Franchisees are calling on lawmakers to act to prevent a top labor regulator from targeting their business model and eliminating their autonomy.
Mara Fortin owns and operates seven Nothing Bundt Cakes in the San Diego region. A single mother of two, she gave up her career as an attorney to become the first franchisee under the company umbrella and now employs about 100 people in her stores. She fears that a decision handed down by the National Labor Relations Board last Thursday will damage her business.
"I thrive on the opportunity to contribute in my community and to provide jobs to groups of people who are just as passionate about the baking as I am," she said. "The absolute last thing I thought I would encounter would be having to defend myself or my business to the government."
Under franchise agreements, entrepreneurs pay licensing fees to corporate parents to operate under the company umbrella. While menu offerings and services do not vary, the day-to-day operations of the business are handled by the franchisee. On Thursday, the board overturned decades of precedent to rule that corporate parents are liable for the labor practices of franchisees and subcontractors.
Fortin said that the decision would take away from her autonomy, lead parent companies to close smaller shops in favor of bigger businesses that can afford better attorneys, and "worst case scenario: we would have to close."
"The real world consequences of the NLRB decision is it would lead to consolidation of our franchisees and … we would no longer be in charge of the businesses we worked so hard to build," she said.
The decision would also hurt employees, according to Fortin, because franchisees would have to "pay more in royalties to our franchisors," to cover increased costs that come with increased liability.
"We are going to have to spend more money on overhead, administrative costs, insurance, those types of things. The effect is going to be less money in the pockets of employees," she said.
Fortin is part of the Coalition to Save Local Business, an organization that has teamed with the International Franchise Association to represent the interests of thousands of franchisees and franchisors. The group’s vice president for regulatory affairs, Mike Layman, said that Congress needs to act, as it has attempted to do to reverse other controversial agency decisions, such as the ambush election rules that went into effect in April after President Obama vetoed GOP objections.
The organization’s members echoed these sentiments. John Sims, owner of early education franchise Rainbow Station in Richmond, Va., said he fears that his days "as an autonomous business owner are numbered" if the agency ruling is allowed to take effect.
"We simply need the Congress to codify the joint employer standard," he said.
Many members of Congress slammed the board for its departure from the existing legal standards that made franchising possible. Rep. Bradley Byrne (R., Ala.) pledged to work in the house to overturn the NLRB.
"This ruling fundamentally alters the long-standing definition of an employer and destroys the dream of countless Americans who aspired to be small business owners. As a member of the House Education and the Workforce Committee, I will work with my committee colleagues to push back against the extremist NLRB and stand up for small businesses on the Gulf Coast and across the United States," he said in a statement.
Ed Rothschild, owner of printing service company AlphaGraphics in Arvada, Colo., said Congress should act to offset the "uncertainty" brought by the agency.
"We regularly hear politicians [praise] small business as the backbone of the economy … now I’m asking for their support," he said.