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Franchise Industry Could Create More Jobs With Meaningful Regulatory Changes

Franchising and small businesses can make great strides, despite the recent economic downturn.

The franchise industry could grow faster and create more jobs if Washington took more meaningful steps to address the tax and spending issues and regulatory uncertainty plaguing the small-business community. That’s the message Sean Falk, a multi-unit, multi-brand franchisee, shared when he testified Feb. 13 on behalf of the International Franchise Association before a hearing of the U.S. House Committee on Small Business on “The State of American Small Businesses.”

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In his testimony, Falk, who is a Salsarita’s Fresh Cantina, Great American Cookies, Mrs. Field’s Famous Brands and Pretzelmaker franchisee, stated that with supportive economic policies in Washington, franchising and small businesses could make great strides, despite the recent economic downturn.

Falk cited several policies that were holding back his growth and others in the franchise community, including the Affordable Care Act, piecemeal tax policy and access to capital.
“I can’t make future business plans when Congress passes and extends regulations for only one year at a time,” he said. “The constantly-moving target created by short-term fixes makes it extremely difficult for me to evaluate investments and business opportunities, and hampers my efforts to expand my business and execute a long-term business plan.”

Falk cited two aspects of the Affordable Care Act that were particularly problematic for franchise businesses. The 30-hour threshold that qualifies an employee as full time; and the 50 full-time equivalent employee threshold that requires employers to comply with the employer mandate.

“Currently, I employ 43 full-time equivalent employees. If my business grows and I create more jobs, I will also drastically increase my costs due to the employer mandate. This has an undeniable impact on my bottom line and is making me reconsider opening new locations,” he explained. “Also, I may be forced to reduce my employees’ hours to less than 30 hours per week so that they do not acquire full-time status. With these challenges and changes, I fear that it may be a struggle just to keep the doors open on my 12 existing businesses.”
Falk cited challenges and delays with the SBA loan approval process as holding back his development of new locations.

“I had signed and purchased four new franchise agreements, meaning that two of the agreements never evolved into actual businesses, and I was never able to recover the lost franchise fees from the remaining two agreements,” Falk said.

Falk was featured on FOX Business’s “Money With Melissa Francis” following his testimony before the House. “I came to Capitol Hill today to talk to them about small business and basically how government is getting in our way of growth,” said Falk. The proposed minimum wage hike translates to a minimum 24 percent increase in his bottom-line costs that will likely lead Falk “to make the decision to not open more locations,” that typically employ eight to 15 people per location.

 

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