Why the Franchise Industry Needs to Increase Franchising Education Activities

Ashley Stewart, Staff Writer for the Puget Sound Business Journal writes on a proposal to implement a $15 minimum wage in Seattle, Washington. To describe the implications of this proposal on small businesses and especially franchisees Stewart uses the example of Subway franchisee, Matthew Hollek.

Matthew Hollek leveraged his house to start a Subway franchise. He calls it a small business, but city leaders disagree. They say franchise owners like Hollek should be included in the same category as big businesses such as Amazon.com when it comes to raising minimum wage.

To not classify franchisees, especially unit franchisees as small businesses is wrong

It’s one of the major sticking points emerging from Seattle Mayor Ed Murray’s phased-in proposal to reach a minimum wage of $15 citywide. Small businesses, under the plan, don’t have to implement the new wage as quickly as big companies.

Many politicans either don't understand the franchisee franchisor relationship or simply fail to acknowledge the truth. 

Many politicans just don't get it and this will be a reocurring issue in many cities and states. Some council members said they’re sticking with the plan to group franchises in the higher tier. Councilmember Kshama Sawant, a force behind the $15 minimum wage campaign, said franchise owners can afford to pay their workers more. “In order to be a franchisee, you need to be very, very wealthy,” she said.

Both franchisor and franchisee groups need to do a better job educating certain groups about our industry 

Education

Ed

In many cases I would agree with you on your point about educating legislators.  In Seattle the situation was different.  They fully understood the relationship between franchisors and franchisees.  They just did not care.

Councilmember Sawant is an elected representative from I believe the Socialist Party and during yesterdays debate continued to refer to herself as a "representative of the people". Seattle was an SEIU play tinged with a punish business play because apparantly business people are all very wealthy as the Councilwoman believes.  It is the leading edge of the living wage debate.

There is actually a movement to have the timing of the $15 per hour minimum moved forward from three years for big business phase in and 7 for small businesses (other than franchises whose systems employ over 500 people nationwide) phase in to January 1, 2015 for all businesses regardless of size.  That would be a ballot initiative and they have 10,000 of the 30,000 signatures required already.

Putting aside the unafordabiliy and destructive nature for unskilled workers of a $15 minimum wage, the battle on the frachising front came down to keeping franchisees at least competitive with other small business owners.  That was the lead in for the comment made by the councilwoman - franchisees can afford to pay their workers more.

There is also a provision eliminating tip credits for waitstaff.

Seattle was really not an educational issue it was an idiological issue.  At one point in reviewing the bill and the press coverage in Seattle I thought it might makes sense to have the bill translated into Russian and find an old Soviet who could explain it to us - it was that bizzare.  The union was out in force at the hearing and interupted it with chanting, boos, shoutouts, etc.

There is a vote on Monday to finalize the bill.  It would be a good time for franchisees in Seattle to come out and show their support against the measure.  Fairly certain that anyone looking to develop a new location or relocate an existing business will be looking outside of Seattle into the suburbs, etc.

Different than other places, Seattle was not education, it was ideology.

Michael

Education II

A good start would be to eliminate Michaels view points! He distorts all issues. If Franchisor CEO's would not scrape off all of the profits from the franchisee/Business operator on the ground level (Sucker who spent his life savings in franchise business) There would be more than enough to pay employees a living wage. Get to the root of the problem! To many franchisors making millions off the back (Screwing) of working peoples retirement with fraudulent franchise contracts etc. which leads to the franchisee being stuck paying min wage. A true business model (Non-franchise) can afford to pay the bottom of the ladder $15.00 an hour when you eliminate the sharks at the top off the franchisor ladder from bilking millions/billions!

Re: Education II

Then perhaps you should start your own "true business", pay your employees a living wage and not use the franchisors brand. Wouldn't that be a simple solution for your distress? What is stopping you?

Maybe instead focus on whether any small business will be able to afford a doubling of their labor cost.

Re: Education II

Ha! I hoped you would go there! I have done it both ways once with a major Franchise that has mastered the Fraud game, (They are seldom call out on it because they must have powerful people in their pocket)and once with my own expertise! Where do you Dumb @sses think most people get there money to fall for the fraud game of franchise salesmen and there fraudulent lying sales tactics and so called honest due diligence paper trail. Now I have started my rebuilding with another TRUE business (NON FRANCHISE!) and I will spend the rest of my young life telling about the fraud and lies YOU and your kind use to trick people into financing corporate fraud! Oh by the way my employees made $15 to $37 per hour plus bonuses with MY business, and while with the FRANCHISE as a Franchisee I could only pay min wage $14 per hour till we had close due to lying franchisors!!! maybe for once you and your kind should do some due diligence and find out where all of these franchise buyers come from, (Successful Businesses DUH!) and realize they are fooled into believing that the FRANCHISOR was supposedly supplying honest real numbers.
So take your ego statistical comment and stick it where the sun don't shine!

EDUCATION II

Ouch, sorry for your bitterness. Franchises aren't perfect, and there is definitely lots of opportunities for fraud or at the very least a less than symbiotic relationship. Congratulations on your new business! Glad you do not need to pay the 4 -6% royalties, the 3-6% marketing contribution or forced to buy food at a premium. I am truly pleased you can pay your employees what you consider a "living wage". However, do not presume that I need you to decide or mandate what a living wage is or what minimum wage should be. I prefer the market to decide that with out government infringement. Quite frankly, our legislators are not the brightest, as demonstrated by the recent "Seattle Brain Trust". Sad to say most would score very low on an IQ test, and those who do better typically are attorneys with no business or economic background whatsoever.

Education

Michael, I agree with your point, however, I think the "industry" could do a better job in terms of making the public and media aware of how franchising works. When we compare the amount of coverage the recent protests at fast food outlets by the SEIU and their paid lackeys received and the weak response by franchise industry representatives it doesn't help. Perhaps PR would be a more appropriate term than education, however, in any case there ought to be a louder response to efforts villifying the franchised fast food sector. The article by the AP reporter using the Subway franchisee was a good example of how the Seattle bill can impact franchisees. Also, several aldermen in Chicago just proposed a bill not unlike the Seattle one. This issue won't go away and a loud retort is required.

Re: Education

Ed

Good point.  As an industry we likley could do a better job but I can assure you the IFA has a lot of resources currently focused on the issue of education for legislators and others. 

I am certain that this will be a major part of the discussion at the upcoming board meetings later in the week.  I will certainly carry your message during the discussion.

The unions attempted a similar measure last year in Canada which was defeated.  Given the shrinking of the private sector unions, I would expect them to continue.

While I expect that IFA staff know about the bill in Chicago, could you shoot me a private email letting me have the names of the Alderman and any information you have on the bill.  I would appreciate it.

Thanks

Michael