2015 Outlook: Politics and Challenges with Steve Caldeira

With franchising on the rebound from the financial crisis of a few years ago and a successful 2014, this year is looking to be another good year for the industry. But all good things come with challenges.

Recent talks of minimum wage hikes and joint-employer mandates have blanketed newspapers and cable television. Healthcare is on everyone’s mind and will be a topic discussed at every dinner table at some point this year. A newly sworn-in Republican congress will most certainly shake things up. 2015 looks like it has an interesting assortment of variables that could tip the U.S. economy in any direction.

1851 had the chance to speak with Steve Caldeira, President and CEO of the International Franchise Association, to find out what those challenges are and their goals for this year.

1851: What are the IFA's big initiatives for 2015? What are you looking to accomplish this year?

IFA has several key initiatives for 2015, which include: preserving the franchise business model by challenging the National Labor Relations Board’s (NLRB) “joint employer” ruling, restoring the 40-hour work week within the Affordable Care Act and improving the legal immigration system to strengthen the workforce.

Other key initiatives include advocating for legislation that would help assist more veterans to get involved in franchising either through employment or ownership, promoting franchise growth through a revised tax code and defending franchise businesses against discriminatory minimum wage hikes.

1851: What will be the greatest challenge in franchising in 2015?

Though the franchise industry is expected to grow and create more jobs at a faster pace than the rest of the economy in 2015 for the fifth consecutive year, federal regulatory intervention promulgated by agencies including the National Labor Relations Board (NLRB) could stifle growth projections significantly. The NLRB has endangered the entire franchise business model through its “joint employer” ruling. This ruling, which states that franchisors and franchisees can be designated as joint-employers, could put the brakes on what looks like a banner year of accelerated growth and job creation in the franchise sector.

In efforts to combat the significant challenges facing the franchise industry, IFA launched the Franchise Action Network (FAN), a strategic initiative that seeks to mobilize the franchise industry at the grassroots level. It will present a united front against anti-franchising forces as well as educate policymakers on the franchise business model and its positive impact on communities across the country. Though FAN was just launched in the summer of 2014, our grassroots advocacy initiative has already made great strides in defending the franchise business model. FAN currently has more than 2,000 members, has facilitated several barnstorming events with local franchise business owners and their members of Congress and most notably has aided in the veto of SB 610, a piece of legislation that would have ultimately eliminated franchising in the state of California.

1851: How does a Republican majority congress effect, if at all, business in 2015?

We look forward to working with the newly-elected Republican majority in the Senate and all members of Congress on both sides of the aisle to send the President legislation that will stimulate job creation while eliminating costly, unnecessary and burdensome regulations for local franchise business owners.

IFA’s political action committee, FranPAC, will continue to support legislators that favor pro-growth economic agendas. The success of FranPAC increases IFA's ability to assist those who support the franchising s industry’s agenda, such as protecting the business model, fighting the unjustified and politically-motivated NLRB decision to designate franchisors and franchisees as joint-employers and making changes to the Affordable Care Act to help franchise owners make sensible workforce policy decisions.

1851: What does the minimum wage debate mean for franchising in 2015?

We are continuing to fight discriminatory minimum wage legislation where franchise businesses face an unfair wage increase. Seattle’s ordinance requires large businesses, defined as those with more than 500 employees, to raise the minimum wage they pay their employees to $15 an hour over three years starting in April, 2015. Smaller businesses get seven years to phase in the wage increase. But at the request of the Service Employees International Union (SEIU), the city’s ordinance willfully categorizes small, independently-owned franchise owners as big, out-of-state businesses, a violation of the Commerce Clause of the U.S. Constitution.

The IFA filed a lawsuit against Seattle, which argues the ordinance defies years of legal precedent clearly defining the franchisor and the franchisee relationship. The franchisor provides brand and marketing materials, based on the payment of an initial franchise fee and ongoing royalty payments to use the brand’s trademark. Franchisees are independent local business owners who operate separately from its franchisors. The lawsuit is currently moving forward in the U.S. district court’s ninth circuit in Seattle.