IFA 2017: What the NLRB Really Means to Both Franchisors and Franchisees

Over the last few years, regulation has become an increasingly common theme running through panel discussions, general sessions and hallway conversations at the IFA’s annual convention. This year, however, it was hard to find a topic that regulation hasn’t touched in some way, and many of those discussions centered on the potential impact that the National Labor Relations Board’s Joint Employer Standard might mean moving forward, particularly in light of the new administration in Washington, D.C.

A Monday panel sought to address the specific impact the Browning-Ferris Industries decision has already made on franchisees. Most of us are aware of the new restrictions that decision put onto franchisors. But, what new responsibilities does the decision place on franchisees? How should they uphold brand standards and operate as an independent business in the new climate?

The solution must begin with the viewpoint that both franchisor and franchisee share the brand, said panel moderator Mary Ann O’Connell, CFE, President of FranWise.

“Think of it like a present in a box: The franchisor gave the franchisee the box. Now, the franchisee owns the box. Even though the franchisor gave them the box, the franchisor can’t look inside the box now. But, the franchisor can wrap that box up beautifully before they give them that box. It’s the same in franchising. The franchisor sells to the franchisee, and it belongs to them now. The franchisor can’t tell the franchisee how to operate, who to hire and things like that. But, they can provide the wrapping—the branding, the consistency for an independently owned business.”

The Joint Employer decision ultimately amounts to holding party ‘A’ responsible for the actions of party ‘B,’ erasing the old standard where the employer (the franchisee) was the person who had direct and immediate control over the employee. The new standard now requires only indirect or even potential control over day-to-day employment matters and working conditions.

“The new standard is meant to advance collective bargaining,” said panelist Marisa Faunce, Partner with Plave Koch LLC, based in Reston, VA. “We’ve seen it with cases like NLRB v. McDonalds. So, how do we fight back? Practical prevention. Educate the consumer that they are dealing with an independent owner.”

It was a mantra repeated in Tuesday sessions as well, including a morning session addressing potential changes in training and operations in a post-Joint Employer decision business climate.

“The NLRB is a distraction, and we must overcome that,” said Andrew Gibson, VP of Operations and Director of Marketing for Tide Dry Cleaners. “We need to search for ways to minimize the risks of co-employment, while still providing training and store support. Focusing on independence and education helps accomplish that.”

“The focus has to shift back to the concept of ‘independently owned and operated,’ agreed panelist Amy Cheng, Partner with Cheng Cohen LLC. “I used to see plaques bearing those messages displayed in franchises across the nation. We don’t see them as much anymore. We need to bring the plaques back! It sounds like a trivial thing, but that mindset does make a difference in educating people about why franchising is, at its core, local and community based.”

Franchisees should work to make their businesses independently identifiable, said Saunda Kitchen, a franchisee with Mr. Rooter in Sonoma County, Calif. They should use unique marks for their franchise location, including descriptions like “proud franchise owner of ‘brand X,” she said.

“And educate your employees about who they’re working for,” Kitchen said. “They are working for you—the franchisee, not for the brand that they might have logoed on their shirt. That’s hard to differentiate for some people, but we need to keep pushing that message.”

A strong example of that differentiation can be found at JAN-PRO and Maid Right, sister commercial and residential cleaning brands, respectively, and subsidiaries of Premium Franchise Brands. Both brands use a master franchisee-unit franchisee model, and thus, must even further refine the model of support for independent ownership.

“We have taken innovative steps to differentiate training versus certification, manuals versus brand standards, and step-by-step directions versus best practices,” said Danessa Itaya, Vice President of Maid Right. “We do a lot of our training in the field now, developing franchisee training centers and in that way, we get insights into their staff, but without any management. There is the correct amount of separation, but still the support of a strong franchisor to an independent franchisee.”

But, even with new advancements in understanding and efficiency of independent franchise operations, both franchisors and franchisees must continue to advocate for the franchise business model. And—addressing the “elephant in the room,” Cheng’s panel agreed: while there are encouraging signs that the incoming Trump administration and Labor Secretary nominee Andy Puzder will take proactive action to help address Joint Employer concerns, the panel agreed that such steps would be, at best, interim solutions.

“Get involved, and become active in shaping the destiny of franchising,” said O’Connell. “Go to @OurFranchise and share your story. Go to things like the FAN Fly-In in Washington D.C. Make your voice heard. We’re already helping to change the story on franchising, but the fight is far from over.”