Cresanti Op-Ed: Small Business Franchises Need Advocates On Their Side


In the fervor to point out what’s wrong with government we should not forget that some forty years ago this week the U.S. Small Business Administration’s Office of Advocacy was launched to champion America’s small businesses, which now represent 99 percent of all U.S. employer firms. The office has been a vital resource offering financial, managerial and contracting support to small business owners, many of whom are entrepreneurial franchisors and franchisees.

In recent years, the office also has highlighted the essential need for federal regulatory reform – the urgency of which grows with every rule that’s too quickly finalized in Washington, while failing to take into account the full impact it may have on the small business and franchise community.

In today’s environment, it’s by no means easy to be the owner of a small business or a franchise. Local business owners often act not only as the leader and day-to-day manager of an operation, but also as the sales, marketing, finance and HR leads — among other roles.

Franchisees and other small business owners increasingly find themselves bogged down by regulations that are overwhelming time drains, difficult to navigate and come with unmanageable compliance costs. Federal regulations alone cost businesses just under $10,000 per employee annually, according to the National Association of Manufacturers, and the total regulatory cost burden on the typical U.S. business comes in at more than $230,000 per employee each year. Taken together, the scope and complexity of many regulations is stifling the American economy to the tune of $2 trillion —annually. How can we expect our small business economy to thrive when its members are constantly being hit with unexpected regulatory costs?

Franchising has always been a uniquely accessible pathway for someone with limited previous business experience a chance to be their own boss. It’s also the best way for entrepreneurs looking to grow their businesses and expand the reach of their brands. And franchising has been growing faster than non-franchise businesses since the last recession. Yet unclear regulatory rulings—such as the National Labor Relations Board’s (NLRB) joint-employer interpretation—make these dreams ever harder to achieve. They make the dream of opening up new storefronts seem insurmountable to many aspiring entrepreneurs. They make the opportunity of creating new jobs in local communities too risky for small business owners to pursue.

This is exactly what business owners and industry leaders have tried to tell Washington. Last week, Ciara Stockeland, founder of North Dakota based MODE designer outlets, and Lynn Berberich, owner of Maryland based BrightStar Healthcare, testified before the Senate. Each of these women has used the franchise model to grow their businesses, provide for their families, and give back to their communities. The new NLRB joint-employer definition, if unchallenged, could stop them from continuing to expand.

Ultimately, the job of regulatory compliance often falls to small business owners themselves. Confusion abounds in navigating and reconciling state, local and federal regulations as they relate to employment, labeling, licensing and many other minute matters. On top of those regulations, new rules are pushed through every day, often times without knowledge of or even consideration of the small business implications.

Ultimately, meaningful reform of the regulatory process — reform that ensures the engagement of small businesses early and often, sound cost-benefit analysis and straight-forward language — is needed to bolster small business growth. The Small Business Administration exists to be an ally to American entrepreneurs, and small franchises need their aid now more than ever on regulatory reform.

The SBA must stand with small business franchisors and franchisees and appeal to Congress to improve, reform and remove senseless barriers. A more level playing field for small business, a greater number of new businesses competing for good workers, raising wages and profits simultaneously, and a more prosperous economy for every American would be the result.

Robert Cresanti is president and CEO of the International Franchise Association, whose members include franchise companies in more than 300 different business format categories, individual franchisees and companies that support the industry in marketing, law, technology and business development.


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