FranConnection 2016: Franchising Under Attack, Must Change the Narrative

Franchising has never been more under attack than it is today, said Aziz Hashim, International Franchise Association Chairman and CEO of NRD Capital, an Atlanta-based private equity firm, at FranConnection 2016.

“We are being attacked by every sector of the government,” he said.

His speech came on the heels of DOL Overtime Rule that became public this morning, in which IFA responded with a statement, including this from IFA CEO Robert Cresanti:

“Far from ‘giving America a raise,’ the new overtime rule will compel many franchise businesses to reduce their managers’ take-home pay simply to comply with the extreme new salary level. The rule is unfair to employees who will need to be reclassified from exempt to non-exempt, and thus effectively demoted. The Administration irresponsibly failed to conduct any economic analysis of this rule’s impact on a myriad of stakeholders, and millions of employees will experience reduced take-home pay, opportunity and flexibility in the workplace as a consequence of the Administration’s actions.”

Overtime rules, NLRB rulings and minimum wage hikes will continue to challenge the franchise industry. Part of combatting this in the future is changing the story of franchising, Hashim said.

“At the IFA, we decided to find out what the general public really felt about franchising, knowing that their opinions, if not aligned with franchising reality, will not help to tell the story,” he said. “We did focus groups of ordinary Americans; 10-12 Democrats and Republicans – a very mixed group. We asked them what they thought about franchising, and it was very negative. The American people do not understand anything about our model. Their opinion is that franchisees are agents of franchisors. The name there says McDonald's, so how could it be owned by the family who lives in the town? Their perception is that the franchisee just manages it for McDonald's. This is a problem."

“We were a victim of our own success. If you walk into one of our units you should not know if it is a corporate or a franchisee owned location. Each location should look and feel the same. We succeeded at building this business culture, but now, the American public really doesn’t know who owns that unit. They think the franchisor owns the unit," Hashim added."Even our own employees don’t know who they work for. Who do you work for? Popeye’s they say, not a Popeye’s owned by a franchisee. We have this massive misperception about our industry that we must correct through education. Changing the narrative of franchising is essential. The public should know that most businesses in their community are owned by family who lives in the community and invested their own money into that brand. If we change the opinions of the public, then, they will understand how these changes can negatively impact their neighbors.”

Hashim said that everyone in the franchise community should help to educate others on their story.

“We are trying to change the narrative through our fund, NRD Capital, but we need more people to help tell the story,” he said.

The IFA launched FAN, Franchise Action Network, a network of 11,000 franchisees, franchisors and suppliers committed to helping to change the story.