Protecting the Franchise Model

For quite a few years, the franchise model has been under attack from all levels of government.

Photo of Aziz HashimWe were reminded of the severity of the threat at the August FaegreBD Franchise Summit* when IFA Chair Aziz Hashim spoke on the importance of the franchise model and the legislation that threatens to harm it.

One way that the International Franchise Association (IFA) has been fighting to neutralize these threats is by educating policymakers about the benefits the industry provides the economy and local communities.

“This year alone, American franchises created more than 7.6 million jobs, generating $674 billion in economic output and 2.5 percent of the gross domestic product (GDP) for the U.S. economy.” — Aziz Hashim, Chair of the IFA

Despite these statistics, there are a couple important questions being debated by our legislators and the franchise industry that will have a big impact on the franchise model:

  • Should franchisors be held responsible for the employees of their franchisees?
  • Will raising the minimum wage cause some franchisees to close their doors?

Let’s take a look at some of the recent progress that has been made to answer these questions:

Joint Employer & Vicarious Liability

Possibly the most discussed issue has been the National Labor Relations Board’s (NLRB) effort to deem franchisors joint employers of franchisees’ employees. In the case that started it all, a ruling has finally been made. McDonald’s has been battling with this issue regarding allegations that a franchise owner in the San Francisco Bay Area cheated hundreds of workers out of wages and overtime. In late October, McDonald’s agreed to pay $3.75 million to settle the lawsuit and avoid additional court fees, according to The Wall Street Journal. As to whether it can be considered a joint employer, a trial currently at the NLRB could soon be the decider under the federal law governing union organizing.

Discriminatory Minimum Wage Increases

Another important issue is discriminatory minimum wage increases. The IFA and a group of Seattle franchisees argued that the city’s gradual wage increase to $15 discriminates against them and is unconstitutional because it essentially penalizes franchisees. This past May, the U.S. Supreme Court rejected a constitutional challenge to Seattle’s minimum wage law. The challengers argue that the bill isn’t just an attempt to raise minimum wage, but that it’s the product of purposeful discrimination by the Service Employees International Union and Seattle city leaders who are trying to drive franchisees out of town.

Aziz points out that these threats are not only examples of why “zees” and “zors” need to work together, but how they also act as opportunities. “Franchisors and franchisees have vested and aligned interests in confronting these external forces. These forces also present opportunities for franchisors to reinforce and balance the roles and responsibilities of the franchisor, franchisee and system as a whole.”

Franchising Looking Forward

Events like the Franchise Action Network (FAN) Annual Meeting have helped the IFA gain momentum and grow the collective voice of franchising by speaking directly with those who have the power to shift the policy needle.

However, one of the main roadblocks is the lack of understanding on how the franchise model works. Now it seems the IFA has a new strategy for turning the legislative tide facing the franchise industry: educating the public through a grassroots initiative.

We asked Aziz what he hopes to achieve through this new initiative: “We found that franchising is astonishingly misunderstood, from government to academia, media and even franchising’s own eight million employees. We are educating millions of franchise employees nationwide, in hopes of creating a bottom-up groundswell of franchising support to supplement top-down outreach to the government.”

@OurFranchise

One way the IFA is accomplishing this is through franchise success stories. Their new resource site, @OurFranchise, hosts these stories and communicates how local franchise business owners and their employees are supporting their communities, creating jobs and fostering new business ownership opportunities.

U.S. Air Force veteran Melissa Anderson’s story is an example of how someone who wouldn’t have been in a position to own her own business was able to succeed thanks to the franchise business model. She now owns and operates her own paint and sip studio called Bottle & Bottega located in Jacksonville, which is the first for the brand in the area and the second across Florida. @OurFranchise is full of other great stories as well as resources to educate the world on how the model works.

Through this comprehensive education program, the grassroots network of franchisees, franchisors and suppliers are actively shifting the conversation, presenting a narrative based not around increased regulation, but around initiatives that create jobs and strengthen the nation’s economy.

“Franchising Gives Back”

regroup employees at Franchising Gives BackFrom supporting little league baseball teams, to donating food to homeless shelters, to organizing marches for cancer research, thousands of charitable stories exist showing how franchisees, franchisors and suppliers are doing their part to give back.

Among these many examples, the Franchise Education Foundation has launched “Franchising Gives Back.” This program recognizes and awards the best examples of franchise philanthropy every year, giving out awards such as Spirit of Franchising Award, Innovation and Impact Award and The Newcomer Award.

Aziz’s message to supporters:

“We must never forget that we have an ongoing duty and obligation to explain what franchising is, how important it is to the economy and its role in helping to democratize opportunity for all Americans regardless of their background, education or station in life. Franchising is the most accessible pathway to the American Dream and I am proud that we are doing all we can to ensure that message is being spread as widely as possible.”

You can show your support and start making a difference today by visiting atourfranchise.org and sharing these resources.

Afterword

re:group regularly writes on developments in the franchising industry and how the role of multi-unit marketing is evolving in a technologically-driven marketplace. That’s because the franchise industry is at the core of who we are. Since 1975, and our 20-year relationship with Domino’s Pizza, it has driven our service offerings and inspired our comprehensive communications approach to complex distribution systems.

As an agency committed to serving the franchise industry and with great respect for the model, we believe in and support the efforts of the IFA and initiatives like FAN.

*BLOGGER’S NOTE

As a sponsor of the FaegreBD Franchise Summit, re:group would like to thank Aziz Hashim, Chair of the IFA, for taking the time to speak with us and Brian Schnell, partner at FaegreBD and founder of the summit, for connecting us with Aziz, as well as another keynote speaker at this year’s summit, Walter Bond.

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