Franchise ruling keeps small operators out of small business

During the past two years, National Labor Relations Board took the unprecedented steps to rewrite a decades-old joint-employer standard, when it concluded franchisors are “co-employers,” along with its franchisees.

The franchise business model’s tenant relies on the principle that franchisees are independent business owners, who invested their savings in the business. Franchisee and the franchisors share a brand, standards of quality and service, which is the primary reason for a franchisee wanting to be in a franchised business.

Regardless of any analysis, the over-riding issue is whether any franchisor or business would have the ability to absorb the tremendous exposure and liability, costs of which will surely send them into financial abyss.

The net effect of the “ruling’ is total breakdown of the franchise business model as it exists today, forcing smaller operators out of business, or dramatically raise the costs of remaining in business. The change in franchisee make-up will be the financially stronger individuals allowed into the franchise pool.

The underserved, disadvantaged are carved out, as they will not “qualify” to own a small business. The economic impact one would guess would be tremendously negative. The results are a tremendous disservice to all it affects.

This story was originally published January 11, 2017 at 12:43 PM with the headline "Franchise ruling keeps small operators out of small business."