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The International Franchise Association released its 2013 Policy Platform in advance of President Obama's State of the Union address today. The platform makes policy recommendations to the administration and Congress on behalf America's 825,000 franchise establishments, which support nearly 18 million jobs, $2.1 trillion in economic output and 3.4 percent of GDP.
"While poised for modest growth in 2013 of about 2 percent (an estimated 162,000 new jobs and 10,000 new establishments), the franchise industry could grow more significantly, creating even more new jobs, if these policy changes were to be implemented," said Steve Caldeira, IFA president & CEO. "Washington should address the fundamental challenges facing our economy that are holding back growth in our sector, such as out-of-control government spending, the complexity of the tax code, our out-of-date immigration system and the costly and onerous aspects of the Affordable Care Act."
The platform, which was delivered to the White House and sent to all members of Congress on Monday, outlines six policy priorities that the IFA believes could accelerate job creation by franchise businesses:
According to the IFA, Congress and the Administration should recognize the importance of growing franchise businesses and ensure that tax policy does not impede their growth. As Congress drafts legislation to reform the tax code, legislators should recognize many of America's small businesses file their taxes as LLCs, partnerships, S-corporations or sole proprietorships. These businesses do not pay the corporate income tax rate. Instead, most franchisees declare their business profits on their owners' personal income tax return and are taxed at the personal income rate. IFA encourages Congress to pass revenue-neutral comprehensive tax reform and is asking Congress and the Administration to address corporate and individual tax reforms as a package and not with piecemeal fixes. Any effort for reform that removes important business tax deductions should lower the overall tax rate for both corporations and individuals.
The IFA believes the Affordable Care Act places undue burdens on the franchise small business community. According to a Hudson Institute study prepared for the IFA, 3.2 million jobs at franchise businesses could be lost due to the employer mandate provision, which will force many multiunit franchisees with more than 50 full-time equivalent employees to pay penalties if they do not provide health insurance. The IFA urges Congress to enact additional legislative changes that will make this law more manageable for Main Street businesses.
IFA stands ready to work with Congress to enact much-needed comprehensive immigration reform. The organization believes the current immigration system is untenable and actions must be taken to address the various employment needs of the franchise industry, particularly for lower-skilled workers where franchise businesses are concentrated, such as restaurants, hotels and service-related businesses. IFA encourages a plan that includes a pathway for unauthorized immigrants to gain legal status, a better legal immigration system which recognizes employer needs, and an effective easy-to-use employment verification system that safeguards employers.
Recent decisions by the National Labor Relations Board (NLRB) and potential rulings by the U.S. Department of Labor have created additional uncertainty in the workplace for franchise business owners, the IFA believes. These regulations include shortening the timeframe for holding a union election and for the creation of small bargaining units, or micro-unions. The reduced timeframe will effectively deprive employees of their ability to hear from their employer before making a decision about union representation and it is "unfair" to small business owners, who lack the resources and legal expertise to understand and comply with the union election process. The U.S. Department of Labor plans to issue a final rule on "persuader" actions by an employer this spring. The IFA believes this rule would violate attorney client privilege and is asking Congress to curb these new policies.
Small business lending
Franchising thrives when capital flows freely from commercial and government-guaranteed lenders to qualified franchise borrowers. For every $1 million in lending to a franchise, 40 new direct and indirect jobs are created, generating $4.2 million in economic output. IFA supports maintaining current funding levels for the 7(a) and 504 loan programs, given franchises are responsible for 7 percent of total SBA loan dollars and 11 percent of total SBA loan volume.
Veterans as small franchise business owners
More than 541 IFA member companies voluntarily offer financial incentives to honorably discharged veterans to purchase a franchise. Currently, there are over 70,000 veteran-owned franchise businesses in the U.S. that account for nearly 850,000 jobs. IFA urges Congress to pass legislation to aid veterans' investment in their future. The Help Veterans Own Franchises Act (HVOFA) introduced by both Senator Bob Casey (D-Pa.) and Representative Aaron Schock (R-Ill.) in the 112th Congress would have provided significant incentives for veterans to own their own franchise business. IFA is engaged with Members of Congress to re-introduce HVOFA in the 113th Congress.
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