March 31, 2008 // Franchising.com // WASHINGTON, D.C.– Franchised small businesses would face a devastating patchwork of local mandates if a San Francisco mandated health plan is allowed to stand, the International Franchise Association said Friday in a friend-of-the-court brief filed with the U.S. Ninth Circuit Court of Appeals challenging the city's ordinance demanding minimum health-coverage spending.
IFA, the world's oldest and largest organization representing the rapidly-growing franchising industry, said the mandate could create a negative impact on the growth and development of multi-unit franchise establishments. There are nearly one million franchise establishments in the United States, 97,000 of which operate in California, creating 1.1 million jobs, according to a recent IFA Educational Foundation study.
At issue is an ordinance adopted by San Francisco last year which would force most of the city's employers to spend a minimum amount each quarter to pay for workers' health coverage. The mandate was ruled invalid by a federal district court since it over-reached the city's authority under federal law.
"With the challenges franchised small businesses already face from excessive taxation, regulatory burdens and an economy struggling to keep its feet, this mandate escalates the threat to the survival of many businesses," said IFA Pres. and CEO Matthew Shay. "No one knows better than small-business owners the need for affordable health coverage. But such a mandate would have just the opposite effect. It would force some employers to have to reduce their workforces because they couldn't afford to meet the demands."
Joining IFA in the brief to affirm the ruling were the Society for Human Resource Management and the National Association of Manufacturers.
According to statistical data released earlier this month by the IFA Educational Foundation, the franchising sector of the economy expanded by more than 18 percent from 2001 to 2005, adding more than 140,000 new businesses and 1.2 million new jobs to the nation's economy. Conducted by PricewaterhouseCoopers, the research showed that the rate of employment growth among franchises was three times higher than for the economy as a whole.