Several policies were rolled out by the National Labor Relations Board (NLRB) 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. The change in policy meant that 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.
According to Robert Cresanti, president and CEO of the International Franchise Association, the NLRB regulations were “the mostly costly and burdensome regulations impacting the franchise business model. Placing 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, leading to decreased franchising opportunities and increased entry costs for franchisees, and fewer jobs.
Introducing the Save Local Businesses Act
To address – and overcome – the struggles franchise businesses 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.” The goal of the Save Local Businesses Act is to 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.
We recently wrote about what franchisors should know about the Save Local Business Act at the corporate level, and below, we’ve pulled together an overview of how the legislation, if passed, could potentially impact franchisees.
Increased Franchising Opportunities
Once franchisors are free from liability in local chains, they’ll be more willing to expand and offer new franchising opportunities to aspiring business owners. This applies to both current and aspiring franchisees. For current location owners, in some cases, NLRB policies have made it difficult to open new locations, as franchisors have hesitated to expand – because more locations opened the door to added liability on the franchisor. In the same way, potential new franchisors might have struggled to open a franchise because decreased expansion led to some franchise chains increasing initial entry costs – or not taking on new franchisees.
More Control Over Day-to-Day Operations
If the Save Local Businesses Act is passed, it will return control over day-to-day operations and responsibilities to franchisees. Many franchisees go into franchising with the expectation of becoming small business owners, but the NLRB ruling took away a lot of autonomy from franchisees. New legislation can allow individual franchisees to take back many of the responsibilities of a small business owner – including hiring, training, scheduling and paying employees. Ideally, many franchisees prefer to leverage the franchise brand’s licensed name, trademarked materials and operations manuals – and otherwise run the business on their own, which will be made possible once again with the Save Local Businesses Act.
Even once autonomy is returned to franchisees, this doesn’t mean franchisors need to be completely hands off. Instead, franchisors can take on more of a consultant role and provide franchisees with the tools they need to succeed. For example, franchisors can still be indirectly involved in the hiring process – without needing to sit in on interviews or vet individual employees at each location – by offering franchisees a recommended hiring and talent management platform. This enables franchisees to centralize their hiring, follow a consistent hiring process and hire their best team. Ultimately, this will free up time for franchisees to spend on more strategic tasks to continue growing the business.
For more tips on how to effectively staff your franchise location, download our eBook, Staffing Up For Success: 4 Things To Do When Hiring At Your New Franchise.