The Ultimate American Business Model: Let's keep working to protect franchising

Even in a country divided politically, one thing can unite us all: The state of franchising remains strong. The growth of our model continues to outperform the broader economy, creating upward mobility and countless opportunities for individuals, families, and communities.

At the International Franchise Association (IFA), we have been working in overdrive to protect, enhance, and promote franchising.

The road hasn’t been easy. Working alongside our partners and members, we have slayed a “three-headed monster” of policy threats. These efforts have created a better environment for our franchise community, which will always remain our North Star.

First, there was the threat of joint employer. The National Labor Relations Board (NLRB) made clear it intended to replace the workable 2020 joint employer standard with the previous administration’s version—the one that cost franchises $33.3 billion per year, eliminated hundreds of thousands of jobs, and increased lawsuits by 93%.

When the joint employer proposal arrived, we hit back with a comprehensive two-track plan. First, mobilizing our members and congressional champions, we helped push a repeal effort—known as a Congressional Review Act—which passed both chambers of Congress in bipartisan fashion.

When President Joe Biden issued a misguided veto, the second track of our strategy bore fruit: A federal judge in the Eastern District of Texas struck down the expanded joint employer, citing the NLRB’s overreach and the economic consequences the rule would bring. The legal battles continue, and we’re not completely out of the woods, but for now, the appropriate 2020 joint employer rule remains the law of the land, and that’s a positive for franchising. 

The second head of the monster was California’s Fast Food Recovery Act (AB 257), one of the most detrimental bills franchising has ever faced, singling out the state’s thriving quick-service restaurant sector and paving the way for sectoral bargaining.

Despite the Golden State’s unfriendly business climate, we helped mitigate the most problematic components of the legislation, most notably removing the joint-employer provision (AB 1228). The power of the unelected fast-food council was watered down, and the minimum wage was reduced from $24 to $20.

While the damage could have been worse, the implementation has been harmful. During the first two months of the $20 wage hike, at least 10,000 jobs were lost.

Finally, there is the Federal Trade Commission (FTC), which, under the leadership of Chairwoman Lina Khan, has aggressively targeted a slew of companies and industries. In March 2023, the FTC opened a Request for Information (RFI) on franchise agreements and franchisor business practices. By the nature of the questioning, it was clear that the effort was designed to elicit negative responses toward franchising.

To proactively address the FTC’s concerns and offer a constructive path forward, IFA assembled working groups of franchisors, franchisees, and suppliers along with attorneys, consultants, and third-party franchise sellers. The groups focused on improvements to the presale process. Over the course of a year, we developed a series of commonsense policy recommendations to strengthen the business model.

The guiding principle of these recommendations is providing a prospective franchisee with key information necessary to conduct due diligence aligned with the significance of their investment before making a franchise purchasing decision.

Those who attended our 2024 Legal Symposium in Washington heard about our Responsible Franchising principles and how these new recommendations are critical components of that effort. They are a concrete example of staying on offense to proactively tell our story and set our policy goals on our terms, rather than let our opponents define the rules of the game.

As U.S. Rep. Kevin Hern, R-Okla., co-chair of the Franchise Caucus and keynote speaker at our Legal Symposium, wrote in a recent op-ed for The Hill, “Policy recommendations put forward by the International Franchise Association, the official trade organization for franchises, offer commonsense improvements to the presale negotiations between a franchisor and prospective franchisee—all to help the franchisee understand exactly what they’re investing in.”

The future of potential FTC changes hangs in the balance of the November election, but whatever happens, we will continue advocating for Responsible Franchising because it is imperative to the future of the business model. 

After all, the threat level remains high. Rest assured that we will stay proactive and vigilant against the Department of Labor’s overtime rule and its new independent contractor standard as well as continued threats on the state level brought forward by our opponents. We will also keep telling your stories to the world. Doing so will create a better environment for your businesses to thrive, which is our job and top priority.

There is no better time to do this than in Washington, D.C., this September at the IFA Advocacy Summit. Join us—just months before this year’s pivotal election—to make sure lawmakers hear directly from you before making changes that can define the way you do business.

Franchising is the ultimate American business model, and we need to ensure it stays that way.

Matthew Haller is president and CEO of the International Franchise Association.