One Month After Midterms: What the Election Results Mean for Franchisors

It has been one month since the midterm elections took place, and the franchising industry has been keeping watch.

Indeed, the year 2018 in general was a huge one for the franchising industry thanks to trending topics such as minimum wage and proposed changes to joint-employer standards. Individual franchise brands also got a lot of press due to the variety of issues they faced, including the Papa John’s scandal and franchisee issues at 7-Eleven and Jack in the Box.

The International Franchising Association released a statement on the midterm election results.

“This was a critical election and, in an era when taxes, health care reform and workforce issues continue to impact the bottom line of franchise small businesses, it is imperative that franchising’s voice is heard as a new Congress takes the lead on significant policy issues,” IFA Senior Vice President of Government Relations and Public Affairs Matt Haller said in a statement. “IFA remains committed to working with members of Congress who support and understand the franchise business model. IFA will work to educate new members about the economic impact of franchising by illustrating how important pro-growth policies are for creating and sustaining jobs.”

The statement also noted that “America’s franchise businesses are found in all 50 states and in every Congressional district. All told, the 733,000 franchise business locations directly support nearly 8 million jobs.”

As contentious as the midterm elections turned out to be, experts do not anticipate any major changes in the franchising industry.  

Leslie Charm, senior lecturer at Babson College, does not anticipate much of a change due to “a divided Congress” and issues such as minimum wage are “issues where both parties are on opposite sides,” he said.

Charm thinks the franchising industry needs to “begin to have a clear position on joint employer rules,” adding that “they need to be able to explain to everybody clearly why joint employer rules” are “probably not fair to the industry or not right.” He added that the “industry better start making suggestions to the franchisors about how to clean up some of the franchise agreements.”

1851 Chief Development Strategist Sean Fitzgerald also does not anticipate much industry change.

“I really don’t anticipate much of a difference going into 2019 as it relates to the franchising industry,” he said.

He believes educating the general public about franchising will be important. One way to educate is to educate people on the fact that franchisees, while under the umbrella of large corporations, are still individual business owners.

“The misconception is that franchising and franchisees are huge corporations and the reality is the far vast majority are just independent business owners that are operating under a franchise system,” he said.

Even large brands, such as Sport Clips*, he said, “are typically independent, small business owners, no different than your local grocer.” They are also faced with challenges of all small business owners, he said, and “lumping all of them into this large organization isn’t a fair representation of the challenges those franchisees face.”

In terms of popular topics of 2018 that affected the industry, Fitzgerald does not anticipate any “vast sweeping changes” in these areas.

“That’s why I think the focus is going to be on continuing education so that everybody understands what franchising is,” he said.

When it comes to topics such as minimum wage, he said, “I think a lot of people look at it through the lens of the workers, which is completely appreciated, but at the same time you have to look at it, and the impact, from the lens of small business owners and if you put franchisees in that category of small business owners I think a lot of people would support franchisees and small business owners."