Standing on a stage just a few miles from the halls of the U.S. Capitol Building, International Franchise Association president and chief executive officer Robert Cresanti made it clear: the franchising model in the U.S. is under attack, but the industry is prepared to fight back.
“We are engaged in a battle, because franchising is facing an existential threat,” Cresanti told franchisors at this week’s FranConnect ’16 Conference, held by FranConnect at the Gaylord National Hotel and Conference Center just outside Washington, D.C. “The very branding of franchising is being challenged through the new joint employer standard. And we are prepared to fight back in Congress to uphold the successful business model we’ve built.”
FRANCHISE BUSINESS ECONOMIC OUTLOOK
Proof of that success is clear, Cresanti told the group. Franchise employment rose by more than three percent last year, to encompass more than nine million total jobs in the U.S. The number of operating franchises is up, too, by nearly two percent. And the industry’s economic output is now a staggering $944 billion annually, up nearly six percent. That represents a full three percent of the U.S. gross domestic product, a figure also up by nearly six percent from the year before.
But despite the impressive gains, the industry stands at a precipice, Cresanti said. The decision last August from the National Labor Relations Board in the Browning-Ferris Industries case dramatically shifted more than 50 years of regulatory and legal precedent governing franchise operations. In order to continue the industry’s recent strong growth, franchising must present a unified front.
“It’s worrisome to me that some in the franchising industry still don’t know enough about the meaning of the NLRB’s joint employer decision. It’s incredibly meaningful for the franchising industry, and we must continue educating both franchisors and franchisees about how it will affect them. Challenges remain, but opportunities exist,” Cresanti said.
JOINT EMPLOYER ACTION PLAN
Cresanti unveiled new details during his FranConnection address on the IFA’s “Joint Employer 2016 Action Plan,” noting that his top priority is a legislative solution to return to a ‘rational definition’ of what a joint employer is. Bills aiming to do that have been filed in both the House of Representatives (H.R. 3459, introduced by Rep. John Kline, R-MN) and the Senate (S.2686, introduced by Sen. Lamar Alexander, R-TN). Working through its Franchise Action Network, or FAN, and the Coalition to Protect Local Businesses, the IFA has helped garner 108 co-sponsors in the House and 48 in Senate, helping to keep the bills alive. The IFA is also investigating potential appropriations bill riders that could help.
Cresanti said he remains hopeful the measures will at least receive debate on the floor.
“We are aware that we are shooting for activity in the lame duck session [before the 2016 Presidential and Congressional election this fall], and these bills are almost entirely supported by Republicans. Most Democrats are still not on board, and the White House has not been largely supportive thus far. We continue to repeat the narrative there that if this does not change, this industry is in danger,” Cresanti said.
The threat reaches beyond the halls of Congress, as well, Cresanti continued, to state legislatures and local municipal and county governments across the country. The IFA is currently fighting back against proposed joint employer threats in Massachussetts, New York and Connecticut, and recently filed a lawsuit on behalf of franchisors against proposed joint employer standard changes in the City of Seattle.
GOING ON THE OFFENSIVE
In order to arm franchisors and franchisees with more effective data in the fight against joint employer standard definition changes, the IFA is building new data sets detailing what is happening at both local and state legislative levels as well as in Congress. But, the organization isn’t stopping there.
The IFA has already been successful in fighting back at the state level in several areas, helping to pass laws that protect franchise employment standards and legislation that codifies the traditional definition of joint employer in Michigan, Tennessee, Louisiana, Georgia and Texas. Potentially discriminatory wage laws have also been shut down thanks in part to the IFA’s lobbying efforts in cities like Chicago, Kansas City, St. Louis, Los Angeles and Portland, Maine, and the IFA has helped hold back attempts to pass new, restrictive laws targeting franchising in other cities and states.
To win the war, however, Cresanti believes franchising must employ a multi-pronged approach. By continuing to grow the Franchise Action Network, the IFA’s efforts will have a more powerful voice. Cresanti echoed calls from the IFA’s annual conference in San Antonio in February encouraging both franchisors and franchisees to log on and join the cause. In the meantime, the IFA is working to leverage the support of like-minded organizations like the U.S. Chamber of Commerce and the American Hotel and Lodging Association and is actively supporting political candidates with pro-growth stances.
Meanwhile, the effect a new U.S. President may have on the process remains unknown, Cresanti said. But, he does see presumed Republican nominee Donald Trump as a friendlier voice to the franchise industry than presumed Democratic nominee Hillary Clinton.
“Donald Trump has experience in franchising, as he does in many businesses. He was a franchisor with the Miss Universe Pageant, which he owned, and I think he understands the essence of how franchising works. I think he would have a friendlier approach to this. But, the IFA is actively working on both sides of the political aisle, and we are in the process of sending a letter to both Donald Trump and Hillary Clinton pleading with them to see reason on this issue,” Cresanti said.
The ultimate goal, Cresanti said in closing, is to embrace the repeated call this week from IFA Chairman Aziz Hashim to change the common narrative of the franchise story, and shift focus to the industry’s unequivocal benefit to the American economy. “Franchising represents the biggest trainer of jobs and creator of brighter futures in America, and maybe even in the world,” Cresanti said. “We train more people for a successful employment future than even the U.S. military. We need to shout that story from the rooftops to help secure our future and ensure that even more people can use franchising to climb the ladder to success for decades to come.”