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Why the NLRB is assaulting the franchise industry

In the U.S. there are two primary ways to capitalize rapid business expansion beyond internal financial resources: 1) outside investors, including going public; 2) franchising. This article is about the latter being in jeopardy.

Here are the basic steps of the franchise model:

1.  An entrepreneur-turned-franchisor turns the best practices proven at the mothership operation into licensed intellectual property (IP).

2.  Independent franchisees purchase this IP and agree to follow rules prescribed in the franchise agreement about how the “product” is presented to the marketplace, like signage, branding and ingredients.

Everything else, including employee hiring, management and firing, is the sole discretion of the franchisee, who succeeds or fails based on ability and local circumstances.

As the headwaters of modern franchising, the U.S. is the global leader in this business expansion model, with more than 3,000 franchise options in over 75 industries. And almost a million franchise establishments - all small businesses - employ almost 10 million people and generate roughly 5% of the U.S. economy. Indeed, franchising has been a big part of the American Dream for thousands of entrepreneurs on both sides of the franchise agreement for over 150 years.

Alas, recent actions by the National Labor Relations Board (NLRB) could put this part of the American Dream in jeopardy. In labor violation complaints against McDonalds, the NLRB says it intends to treat the franchisor corporation as joint employer with its thousands of franchisees. It gets worse: According to Kent Hoover, Washington Bureau Chief for American City Business Journals, “The NLRB as a whole may adopt this standard for all businesses.

Connecting franchisee employees to the franchisor corporation is not only technically flawed, but it serves no benefit for either entity, employee or customer. So what is motivating such an unprecedented deviation in the treatment of the franchise industry by the NLRB? Two words: unions and Obamacare.

As another straw man for the Obama administration, the NLRB pursuing this assault on franchises gives something to unions in return for the president opposing the XL Pipeline, which the unions want. With this single ruling changing the definition of a franchise employee, it would be much more feasible for unions to organize down to workplaces at America’s last mile, like the local burger and pizza franchise.

Moreover, since franchisees typically don’t have enough employees to fall under Obamacare’s employer mandate, the same ruling would serve to eliminate that distinction.

The NLRB must not be allowed to disrupt the proven and productive relationship between franchisor and franchisee. The franchise model produces entrepreneurship, which produces economic growth, which produces the American Dream.

Write this on a rock … Tell your Congressional delegation to stop the NLRB’s assault on franchises.

RESULTS: Who should own the Internet?

The Question:

The Net Neutrality debate is about who controls the Internet: businesses through competition and contracts, or government by turning it into a utility. What do you think?

2% - The government should be in control of the Internet.
74% - The government should leave the Internet alone.
19% - There should be a way to balance control between these two.
5% - Undecided.
Jim’s Comments:

Should the Internet become a utility?

As you may remember, I’ve been reporting on the Net Neutrality issue for over a decade, including all the significant players in the debate.

Most reasonable people agree that one of the reasons the Internet has been such a phenomenal success is because it has been so lightly regulated. However, as I reported recently, President Obama has taken executive steps to make the Internet a public utility, subject to all sorts of government oversight.

When we asked our small business audience what they thought about this plan, almost three-fourths reject the president’s idea, with only 2% who think his plan is good.

One reason for this overwhelming response against the president is because small business owners have benefited on many levels, directly and indirectly, from an unencumbered Internet. And since over half of the U.S. economy is produced by small businesses, the president should pay attention to what this sector thinks.

In case you missed them, here are links to three articles I’ve written about the president’s  behavior regarding the Internet.

Why you should care about the net neutrality debate

If you like your Internet, you may not be able to keep it

Obama’s Internet words don’t match his actions

President Lincoln’s leadership continues to impress

This month marks the 206th birthday of America’s 16th president, Abraham Lincoln’s life and hard times continue to inspire generation after generation of leaders and followers so much that 150 years after his death Honest Abe is still one of the most important individuals in the history of the United States.

Lincoln’s story is especially important for small business owners. Every day along the business ownership continuum, from startup to locking up for the last time, Main Street merchants can draw strength and inspiration from the uncomplicated and honest witness of Lincoln’s character.


CC Photo via Pixabay

But, ironically, beyond his leadership record, we’re perhaps more inspired by how he persevered in the face of painful adversity and professional failures. Consider this partial list of Lincoln’s life challenges:

•  Failed in business in 1831 and 1833

•  Defeated for state legislator in 1832

•  Fiancee died in 1835

•  Had a nervous breakdown in 1836

•  Ran for Congress in 1843 and ’48; lost both races

•  Ran for the Senate in 1855 and ’59; lost both races

•  Ran for Vice President in 1856 and lost

•  Buried two of his four beloved sons

•  Elected President in 1860 as America’s house divided and dissolved into “a great civil war”Reading this list, one is overwhelmed by two emotions:

1.  Sadness - that any one person would experience so many unfortunate things;

2.  Admiration - that in the face of such adversity, anyone could accomplish so much.

Nine years after critics wrote him off as a political player, Lincoln accomplished leadership feats and professional successes that were nothing short of heroic. And for these, history recognizes him as one of America’s greatest presidents.

As 2015 unfolds, if you’re ever tempted to slump into a self-involved pity party because the marketplace licked the red off your candy, go back and reread Lincoln’s failures and setbacks. This time you might feel two other emotions:

1.   Shame - that you allowed yourself to lapse into a funk;

2.   Renewed perseverance – now realizing that, like Lincoln, as long as you’re alive, every new day you show up to work on your business and life could be the day you turn the corner and win the war.

Lincoln taught us that often the difference between bold accomplishment and painful setback is the courage, character and diligence to persevere.

Write this on a rock …

There is no better model of courage, character and perseverance than Abraham Lincoln. Let his life inspire yours.

RESULTS: What are your hiring plans for the year?

The Question:

Employment in the U.S. is still down. What are your hiring plans for this year?

16% - We will definitely be hiring this year.
5% - We’re probably going to be hiring this year.
61% - We only hire as business opportunity dictates.
18% - We will not be hiring this year.
Jim’s Comments:
There was a time when businesses hired in anticipation of opportunity, to make sure there was no delay in serving customers. But as you can see from our response this week, of the almost 80% who have no current plans to hire this year, three-fourths of them are waiting on opportunity to dictate their next step.

Employment growth has historically been one of the indicators of economic optimism. So when barely one-in-five of our respondents are making plans to hire, we have to be honest and admit that doesn’t bode well for the economy in 2015. However, as mentioned above, if good news could start taking over the headlines, those who plan to hire and those who would hire could turn the tide and result in over 80% of small businesses putting more new employees to work.

I’m working on more about this for an upcoming Feature Article, so stay tuned.  Thanks for participating.

Tuesday Challenge: Take a leap of faith

One of the most powerful words in the English language is courage; it’s also a characteristic unique to humans.
The reason courage is a uniquely human trait is because it is typically demonstrated for something other than self - a cause, a country, another human - which is abstract thinking, also unique to humans.  And courage usually manifests itself after the courageous has had time to think about it.  Someone once said, “Courage is fear that has said its prayers.” If you’ve had time to pray, you’ve had time to change your mind.

Courage is certainly not unique to entrepreneurs, but it is a characteristic very much in evidence in our world. And the abstract that we are willing to fight for is our vision.

When you start a small business you demonstrate courage. When you persevere in the face of entrenched paradigms and small-minded naysayers, you demonstrate courage.

And what about failure?  If you fail - nay, when you fail - welcome to the rarified air of the courageous. Since you can’t fail if you don’t try, only the courageous can know failure.