Earlier this week, a Washington federal judge rejected the argument of the International Franchise Association that Seattle’s new minimum wage law unfairly targets franchise owners in Seattle. The new law will raise the minimum wage in Seattle to $15 per hour over the next several years. The focus of the IFA’s court action was not whether the city had the power to raise the minimum wage, but the way the increase is to be implemented. Small businesses will be allowed to implement the increase over a seven year period while large businesses (500 employees or more) must implement the increase in only three years. However, the law places franchise owners in the large business category regardless of the number of employees the franchisee actually employs. On its face, the law seems to unfairly burden franchise owners simply because they operate using the business format and trademarks of the franchisor. As franchisees know, ownership of an independently owned franchised business does not equate to being a “large business” employing 500 people. In fact, most franchised businesses are small, locally owned and lack the resources of companies who employ 500 or more people. The IFA stated that it will continue its’ fight against a law that it perceives to unfairly discriminate against franchise owners.
Tag Archives: franchisee
Sarah Ivy, Chair of G&K’s Executive Compensation and Employee Benefit practice, provided the following update. Large franchisors and multi-unit franchise owners should take note.
We are watching the progress of H.R. 2575 very closely. Any upwards modification of the 30 hour per week standard in defining a full-time employee under PPACA would be a relief to those large employers subject to the pay-or-play penalties. We will keep you updated on the status of the Save American Workers Act bill. http://www.benefitspro.com/2014/02/04/committee-approves-full-time-worker-bill
According to this “New York Times” article, the best franchisee investors are hybrid entrepreneurs who mix risk & structure.
Franchisors spend a great deal of time trying to determine what kind of person will make the most successful franchisee for them. Once you get past the financial requirements, this piece in the “New York Times” suggests that frequently, the ideal franchisee investor is not a person who is an out and out entrepreneur. Rather, the more successful franchisees are those people who are entrepreneurial and yet they are comfortable working within the formula and structure of their franchisor. What do you think?
Here is a link to an informative article addressing the complexities of determining whether employees are full time or part time, and some of the implications of full time status under the Affordable Care Act.
The famous quote from the Terminator, California’s former Governor Arnold Schwarzenegger, might as well apply to “Level the Playing Field for the Small Businesses Act,” legislation that failed to pass in California in 2012. As predicted, legislation is now pending in California that picks up on the 2012 effort to expand California’s existing franchise laws.
2013’s version is called the “California Small Business Investment Protection Act.” The 2013 version is based upon the same underlying principle as its predecessor, that the franchise relationship is inherently unfair, pitting the naïve small business owner against the sophisticated corporate giant. This comparison is tired and dated. The reality is that in 2013, the franchisor is more likely to be a small business with a solid concept and lean infrastructure that is looking to partner with smart business owners to seize upon opportunity. While I want to assume the authors of the pending legislation have good intentions supported by valid business concerns, the following section gives me pause;
“As opposed to corporate entities that are franchisors and most often reside outside California, franchisees are the local small business owners who personally fund the franchise brand development, sales, use and income tax, and who invest in building, equipment, pay leases, and other spill over investments. Franchisees invest their substantial assets, take loans sometimes secured by their family homes, and enter into long-term commercial leases and other obligations while looking to their franchise businesses for their livelihoods.”
While this is sometimes a true statement, it implies that franchisors are not “small business owners” who “personally fund” the development of a franchise system. While many trial lawyers may be drooling at the prospect of this new legislation, I don’t believe the business community will benefit.