Top 10 Political Stories That Affected Franchising in 2015

2015 saw franchising put front and center in the mainstream news cycle on what seemed like an almost weekly basis, as a wide variety of potentially divisive issues affecting the industry came to a head. Some have been simmering for years and are finally resolved. Others are still being hotly debated, and could stretch on long into the New Year ahead.

 

The ultimate effects of these politically charged issues remain to be seen, but one thing is clear: the franchise industry is poised to play a bigger role than ever before in 2016. With that in mind, here are the top 10 political stories that affected the industry in 2015, as compiled by 1851 Franchise’s editorial staff:

 

In early July, President Barack Obama announced in an op-ed on the Huffington Post that he will raise the threshold for overtime pay in American workplaces. Under the proposal, overtime pay would be guaranteed to nearly 5 million additional workers in 2016, covering all salaried workers making up to $50,400 next year.

 

Full impact of the proposal remains to be seen, but across nearly all levels of franchising, concerns were quickly voiced over how the shift might affect the industry moving forward. CEO’s, like Back Yard Burgers' David McDougall, took to the airwaves on programs such as CNBC’s "Power Lunch," saying the proposal could ultimately result in a shift on how managerial pay in the franchise world is structured.

 

The U.S. Labor Department's new Home Care Final Rule officially took effect Nov. 12, requiring third-party home care employers, commonly known as home care agencies, to pay their live-in and hourly employees overtime and minimum wage, as prescribed under the federal Fair Labor Standards Act. Previously, there had been an exemption for those workers for nearly four decades, media outlets like the Hartford Business Journal reported.

 

The new federal rule extends greater workplace pay protections to home health and personal care workers, but a number of franchise experts say it is also likely to force home care agencies, including a growing segment in the franchise industry, to raise rates, re-think their business models, and could lead to consolidation across the industry.

 

On a June morning from the Rose Garden at the White House, President Barack Obama declared: “The Affordable Care Act is here to stay” following a SCOTUS decision that upheld a key part of the Affordable Care Act that provides health insurance subsidies to all qualifying Americans. The 6-to-3 decision, delivered by Chief Justice John Roberts, became a sympathetic affirmation of what has become known as Obamacare, and the majority opinion’s legal reasoning now seems to have finally fully insulated the 2010 law against opponents who want it torn down before it takes full hold on American patients, and their employers.

 

With Paul Ryan now officially installed as the next Speaker of the House of Representatives, what does the future hold for the balance of power on Capitol Hill? While many eyes have focused on the Presidential primary races—and rightly so—the future of hundreds of pieces of legislation in the House and Senate remain as delicate as ever. International Franchising Association CEO and president Robert Cresanti spoke to the House GOP Caucus in October, laying out a case for what Congress must do to protect franchising, the Associated Press recently reported. Some conservative groups are looking to unseat House Republicans they view as being too willing to work with President Barack Obama and Democratic lawmakers. Cresanti, however, said the IFA would be wary of candidates who are not open to bipartisan compromise.

 

The Occupational Safety and Health Administration may be exploring circumstances under which a franchisor could be held responsible for the safety violations of its franchisees, Business Insurance recently reported. The issue, still under debate, could have wide reaching implications if OSHA rules that franchisors and franchisees are jointly liable. "The biggest concern is franchisors are going to feel compelled because of potential liability to be more involved," said Elizabeth Taylor, IFA's vice president of federal government relations, public policy and counsel. "The converse is that the franchisees don't want the franchisor more involved."

 

Introduced in July by Rep. Keith Ellison (D-MN), H.R.3196, also known as the Fair Franchise Act of 2015, was written to “establish minimum standards of fair conduct in franchise sales and franchise business relationships, and for other purposes.” Under the proposal, franchisors would not be able to “hinder the formation of or participation in franchisee associations, charge excessive and unreasonable renewal fees or impose a standard of conduct or performance on franchisees unless the franchisor can prove that the standard is reasonable and necessary,” among other provisions. The bill was assigned to the House Subcommittee on the Constitution and Civil Justice, but has not yet received a hearing.

 

As the ball drops on 2016 at the end of the month, the final push for primary season begins. Democratic frontrunner, former Secretary of State Hillary Clinton is making aggressive moves to put the nomination out of reach for any of her rivals. But, the campaigns of candidates like Sen. Bernie Sanders and Gov. Martin O’Malley have made it clear they plan to fight to the finish. Still, while Clinton is one of the few candidates who has provided some concrete details about what her potential Presidency would do for the business sector, her relationship with the business community remains rocky at many turns.

 

In a crowded GOP field, one voice has consistently been louder—both figuratively and literally—than the others: Donald Trump’s. Despite daily jabs from critics, Trump has remained on top of the polls, drawing praise of a bevy of vocal supporters and ire from opponents. Regardless of which side you fall on, there’s no denying his influence on the race, and ultimately on business and franchising. Whether Trump holds on to win the nomination, or whether it goes to another Republican in the packed field like Ben Carson, Sen. Rand Paul, Sen. Marco Rubio, or a host of other candidates, it is clear: entrepreneurial spirit will play a major role in the outcome of the Republican race in 2016.

 

The debate took center stage in April in Seattle, as lawmakers there agreed to incrementally raise the city’s minimum wage to $15 per hour over the next three to seven years, depending on, among other things, the size of a business. Since then, the debate—and action on it—has expanded to other cities and states. With the rhetoric surrounding the 2016 president race likely to intensify in the coming months, questions remain over how states—particularly traditionally conservative ones--will address the wage fight. Congressional Democrats have pushed to raise the federal minimum to $12 per hour by 2020. Other wage advocates are pushing for $15 an hour, especially in the fast-food sector. The International Franchise Association has vocally—and legally—opposed such measures. But, the ultimate outcome of the debate will continue into 2016.

 

Perhaps no issue impacted the future of franchising more in 2015 than a decision from the National Labor Relations Board to uphold an altered joint employer standard, dramatically changing the way franchises do business, and potentially opening them up to further liability. The move potentially makes it easier for unions to organize employees of franchisees and subcontractors by forcing corporations to the bargaining table. The new standard also means corporations can be held legally liable for workers if franchisees or subcontractors break labor law. The International Franchise Association criticized the decision, saying it ignores nearly 50 years of bipartisan policy and decades of court and regulatory rulings and will ultimately harm the national economy. IFA members have vowed to fight the decision, and blanketed Capitol Hill at the end of September, urging Congress to roll the changes back.