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Updates


Franchise Industry Poised for Growth in 2016 Despite Regulatory Threats

For the sixth consecutive year, the franchise industry is expected to outpace non-franchise business growth in 2016, according to the Franchise Business Outlook: 2016 released this week by the International Franchise Association.

“We are forecasting that for the sixth consecutive year, franchise businesses will grow at rates that exceed the economy-wide growth of industries where franchises are concentrated,” said IFA President & CEO Robert Cresanti. “Franchise businesses are showing tremendous capability to provide new jobs for working families and new businesses for first-time business owners across all sectors in local communities, despite the fact that franchisees are facing many new regulatory threats at all levels of government.”

Local franchise business owner, Robert Dorfman echoed these sentiments about the franchise model when he told CNBC that the franchise model, “gives small business people like myself a great opportunity to leverage some brand equity, which is very difficult to create over a short period of time, and to use that brand identity to then take that entrepreneurial spirit and control my own destiny.”

Click here or on above image to view the segment.

While the franchise industry is on track for record growth this year, Cresanti added that government regulations such as the National Labor Relations Board (NLRB) decision to treat franchisors and franchisees as “joint employers” has the potential to erode growth and change the business model over the long term.

“Franchise businesses’ resiliency in the wake of these threats is a byproduct of the strength of the franchise model itself. However, surveys and independent research show that regulations like the new joint employer concept imposed by the NLRB introduces complexities into the day-to-day operations of local franchise owners and jeopardize expansion plans,” Cresanti stated.

Cresanti isn’t the only one concerned with the implications these adverse regulations and potential legislation may have on franchising. Dorfman who is set to open his second World of Beer location in Virginia this March is also concerned about what the current regulatory environment might do to his growth plans. “I am a strong proponent of providing for all of my employees, making sure they’re well compensated, they have appropriate benefits, they feel great about the environment in which they work, however, the Affordable Care Act is going to put a serious financial limitation on myself as a small business person.”

While franchising remains a viable economic engine to the overall economy, future regulatory uncertainty threatens to stifle franchising’s full growth potential and job creation. “With continued job gains, consumer spending will accelerate creating another strong year of growth for franchise businesses," said IHS Economics Senior Economist Jim Gillula. “But the uncertainty surrounding this new NLRB standard has the potential to discourage job creation for franchises and millions of businesses that use licensing agreements.”

Date: 2016-01-22

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