The International Franchise Association (IFA) warned members Wednesday to prepare for some ups, but also a year of pain at the hands of the federal government, which IFA said is endangering the entire business model.
IFA, with help from IHS Economics, released a report predicting that franchises will experience some great improvements in 2015, but that some of these successes will be greatly hindered by recent federal overreach, such as the joint employer ruling issued by the National Labor Relations Board (NLRB).
“The National Labor Relations Board moved to upend decades of law and practice by issuing a complaint against McDonald’s saying that it should be considered a ‘joint employer’ with its franchisees,” IFA President and CEO Steve Caldeira told reporters during a teleconference. “The ruling could put the brakes on what looks like a banner year of accelerated growth and job creation in the franchise sector.”
Caldeira also noted that the ruling was motivated by outside influences, including labor unions, and the Service Employees International Union in particular.
“The entire business model of franchising is endangered by this ill-conceived complaint,” Caldeira said.
Caldeira also noted, “Hundreds of thousands of franchisees must now operate not knowing whether they should believe what their contracts clearly state.”
Matthew Patinkin, a franchise owner of Auntie Anne’s Pretzel shops, told reporters that he was very concerned about the NLRB ruling.
“It is clear the business model for franchising is under assault,” Patinkin said. “The complaint by the general counsel at the National Labor Relations Board leaves franchise business owners like me uncertain and very concerned about the future.”
“They simply don’t understand how franchises work– or have an alternative motive,” Patinkin added.
The NLRB has defended their joint employer decision by stating that franchisors have too much control over the independent franchisees they contract for them to be considered independent operations.
As the NLRB argued, “Through its franchise relationship and its use of tools, resources and technology, [a franchisor] engages in sufficient control over its franchisees’ operations, beyond protection of the brand, to make it a putative joint employer with its franchisees, sharing liability for violations of our act.”
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