On Tuesday, 73 business owners joined forces to push back against a new federal rule that could significantly alter the franchise model.
The Coalition to Save Local Businesses was formed to fight a National Labor Relations Board decision which makes franchisors joint-employers with the individual franchisees they contract out to. The coalition included employers who operate franchises like Golden Corral, Two Men and a Truck and Choice Hotels. Though the decision has not yet be implemented, business leaders and congressional Republicans have fought against it, arguing that it will overturn decades of established law and destroy many small businesses.
Franchise owners John Sims and Matthew Patinkin helped to started the coalition with help from the International Franchise Association and U.S. Chamber of Commerce among other business groups. The coalition argues the NLRB rule could damage the franchise model and risk business and job opportunities. It currently has 14 co-chairs and dozens of members.
“At best I will be a location manager, at worst I will lose my businesses,” Sims told reporters during a press call. Sims owns a Rainbow Station at The Boulders in Richmond, Va.
The franchise model is unique because it allows entrepreneurs, who wouldn’t otherwise be able, to open their own business while still having the name recognition and support of a major corporation. The NLRB ruling changes that and makes the individual franchise owner just a part of the corporation as opposed to a private partner.
The coalition hopes to educate lawmakers of the potential negative impact the ruling will have. They argue the issue goes beyond party politics.
“I have been educating lawmakers on the NLRB,” Sims notes. “It’s not just me but people across the country who will lose the most if the National Labor Relations Board goes through with these rules.”
“It’s less about Republicans and Democrats but more about small businesses,” Sims explained. “The uncertainty of this issue is hurting my family and many families that own a small businesses.”
Matthew Patinkin, who owns several Auntie Anne’s Pretzel’s, Red Mango Frozen Yogurt and Jamba Juice stores, notes the decision is making him and many other franchise owners hesitant to open more stores or hire more people.
“The full impact of this ruling may not be known for years,” Patinkin argues. “That is a risk not worth taking.”
The NLRB has defended the “joint employer” decision by stating that franchisors have too much control over the independent franchisees they contract with for them to be considered their own operations.
As the NLRB argued, “Through its franchise relationship and its use of tools, resources and technology, [franchisors engage] in sufficient control over its franchisees’ operations, beyond protection of the brand, to make it a putative joint employer with its franchisees, sharing liability for violations of our act.”
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