We asked the legislative experts at the IFA and the National Restaurant Association to tell us what’s on their radar for 2008. Here’s their collective answer.
Without question, state and local governments have become the hotbed of political activity on issues that affect franchising. Controversial policy debates that once were exclusive to the Washington beltway have migrated far and wide to statehouses, local governments and polling places. This makes our work more challenging and the need more imperative for active involvement at all levels from franchised small businesses.
Franchisees must remain vigilant of any proposals that disregard their standing as small businesses and contributors to local economies. At the core of many of the threats facing the franchise community is the misconception among policymakers about the definition of a "chain." Continuing assumptions that all franchisees are all part of the same parent brand under common ownership could have led to costly consequences last year under several menu labeling proposals, trans fat bans and a mandated health care bill that was fortunately defeated in Maryland. In each case, franchisees would have been treated as any corporate brand and would be responsible for compliance and corresponding increases in labor costs.
Health and immigration
The list of potentially harmful issues for 2008 is extensive, with the health care debate taking center stage. Recent surveys cite health care as the number one domestic issue among Americans. Twenty-three states introduced bills in 2007 that would require employers to provide their employees with health benefits or access to health care plans, or pay a fee to the state.
The failure of Congress to act on comprehensive immigration reform last year prompted states to action with over 1100 pieces of immigration reform legislation. Taking aim at employers, 35 states this year introduced more than 117 bills to prohibit the employment of undocumented workers, impose penalties for employer noncompliance and/or require work-authorization verification beyond what federal law requires. A host of other immigration reform laws could also have indirect and unintended consequences on employers including documentation/ID, driver's licenses, benefits and human trafficking reforms.
The impact of these proposals would hit hard industries that have a tough time finding workers, like restaurants, hotels, lawn care and commercial cleaning services.
Conflicts and contradictions between new state and federal immigration laws are causing confusion. These laws put a burden on business owners concerned about the accuracy of the federal government's database for checking identity documents, and worry that taking on the job of immigration enforcement could open them up to discrimination charges and lawsuits.
Mandated nutrition labeling on menus can be expected again in 2008 at the state and local level, and without grassroots involvement from franchisees and franchisors, will likely be enacted at the state level. In 2007, 14 states introduced menu-labeling legislation. California Governor Schwarzenegger vetoed menu labeling legislation passed by the assembly, noting the costs and lack of fairness in the bill. Legislation passed in King County, Washington, however, and will be implemented on August 1, 2008.
In New York City, a judge ruled that the city had exceeded its authority under its menu labeling proposal and prevented it from enforcing the regulation. The New York City Board of Health filed an appeal with the court but is likely to drop it in favor of a new menu labeling proposal that has recently been introduced which accommodates the judge's ruling and seeks to be enacted in March for all "chain" restaurants of 15 or more nationally. The City of Philadelphia introduced similar legislation.
And some new issues
A number of new issues have surfaced that are certain to pose challenges for franchised companies. Following the lead of the federal government, efforts are underway in states to mandate paid sick leave for employees and expand the Family Medical Leave Act to require extended paid leave for employees. Twelve states are rumored to be pursuing new sick leave laws via ballot initiative. Signatures are aggressively being collected in Ohio, where a coalition plans to submit them for verification to the Secretary of State at the end of the year.
A recent spate of activity at the state level seeking to further complicate the contractual relationship between franchisees and franchisors should also be of concern to the franchised restaurant industry. Several states have considered upsetting the existing balance in the franchise agreement, with Rhode Island the sole state enacting this type of law in the last decade. With a diminished ability to enforce brand standards of quality and performance, all franchised businesses should keep a watchful eye on this activity.
Another hot-button issue is the increasing number of proposed laws relating to credit and debit card security. High profile security breaches have prompted several states to introduce legislation that codifies parts of the Payment Card Industry (PCI) Data Security Standards (DSS) into statute. The unintended consequences of security penalties and ever-changing compliance codes could be especially crippling for restaurant franchisees.
There is much at stake in the coming election year, which is why now more than ever the franchise community must be engaged. It is important to foster early relationships with lawmakers from both sides of the political aisle to ensure that they understand that franchisees are the individuals who develop, own and operate many of the neighborhood establishments that provide employment, serve local customers and contribute to the local economy. In that regard franchisees are no different from the "mom and pop" establishment down the street.
The forecast is cloudy for 2008, but a commitment to political advocacy is sure to bring brighter skies. To receive up-to-date state government affairs information, visit www.restaurant.org/government/state/ or www.franchise.org.
Troy Flanagan is director of government relations for the International Franchise Association and Kelly Benedetti is vice president for State & Industry Relations at the National Restaurant Association.
