The National Labor Relations Board (NLRB) rolled out a series of policies in 2015 that redefined the definition of a “joint employer,” disrupting the way franchise businesses independently hire, set wages, manage their staff and run day-to-day operations. Rather than franchisees having full control over these aspects of the business, the joint employer ruling put liability on franchisors for workplace conditions and violations. While the NLRB and employment regulation impact small and large businesses in a variety of ways, we’ve pulled together an overview of some recent developments and how they might impact franchise businesses.
The franchise industry is responsible for $674 billion in economic impact and more than 7.6 million jobs. But placing such liability on franchisors, rather than allowing franchisees to run as independent business operations, has put the franchise industry and business model as a whole in jeopardy. The regulations mean some franchisors have since directly operated more stores on their own, forgone expansion plans or closed stores, leading to decreased franchising opportunities, increased entry costs for franchisees, and fewer jobs. According to Robert Cresanti, president and CEO of the International Franchise Association, the NLRB regulations have been “the mostly costly and burdensome regulations impacting the franchise business model.”
Enter the Save Local Businesses Act
Given the struggles franchise businesses have faced following the NLRB ruling, new legislation was recently introduced to again redefine the meaning of a joint employer. The bill, called the Save Local Businesses Act, is intended to “to provide clarity for local businesses on what it means to be a joint employer.” Unlike the NLRB ruling, Cresanti has called the bill “the most important legislation for franchising in a generation.” Ultimately, the Save Local Businesses Act would free national franchise organizations from liability in their local chains, which set their own hours and policies, and empower franchisees to have more control over their own businesses. The House of Representatives passed the Save Local Businesses Act on November 7, but will have to be passed by the Senate and signed into law by President Trump in order for the NLRB joint employer ruling to be reversed.
What this Means for Franchise Businesses
If the Save Local Businesses Act passes, it will free up franchisors’ time and resources to focus more on expansion and improving the overall franchise brand. But, even if franchisors aren’t held liable for hiring, scheduling and other responsibilities at the franchise location level, they should still put tools in place to set franchisees up for success. For example, franchisors can still be indirectly involved in the hiring process – without needing to sit in on interviews or vet individual employees – by partnering with an integrated hiring and talent management platform.
Franchise Business Talent Management
Partnering with a hiring platform at the corporate level and recommending the platform to franchisees can help franchisors rest assured knowing location owners have everything they need to build their best teams. An integrated hiring platform provides franchisees with a proven, consistent hiring process, which is critical to franchise business success, as many franchisees are first time business owners. Some key steps to an effective hiring process include regularly reviewing applicants, completing multiple rounds of interviews, administering candidate skills tests, completing reference and background checks, and distributing onboarding materials before employees even arrive for day one.
In addition to making it easier for franchisees to hire at their locations, an integrated hiring and talent management platform can provide franchisors with quick insight into hiring activities at each location – including if certain managers are missing steps in the hiring process or a specific location takes longer to hire than others. Such insight enables franchisors to provide franchisees with actionable steps for hiring process improvement, while still empowering franchisees to make hiring and other day-to-day business decisions on their own.
For more tips to help your franchisees make successful hires at each new location, download our eBook, The Best Hiring Practices for Emerging Franchisors.