New Laws Threaten Multi-Unit Owner Growth and Expansion

ifa2The following article was recently published in the International Franchise Association publication, Franchising World. The article addresses future franchise growth as potentially being affected by several bills expected to be considered by Congress. If the bills become law, the negative effects could be dramatic.

New Laws Threaten Multi-Unit Growth and Expansion
“Perfect storm” of organized-labor legislative proposals is aimed squarely at multi-unit owners.
By Matthew Shay
as published in Franchising World April 2009

Multi-unit franchise ownership continues to increase in popularity as a growth strategy for franchising. Data show that since 2004, multi-unit operators control almost half of franchised units and about 20 percent of franchisees are multi-unit operators. Industry-research firm FRANdata expects the growth to continue as more franchisors embrace multi-unit operators, and the established field of professionally-managed and sizable franchisee-owned companies gains popularity.

This growth, however, could be threatened by a “perfect storm” of three separate organized-labor-related bills expected to be considered by Congress. If enacted into law, these measures could derail the franchising industry’s ability to provide jobs and boost economic output to their local communities. The eye of this coming storm is aimed squarely at multi-unit restaurant owners.

The Employee Free Choice Act, known as “Card Check;” the Healthy Families Act; and the Re-Empowerment of Skilled and Professional Employees and Construction Tradesworkers Act, called “RESPECT” by its proponents, all sound harmless enough. However, despite the use of words like “choice,” “healthy” and “respect,” these bills, if passed, could result in the largest expansion of government interference into the free enterprise system since the New Deal.

Card Check would eliminate secret-ballot elections and require only signatures on cards to organize any segment of workers in a business, even in just one store. This means that you could walk into one of your stores on a Monday morning to find that a simple majority of your clerks had signed union cards over the weekend. Congratulations! You are now bound to a union such as the International Brotherhood of Teamsters and you only have a few weeks to negotiate a contract before a government bureaucrat imposes one.

The Healthy Families Act would require employers with as few as 15 employees to provide seven days of leave—with pay—annually to all full-time employees and a pro-rated amount of leave to part-time employees. Employees could take the leave in increments as small as six minutes with no notice and no documentation, and workers would be entitled to the leave almost immediately. Employees would be allowed to report to work an hour late in 56 different instances or be 15 minutes late for 224 days. In many cases, employees could do so without any notice, and the employer could not discipline the employee or require documentation. If this is enacted, you would either have to hire additional employees to be sure your shifts are always covered or not be able to service your customers’ needs adequately.

The RESPECT Act would change the statutory definition of “supervisor,” effectively making your managers and staff, who you rely on to manage your daily operations, members of a union. Your managers or supervisors would become part of a bargaining unit potentially making staffing decisions based on union membership rather than merit, ability or your established staffing policies.

IFA certainly supports an employee’s right to unionize and to be treated fairly and equitably, but these laws would jeopardize the basic tenets of franchising—being able to establish uniform processes and operations throughout systems. And if you own multiple units, you could very easily be affected differently from unit-to-unit, wreaking havoc on your company.

The likelihood of these laws being passed is high. To defeat their passage or make them less onerous, the franchising industry—franchisors and franchisees together—must work harder than ever to ensure that lawmakers in Congress understand the severe consequences on small businesses.

We are actively developing educational programs and other member services to better meet the needs of multi-unit operator-members of IFA in all franchising sectors. And our new Franchise Congress will be designed to step up our grassroots efforts by providing the tools and information needed to get all members more engaged politically.

It is more important than ever to have single and multi-unit franchisees involved in IFA to help defeat laws that restrict the virtues of the franchise model. As the old adage says, “there is strength in numbers.” That’s the key to success for all in franchising.

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