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Your roadmap for effective congressional visits on Capitol Hill
SUCCESS
ISSUE BRIEFS
On behalf of IFA and the Board of Directors, welcome to the Franchise Action Network (FAN) Annual Meeting! I’m pleased that you’ve made the trip to Washington, DC for this important event. I know it can be a challenge to leave your businesses for a few days, so your attendance is a sign of the importance of the work before us. We are excited to have an impressive and diverse array of speakers, panelists, and breakout sessions over the course of the week. The week culminates in our most important advocacy effort – the annual Capitol Hill Day. As franchise business owners, your voices and stories have an
invaluable benefit to our business model. The Franchise Action Network is one of the most valuable advocacy tools that IFA has to influence public policy and ensure that franchise businesses are well-represented in Congress, in the Administration, and in state capitals across the country. Franchise businesses had major legislative success late last year with the new tax law. IFA’s continued involvement resulted in about $8 billion in federal tax savings for franchise businesses per year. It’s a testament to the positive role franchise businesses have in our local communities that more than 400 franchisors and franchisees pledged to reinvest their savings from the Tax Cuts and Jobs Act into their companies in the form of higher wages, bonuses, and increased worker training. The most important policy issue affecting franchising remains the “joint employer standard” or “joint employer.” This standard changed under the Obama Administration, and overturns long-standing precedent governing the relationship between franchisees and franchisors. It would maintain that franchisors are joint employers of a franchisee’s employees, effectively consolidating all businesses operating under a franchise brand into one company. This creates new opportunities for litigation and collective bargaining. Most importantly, it means that franchise small business owners effectively become managers in a large chain – not owners of their own companies. The House passed a legislative solution to the problem this year in a bipartisan vote. The Save Local Business Act would codify the traditional understanding of the franchisor- franchisee relationship, but it is currently stalled in the Senate. Our legislative work isn’t finished, and it’s important to use this opportunity with your elected officials to pushfor additional solutions on joint employer, updates to the tax code, and regulatory actions to help franchise businesses. Once again, thank you for your activism, enthusiasm, and participation. I’m looking forward to a great week!
Liam BrownPresident, North America, Select & Extended Stay Lodging & Owner Franchise Services Marriott InternationalIFA Chair
A Letter From IFA’s Chair
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On behalf of the International Franchise Association and our incredible business model, welcome to the 2018 Franchise Action Network (FAN) Annual Meeting. Thank you for joining us for what is the most important advocacy
event IFA hosts. The reason we’re all here is bigger than any one business, brand, or person – the entire franchise business model is only successful because of people like you; dedicated to ensuring its continued growth and success in the changing landscape of American economics and politics. IFA remained steadfast in our promise in delivering lower tax rates for the franchise sector, which includes 733,000 franchise businesses, supporting 7.6 million jobs. The passage of the historic tax reform legislation directly led to an increase in optimism surrounding the franchise economy and allowed for increased business expansion, workforce development and wage increases, and community reinvestment. We continue to promote the tax reform legislation to Members of Congress and the Administration while asking for important fixes to the law that impact all franchisees and franchisors. With the help and coordination of our greatest advocates – franchise owners – we’ve made strides on a number of regulatory fronts to advance the collective interests of our model. Further, with a renewed focus on franchise education and training, we are at the forefront of education and accessibility amongbusiness groups of all sizes and industries. The franchise business model continues to outperform other business categories in the U.S. economy and remains the largest and
A Letter From IFA’s President & CEO
most successful vocational trainingprogram in American history. With this comes a responsibility to educate and inform our friends, family, neighbors, and employees about what it means to operate in this space. A major priority of the Administration is to elevate and expand apprenticeship programs in theU.S. to usher in new generations of American entrepreneurs. IFA members are doing their part by investing in technical skills trainingfor employees to master their craft, become efficient business managers, and eventually move on to sign the front of the check, not just the back. This week, we have a unique opportunity to impart our perspective on lawmakers and help bring about meaningful change for the franchise community. As you meet your elected officials on Capitol Hill, go in with the knowledge that your business is a critical contributor to your local economy and markets. Make sure your member of Congress understands, that while you share a familiar logo and brand with others, you are a small business owner seeking to create opportunity for yourself and others. It cannot be overstated: you are the best advocate for your business and we are beyond thankful that you’ve taken the time away from your business and your home to be here.It is our duty to bring our message to Capitol Hill during this year’s FAN Annual Meeting. Once again, thank you for being here – your participation in the process is critically important to the success of the franchise model!
Robert Cresanti, CFEPresident & CEOInternational Franchise Association
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IFA’s Government Relations & Public Affairs Team
Caleb GunnelsSenior ManagerPolitical Affairs & Grassroots [email protected]
Leah ShimpAssociate Director, Government Relations & Public [email protected]
Stephen WorleySenior [email protected]
Jenna WeisbordSenior ManagerCommunications & Public [email protected]
Haider Murtaza CoordinatorGovernment Relations &Public Policy [email protected]
Erica FarageVice President, Political Affairs & Grassroots Advocacy [email protected]
Matthew HallerSenior Vice President Government Relations & Public [email protected]
Jeff HanscomVice President, State Government Relations & Public Policy [email protected]
Suzanne BeallVice PresidentGovernment Relations & Public Policy [email protected]
Michael LaymanVice PresidentFederal Government Relations & Public [email protected]
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Joint Employer – Department of Labor RulemakingBackground:
In 2015, the National Labor Relations Board (NLRB) issued Browning-Ferris Industries of California, Inc (BFI). The decision changed the definition of what constitutes a “joint employer” and overruled more than thirty years of bipartisan precedent. The Board replaced the predictable and clear “direct and immediate control” standard for determining joint employer status with a vague test based on “indirect” and “potential” control over workers’ terms and conditions of employment. The decision exposed a broad range of businesses, including franchisors and franchisees, to workplace liability for another employer’s actions and for workers they do not employ. Specifically, franchise businesses are facing more operational and legal costs, decreased business values, less compliance assistance from franchisors, less growth and fewer jobs as consequences of the new joint employer policy. The IFA has been calling on Congress to enact a permanent legislative solution to jointemployer that provides certainty to small and large businesses and promotes economic growth and job creation. In 2017, the U.S. House of Representatives passed H.R. 3441, the Save Local Business Act, to simplify the joint employer standard for franchise businesses and their employees, but that legislation has stalled in the U.S. Senate. Beyond Congress, federal regulatory agencies including the NLRB, Equal Employment Opportunity Commission (EEOC) and Department of Labor also have important roles to play in establishing the legal standard regarding “joint employer.” The NLRB has already announced plans to do rulemaking under the National Labor Relations Act. Now franchise businesses need the Department of Labor to follow suit and issue its own rulemaking under the Fair Labor Standards Act (FLSA).
How does this affect franchising?
Since the BFI decision, multiple federal agencies have expanded the joint employment definition under statutes in their jurisdiction. The FLSA is the law under which franchises have seen the most joint employment lawsuits, largely because it allows individuals to file private actions. Joint employer rulemaking under the FLSA is needed because there are at least five different multi-factor tests applied by the eleven federal circuit courts. Furthermore, some circuit courts may apply different tests on a case-by-case basis. This legal unpredictability is generating unnecessary litigation, frustrating franchise growth, and hurting job creation. The Department of Labor, under Secretary Alexander Acosta, took the positive step in June 2017 of withdrawing the Wage and Hour Administrator’s overly broad administrative interpretation on joint employment. Now we must proceed toward rulemaking on joint employment under the FLSA to clarify employer responsibilities under wage and hour law.
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Top Talkers
• The joint employer liability standard under multiple federal laws remains unclear and unpredictable, which hurts the long-term viability of the franchise business format.
• Clear rules would provide great certainty to local franchise business owners and would promote economic growth and job creation in every state and congressional district.
• We are very pleased that the National Labor Relations Board is planning to propose rulemaking on joint employer during Fall 2018.
• Now we are urging Congress to write a letter to Labor Secretary Acosta to ask the Department of Labor to proceed toward rulemaking on joint employment under the FLSA to clarify employer responsibilities under wage and hour law.
THE ASK TO THE HOUSE OF REPRESENTATIVES:
“Will you sign a letter to Labor Secretary Alexander Acosta that urges the Department of Labor’s Wage and Hour Division to begin rulemaking on joint employer?”
THE ASK TO THE SENATE:
“Will you sign a letter to Labor Secretary Alexander Acosta that urges the Department of Labor’s Wage and Hour Division to begin rulemaking on joint employer?”
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Brand Trademark ProtectionBackground:
While many members of Congress and the IFA have been pushing to solve joint employer by enacting the Save Local Business Act, there is a second legal area relevant to franchising’s joint employer concerns. Federal trademark law requires a franchisor to maintain control over its trademark. The Lanham Act requires that licensors (franchisors) police the use of their intellectual property licensed to third parties, since the trademark’s value is that it is consistent and uniform to the consuming public. Absent control over the nature of the products and services, the brand loses its quality, which jeopardizes its purpose. At the same time, federal employment law increasingly penalizes franchisors for establishing control mechanisms to protect their trademarks. Franchise businesses are faced with an unworkable “Catch-22” with federal requirements, they are required to protect their trademark but prevented from doing so.
How does this affect franchising?
While trademark law requires franchisors and franchisees to enact controls to protect the brand, employment law penalizes franchises for establishing the same controls. For example, restaurant or hotel brand standards may require employees to wear branded uniforms so that every location looks the same to the public. However, the requirement of branded uniforms has been used as evidence of joint employment in litigation. As such, franchises face great uncertainty about what amount of control will trigger a finding that the franchisor is a “joint employer”. The Trademark Licensing Protection Act was recently introduced by Rep. Steve Chabot (R-OH) and Rep. Henry Cuellar (D-TX) to help solve this Catch-22 joint employer issue for franchises. This legislation will resolve the inconsistency regarding brand controls in federal law. Because the courts have created a chaotic web of vague standards under employment law,IFA is asking Congress to clarify the definition of “joint employer” in this way so that common sense terms of traditional employment — such as pay, hiring and firing — are the only factors courts could consider in their analysis.
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Top Talkers
• Franchising is governed by trademark law, and specifically, the Lanham Act. This law requires that franchisors police the use of their intellectual property licensed to third parties so that the brand is consistent and uniform to consumers. Without controls over brand standards, the brand loses its quality and value in the public.
• While trademark law requires franchisors and franchisees to enact controls to protect the brand, employment law penalizes franchises for establishing the same controls.
• Support the Trademark Licensing Protection Act, which resolves the discrepancy between employment and trademark law regarding controls put in place by licensors and franchisors.
• This legislation clarifies that franchisors who exert controls to maintain their brand as required by trademark law are not to be considered “joint employers” under federal law.
THE ASK TO THE HOUSE OF REPRESENTATIVES:
“Will you co-sponsor the Trademark Licensing Protection Act, introduced by Rep. Steve Chabot (R-OH) and Rep. Henry Cuellar (D-TX)?”
THE ASK TO THE SENATE:
“Will you introduce a Senate companion bill to the Trademark Licensing Protection Act?”
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Tax ReformBackground:
December 2017 saw the passage of historic tax reform legislation, the first time in three decades that Congress has modernized the current tax code. The Tax Cuts and Jobs Act (TCJA) led to an increase in optimism surrounding the franchise economy and allowed for increased business expansion, workforce development and wage increases, and community reinvestment. While the Tax Cuts and Jobs Act was a landmark piece of legislation for franchise businesses, there are still tax issues that Congress must address to ensure franchise businesses can fully take advantage of the new law. Recently, there has been a push to implement “Tax Cuts 2.0,” which is an effort to further improve the tax code for American families and local businesses.
How does this affect franchising?
The law’s enactment resulted in about $8 billion in annual federal tax savings for franchises per year. Following enactment of the tax law, more than 400 franchisors and franchisees committed to reinvesting their savings from the Tax Cuts and Jobs Act into their companies in the form of higher wages, bonuses, and increased worker training. IFA was instrumental in securing the following franchising priorities in the tax law: (1) Nearly 2,000 franchisors and 200,000 franchisees are pass-through entities, and will have an estimated annual tax savings of $2.5 billion in Pass-Through Tax Deductions; (2) More than 300,000 individual/married tax filers with direct franchise investments will have an estimated annual tax savings of $3 billion in Continuation of State and Local Tax Deductions, (while employees also benefit, they are not reflected in the savings); (3) About 300 franchisors and 20,000 franchisees (totaling 37,000 units) will have an estimated annual tax savings of $200 million in Professional Services Pass-Through Exemptions; and (4) More than 20,000 new and upgraded franchise units are impacted by the new law, and they will realize an estimated annual tax savings of $2 billion in Immediate Expensing of Equipment Purchase. Despite these benefits, the new tax law deserves several improvements to ensure that franchise businesses can fully realize its benefits.
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Top Talkers
While the Tax Cuts and Jobs Act was a landmark piece of legislation for franchise businesses, there are still tax issues that lawmakers must address:• First, Congress should make the individual tax cuts permanent. Nearly 2,000
franchisors and 200,000 franchisees are pass-through entities, so they pay income tax at the individual level, not the corporate rate.
o Making the individual tax cuts permanent means franchise small business owners can continue to grow their businesses, create more jobs, and have the certainty they need to plan for the future.• Second, the pass-through deduction should be clarified so that it doesn’t
unintentionally harm franchises. o The pass-through deduction – or Section 199A – would improperly classify some franchise businesses as professional service entities, which would make them ineligible for the deduction. IFA has requested the Dept. of Treasury fix this issue, and is hopeful that it can be fixed without Congressional action.• Third, Congress should fix the provision in the TCJA that is inhibiting franchise
businesses from making property improvements. o Historically, businesses were able to write off certain property and capital expenses at an accelerated rate, called bonus depreciation. But because of an error in the tax bill, these expenses are no longer eligible for this preferential expensing schedule. This means that franchise owners are disincentivized to open new locations and renovate their existing ones. Lawmakers clearly intended to give these expenses eligible for bonus depreciation and they should remedy this drafting error.
THE ASKS:
“Will you support making the individual tax cuts in the TCJA permanent in ‘Tax Cuts 2.0?’”
“Will you ensure all franchises can benefit from the TCJA pass-through provisions?”
“Will you support fixing the drafting error on depreciation?”
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WHAT TO DO:Here are some tried and true tips on how to maximize your impact while you’re here in D.C.— and how to continue protecting your small business once you get home!
1. Thank Your Members of Congress or Their Staff. Let them know you appreciate their time and attention.
2. Be Concise. Introduce yourself and say where you live and work. Recognize that you may have only 5 minutes of a lawmaker’s time, so be sure to make a few key points quickly!
3. Know Your Issues. Read the issue brief booklet and let Members of Congress know how these issues specifically impact your business.
4. Invite Them to Your Business. Invite members of Congress to your business back home to meet you and your colleagues and to learn what goes on behind the scenes. Download the Franchise Action Network In-District Meeting Toolkit at www.franchiseactionnetwork.com to help guide you through the process of requesting a meeting, preparing to host, and following-up.
5. Be Sure to Follow Up. Within a week, follow up with any requested information. Also, report back to IFA through the Soapbox mobile platform or [email protected] so that we can be sure to follow up as well!
Making The Most of Your Capitol Hill Visits
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WHAT NOT TO DO:
1. Don’t Be Offended. Due to scheduling conflicts, your Member of Congress may ask you to meet with a staff person. Members of Congress rely heavily on the opinions of their staff when making decisions, so don’t worry about it!
2. Don’t Assume Your Lawmaker Disagrees With You. Even if you disagreed with their viewpoints in the past, take this opportunity to help your lawmaker better understand franchising, and see if you can find an issue, like creating new jobs, that you can both agree on!
3. Don’t Just Talk About Statistics - Talk About YOUR Story. Help lawmakers see your top-priority issues in real terms – the impact on your day-to-day life. You have a great story to tell. Be proud of what you do for your employees, your community and your local economy.
4. Don’t Walk Away Without “Making The Ask.” Make sure you ask your lawmaker for something specific. Refer to IFA’s issue briefs which list “The Asks.”
AND FINALLY...Stay motivated! Advocacy is not just a one-day-a-year task: it’s a 365-day commitment. Pick up the phone, send an e-mail, rally your franchise colleagues to “make the ask” of your legislators on the key issues facing your business’s bottom line on the Hill and in the states. Join IFA’s Franchise Action Network program to stay involved! Contact IFA’s Erica Farage at [email protected] for more information.
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Map of Capitol Hill
Boxed Lunches and Refreshments (Capitol Hill Club
at the corner of First St & C St
SE)
Bus Drop-Off Location for
Congressional Appointments
(Garfield Circle)
Please use the Uber promo code below
for $10 toward your trip back to the JW Marriott between
6:00 pm-8:00 pm on Thursday.
Code: FAN18EVENT
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www.franchiseactionnetwork.com
Share your experience on social media: #FAN2018
