The Changing Franchise Relationship

PAC14_Brochure_cover_small_view“…the summer of 2014 saw two major judgments that underscored the changing times. While these two rulings address different parts of franchise operation, they both serve as actions seeking to level the balance of power between the franchisor and the franchisee.” – Franchise Direct

The quote above was from the beginning of a recent article on FranchiseDirect.com, The Changing Franchisor-Franchisee Relationship. It was for this article that I was asked to be interviewed. I’d like to thank the team at Franchise Direct for the opportunity to share insight and perspective about the upcoming International Franchise Association Public Affairs Conference in Washington DC. As well, I’d like to express my gratitude to IFA Staff for their assistance in preparing responses to interview questions. I believe it’s very important to deliver the correct message on all issues so their assistance and guidance was greatly appreciated. Their professionalism is second to none!

The complete article may be read HERE, but I’ll share my interview below…

Commentary from an Industry Expert

A noted franchise industry expert and speaker, Paul R. Segreto, CFE, was nice enough to answer some questions for Franchise Direct about the legal fight the franchising industry is enduring. Paul is a current member of the IFA Franchise Relations Committee. In addition, Paul is currently the CEO of Franchise Foundry, a franchise development company, as well as the host of Franchise Today on Blog Talk Radio. You can find out more about Paul here.

What will be the main points of discussion at the IFA Public Affairs Conference (September 15-18 in Washington, D.C.)?

The Public Affairs Conference is the best opportunity for IFA members to advocate for their business and communicate to lawmakers the challenges we are facing. In July, the National Labor Relations Board (NLRB) Division of Advice announced that a franchisor could be designated as a joint employer of its franchisees employees. The IFA is fighting this dangerous assertion because it is unlawful and will harm job growth, the economy and locally-owned franchise small businesses in every state. Franchisees have invested their capital in the business and stand to lose equity in their businesses if their franchisors are deemed joint employers. During the Conference, IFA members will take this message to Capitol Hill to fight for franchising and educate those on the success of the franchise business model and the growth that it continues to provide to our economy.

What is the risk to the industry from some of these judgments that have been handed down?

If franchisors are joint employers with their franchisees, these thousands of small business owners would lose control of the operations and equity they worked so hard to build. The jobs of millions of workers would be placed in jeopardy and the value of the businesses that employ them would be deflated.

This recommendation is a drastic and overreaching solution. Ample federal, state and local remedies are available – and are regularly used to enforce current law, including more limited NLRB action, state attorneys, general action and private rights of action – to deal with labor violations of various kinds. Destroying the fundamental tenets of the franchise model would eviscerate the most successful business model in existence.

Why do you believe so many cities and states are reviewing their franchising policies?

The Service Employees International Union (SEIU) is leading organized attacks against franchising and these jobs they create. The labor unions multi-pronged attack at the local, state and national levels, including having the federal government declare entire franchise systems as a single unit rather than the collection of separate, small business owners they actually are. The SEIU wants to undermine the franchise business model so they can more easily unionize entire franchise systems, as it is much more difficult for unions to organize thousands of independent small businesses under the current regulatory system.

What specific actions are the IFA taking, or considering, to protect the rights of both franchisors and franchisees?

With our continued fight to defend the franchise business model, the IFA is ensuring that franchise small business owners are well informed of policies that could alter the way they do business so they are armed with the tools necessary to educate lawmakers. The IFA’s Franchise Action Network is a new strategic initiative that mobilizes franchisors, franchisees and suppliers at the grassroots level. A coalition of the franchise owners, all promoting a single mission, is the best way to protect our industry from an increasingly hostile legislative and regulatory environment at the federal, state and municipal levels.

How does Aziz Hashim’s ascension to chairman underscore the changing relationship climate between franchisors and franchisees?

Aziz Hashim is going to elevate the role of franchisees in everything IFA does. The nature of the game has changed. There has been no more important time for franchisees to be engaged with the IFA on public policy issues. Legislators need to hear the concerns these business owners have about policies that impact their relationship with their franchisor.

About Paul Segreto

Entrepreneur, Franchising & Small Business Professional, Top 100 Champion Small Business Influencer Awards 2014 & 2015, Popular Blogger & Podcaster
This entry was posted in Franchise Relations and tagged , , . Bookmark the permalink.

2 Responses to The Changing Franchise Relationship

  1. Pingback: Top 4 Most Popular Posts from Second-half of 2014 | FranchisEssentials

  2. Pingback: Top 4 Most Posts from Second-half of 2014 | FranchisEssentials

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