti, CFE

Fix joint employer, avoid restrictions on franchise agreements and non-competes, apply new wages fairly, revise the tax code, establish a market-based health care system, increase access to credit and hire more veterans. Those seven initiatives will lead to additional business growth for the 733,000 existing franchise establishments and the creation of many more new locations that directly support more than 7.6 million jobs in the U.S. For those of us in franchising, sounds simple enough, right?

Unfortunately, outside the franchising community, and especially in Washington, nothing is simple. Once the complicated nature of politics gets involved, Monday’s top priority could end up in Tuesday’s trash pile. That’s why it’s important to lay out the policy goals of the franchising community. IFA’s 2017 Public Policy Platform outlines seven priorities to accelerate job growth in franchising. Here are the key points:

Joint employer. Preserve the Franchise Business Model. The National Labor Relations Board’s 2015 decision in Browning-Ferris Industries overruled more than 30 years of employment law. It replaced the “direct and immediate control” standard for determining joint employer with a vague test based on “indirect” and even “unexercised” control over workers’ terms and conditions for employment. Franchise owners are facing more operational and legal costs, decreased business values, slowed growth and fewer opportunities to create jobs under the ambiguous standard. This needs to stop.
Market-based approach to health care. A market-based health care system would provide universal access to health insurance, rather than guaranteed or mandated coverage. Steps should be taken to promote cost-containment, such as association-sponsored health programs, as viable mechanisms for pooling risks and increasing market leverage for small employers. Congress should also streamline reporting requirements for employers and allow more flexibility to provide benefits to workers through expanded health savings accounts and health reimbursement arrangements.
Reject restrictions on franchise business agreements. In recent years, several states have proposed legislation to limit the right of franchisees and franchisors to negotiate business contracts by placing unreasonable restrictions on franchise agreements. This is bad for numerous reasons. Lawmakers should exercise restraint in passing new legislation that over-regulates the contractual business relationship between franchisees and franchisors.
Apply new wage laws fairly. Policymakers should take steps to implement new wage laws evenly and fairly, and without putting franchise business owners at a competitive disadvantage compared to businesses of identical size.
Revise the tax code. Given that 80 percent of franchise owners file their business income on their individual tax returns, individual tax rates need to be addressed to unlock the potential of America’s locally-owned small businesses. Comprehensive tax reform is still needed to ensure parity of corporate and individual tax rates.
Enhance access to credit. Despite the increased flow of credit to small business, the U.S. Small Business Administration (SBA) loan guarantee programs still provide a significant source of financing for new franchise units. SBA needs to ensure access to capital continues unabated.
Hire more veterans and increase ownership opportunities. Congress should offer increased incentives for companies to hire military veterans. As part of IFA’s VetFran program, nearly 5,200 veterans have become new franchise owners since Veterans Day 2011, and more than 150,000 veterans have started careers in franchising.

What does this mean for you? Any time you have the ear of a policymaker, focus on these seven priorities as a roadmap to frame the discussion. We can’t do this alone; we need your help to spread the message. Call your representative, send a letter, reach out via social media, or even attach a message to a carrier pigeon — anything to get their attention is a huge help to IFA and the overall efforts to move the franchising community’s priorities up the list. Read the full platform online: www.franchise.org/policy-platform.