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Franchise industry group leader fires back on labor proposals

Proposed labor rules could destroy the industry, claims International Franchise Association chief.

July 30, 2015

In what can be aptly described as a scathing rebuke, the International Franchise Association’s chief described how small business and the franchise business model are facing a "death-by-a-thousand-cuts" that could destroy the industry.

Steve Caldeira, president and CEO of the International Franchise Association based in Washington, D.C., claimed that the proposed policy changes and new edicts from the federal labor department and White House administration are "smothering mandates" that may destroy dozens of thousands of jobs. In a column published at Real Clear Politics, Caldeira targeted the Service Employees International Union, and David Weil, administrator of the Labor Department’s Wage and Hour Division.

He said the new policy and regulatory moves would have a direct impact on franchises and that altering the current joint employer standard would eliminate contractual arrangements which would then cripple the franchise business model.

"Corporate entities would be forced to run day-to-day operations that independent small business owners — franchisees — now manage. Under this Weil-like vision, franchise owners would become local managers and lose their incentive to grow locally," he wrote in the column.

He noted that new overtime regulation would lead to higher wages that franchise owners can’t afford and would prompt more franchise operators to move workers from salary to hourly status, which means workers would lose benefits and the opportunity to move forward in management. He also took issue with raising the minimum wage for federal contract workers, specifically the impact on franchises connected with military bases.

“This could lead to extensive job losses as well as lower sales and fewer hours for employees. Even the secretary of the Navy has said that businesses suddenly forced to pay a steeply increased minimum wage might find themselves unable to renew their contracts, thus depriving already depressed military communities of employment for military dependents,” Caldeira wrote. "Applying economic theory from the Ivory Tower will stifle job creation. It must stop and soon before an industry is destroyed."