Protecting the Franchise Model: The Role Suppliers Play Defending the Industry

Critical issues are facing the franchise industry today. The time to act is now!

By Ryan Cunningham

As chairman of the International Franchise Association’s Supplier Forum Advisory Board, I work with a group consisting of 21 suppliers who represent the interests of the IFA supplier community. Annually we request nominations from supplier members to join the board and help shape the direction of the IFA and the franchising industry. The SFAB’s mission is to support our supplier members by providing industry education, creating opportunities to interact with franchisors and franchisees, and presenting leadership opportunities within the association.

There are 680 supplier members in the IFA, contributing 36 percent of the association’s annual budget; 44 percent participate in the IFA’s lobbying effort, FranPAC. Four suppliers, current and former SFAB members serve on the IFA Board of Directors and, through the committees of the SFAB, suppliers play a role in organizing the annual convention, providing expertise for the educational sessions throughout the year, and supporting the association’s efforts to “protect, enhance and promote franchising.”

There are many threats facing the franchise industry today. One of the SFAB’s undertakings this year is to provide members with information to better understand these threats and provide the means to support the IFA’s drive to turn the legislative tide facing the industry today. Here is a summary of the critical issues franchising is facing today:

Joint Employer – National Labor Relations Board

The U.S. National Labor Relations Board (NLRB) and the U.S. Department of Labor (DOL) have drastically increased their efforts and budgets to enforce the belief that franchising violates U.S. labor laws and that our business model should be shut down. The NLRB and DOL believe franchisors and franchisees should be jointly liable for their business. This would eliminate the independence franchisees seek when opening a franchise and would destroy the franchise model. If the NLRB is successful, a franchisor would be held liable for all of the actions of its franchisees and their employees.

Overtime Regulations

DOL released its new proposed rule for overtime regulations, which will double the minimum salary level for exemption from the current $23,660 to $50,400. Future increases will be tied to inflation so annual increases are also expected. DOL is also contemplating making the “duties” test more stringent so fewer managers will be exempt from overtime. In order to compensate for increased salary ranges for exempt workers, employers will be forced to make significant cuts to their workforces, demote employees from managers to hourly employees, or increase prices.

Discriminatory Minimum Wage Increases

Cities and states across the country have introduced measures to raise minimum wage rates. Regrettably, in many of these wage hikes, franchise businesses are being incorrectly lumped in with big businesses. Franchisees are not being recognized as independent small-business owners, but employees of the franchisor instead, forcing franchise businesses to pay the higher wages faster than other small-business owners in their communities.

Affordable Care Act

The Affordable Care Act requires large employers (50 or more full-time employees) to offer affordable, minimum value health plans to full-time employees or face tax penalties. It defines “full-time employee” as one working 30 hours per week, a definition that is far below the industry standard of 40 hours per week and the one that is used for determining overtime pay. Many employers will be forced to restructure their workforces to mitigate costs. Some will eliminate hours for variable-hour employees to keep them under 30 hours.

As suppliers, there are a number of ways to help protect the business model that has provided so many people the opportunity to own and run their own business with the guidance and direction of experienced franchisors:

1. Join the IFA’s Franchise Action Network (FAN). By simply registering with FAN, you will be kept up-to-date on developments of these threats and others that may develop. In addition, FAN will provide the tools to get involved and share your opinions with local, state and federal lawmakers.
2. Contact fellow suppliers and franchisor clients to discuss and educate them about the issues facing the industry. The more people who get involved, the stronger the franchising voice becomes.
3. Participate in Franchise Business Network (FBN) events. FBN is a network of more than 30 local groups that meet quarterly to discuss industry issues and provide educational opportunities for suppliers and franchisors alike.
4. Make a financial contribution to the cause. The IFA and SFAB have launched the Franchise Preservation Fund to help support multiple battles underway to protect the industry through lobbying, legal efforts and educational efforts to widely disseminate the message about the significant economic impact of the franchise industry. This includes new jobs, revenue generation and business ownership opportunities. Contributing to the fund is a way to protect your livelihood as well as the interests of your franchise clients and fellow suppliers.

The time to act is now. With so many ways to contribute to the IFA’s mission, suppliers have many opportunities to step up and take the lead in the IFA’s efforts. I encourage all suppliers to think about participating on the SFAB, hosting a local FBN event, or leading an educational session, whether through IFA’s WednesdayWise seminars series, Business Solution Roundtables at the annual convention, or speaking on a panel at any of the IFA’s events throughout the year. And of course, contributing to the Franchise Preservation Fund. 

Ryan Cunningham is founder and president of Javelin Solutions and chairman of the IFA Supplier Forum Advisory Board. Find him at fransocial.franchise.org.

Current Board Members of the Supplier Forum Advisory Board:

Supplier Forum Advisory Board Executive Committee:

Ryan Cunningham, Javelin Solutions

Larry Weinberg, CFE, Cassels Brock & Blackwell

Ronald Feldman, CFE, Siegel Financial Group

Mark Kirsch, CFE, Gray Plant Mooty


Supplier Forum Advisory Board:

Matt  Alden, CFE, Franchise Solutions

Aaron Chaitovsky, CFE, Citrin Cooperman

Amy  Cheng, Cheng Cohen

Marisa Faunce, Plave Koch

Lorne Fisher, CFE, Fish Consulting

Stan  Friedman, CFE, FRM Solutions

Gary Goerke, CFE, Clarity Voice

Nina Greene, Genovese Joblove & Battista

Stuart Hershman, DLA Piper

Lynette McKee, CFE, McKeeCo Services

Larry Myer, F.C. Dadson

Mary Ann O’Connell, CFE, FranWise

Amit  Pamecha, CFE, FranConnect

Michael Rozman, CFE, BoeFly

Philip St. Jacques, CFE, St. Jacques Marketing

Ritchie Taylor, CFE, Manning, Fulton & Skinner, P.A.

Edith Wiseman, CFE, FRANdata