Ruling creates ‘disincentive’ for franchisees
 
Ruling creates ‘disincentive’ for franchisees
09 SEPTEMBER 2015 8:11 AM
The entrepreneurial nature of hotel franchising as we know it is set to change, post-NLRB ruling.
When I started working in the hotel industry nearly two decades ago, I figured out pretty quickly that affiliating with a franchise was the fastest, most effective way to launch a new hotel in a market and have that property be successful over the long run. 
 
By becoming a franchisee, I was able to associate with well-known, well-respected brands that represented quality in the consumer’s eyes, and that helped jump-start my revenues—well worth the investment. Then it was up to me to run my business—to hire my employees, set my prices and ensure exceptional service to the guests in my hotels. 
 
Today my company owns or manages 17 hotels in primary, secondary and tertiary markets in seven states. I also currently serve as chairman of the IHG Owners Association, an organization that advocates for thousands of owners and franchisees of InterContinental Hotels Group (IHG) hotel brands such as Holiday Inn, Holiday Inn Express and Crowne Plaza around the world. The members of this association, like me, are entrepreneurs and small business owners who followed the franchising path to fulfill their dream of operating their own businesses as a means of providing for their families while contributing to the economy of their local communities.  
 
At least, that’s the way the franchising model has operated over the past 30 years or so. But the recent ruling issued by the National Labor Relations Board has the potential to unravel the franchisor/franchisee relationship by redefining it. The NLRB decision in the Browning-Ferris Industries of California case greatly expands the definition of “joint employer.” If this new standard is applied to the franchise business model, it would mean small business owners who operate franchises could lose their ability to make decisions about what’s best and fair for the employees who work for them.  
 
What this means for small businesses
This new direction of the NLRB could create a serious disincentive for operating a small business under a franchise agreement. Why would anyone want to invest their money and hard work into a business over which they will have limited operating control? 
 
This potential disincentive would limit the growth of small businesses and therefore the jobs they create. According to the International Franchise Association, there are more than 780,000 franchise establishments supporting nearly 9 million jobs.
 
Franchised businesses generate $890 billion of economic output for the U.S. economy and represent 3 percent of the Gross Domestic Product. The IFA projects that franchised businesses will increase and create jobs at a faster pace than the overall economy in 2015, as has been the case in each of the past four years. 
 
What’s more, expanding the definition of “joint employer” could ultimately increase individual owners’ cost of doing business, as a result of increased regulation and higher fees. Owners can also expect to see increased activity by unions seeking to organize the employees of individual franchisees through the franchisor.
 
As the new “joint employer” definition is applied and the issue inevitably makes its way through the courts, we, as small business owners, must continue to ensure our voice is heard. No one is better positioned than we are to provide a first-hand account to our elected representatives of the benefits the franchise business model brings to the economy, to small business owners and to workers. 
 
Kerry Ranson, a 21-year veteran of the hospitality industry, is Chairman of the IHG Owners Association. He is also President and Chief Operating Officer of Expotel Hospitality Services, a New Orleans-based hospitality ownership and management company. 

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