What is in this article?:
- IFA fights Chicago city council on $15 minimum wage proposal
- Franchisees under fire
Trade group suggests the ordinance discriminates against franchisees
The International Franchise Association has voiced its opposition to part of a minimum-wage increase proposal under consideration with the Chicago City Council, arguing that legislators’ misunderstanding of the franchisee-franchisor relationship would unfairly penalize franchisee operators if the $15-per-hour draft ordinance gets adopted.
In a letter to the Chicago City Council, IFA president and chief executive Steve Caldeira suggested that the ordinance discriminated against franchisees by treating them the same as the large, national brands they represent, and not as locally owned small businesses.
“We would appreciate any opportunity to further explain our business model to the council, which runs afoul of decades of legal precedent and flies in the face of common sense before an ordinance of this type takes hold,” Caldeira wrote.
Under the proposal before the City Council, Chicago would require employers with at least $50 million in annual revenue to raise their employees’ minimum wage to $12.50 an hour within 90 days of the law’s passage. The employers would then be required to raise workers’ hourly wages to $15 within one year of the law’s passage.
The draft of the legislation allows businesses with less than $50 million in annual revenue to raise their hourly wages in smaller increments and over a longer phase-in period, beginning with a $12-per-hour wage within 15 months of the law taking effect. After that, those small businesses would be required to raise their hourly wages by $1 per hour every year until they reach the $15-per-hour threshold by 2018.
However, the law currently defines “large employer” to include any franchisee or on-site contractor of a larger brand. “Franchisee” is defined in the draft legislation as “any employer that operates in the city in the restaurant industry under a franchise agreement with the large employer.”
The IFA contends that this stipulation would unfairly demand the same expectations for compliance for a single-unit franchisee as it would for the parent brand.
“The perverse effect of these definitions would be that a small franchisee with a few employees would be forced to pay higher wages than a non-franchised business with gross revenues of up to $50 million,” Caldeira wrote. “Under these definitions, franchisees will be forced to raise their prices or lay off workers due to the unfair and unequal competitive marketplace created by this ordinance.”
Also this week, the IFA lodged a similar criticism of Executive Order 13658, which President Obama issued in February, directing the Department of Labor to increase the minimum wage for workers of federal contractors to $10.10 per hour. The trade association said the order would have a similar unintended consequence for operators of franchised brands that serve military bases, resulting in “lost jobs, less sales and fewer hours for employees.”
“Franchisees that are forced to pay a steeply increased minimum wage, while lacking the flexibility to increase prices, will be unable to renew their contracts, closing franchise establishments and depriving military communities of jobs often held by military dependents,” Caldeira said in a statement.