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IFA Asks Chicago City Council to Treat Franchisees as the Small Businesses They Are

Requests Removal of Discriminatory Provision in Minimum Wage Bill  

CHICAGO, June 17, 2014 – International Franchise Association (IFA), a Washington, D.C.-based trade group, President and CEO Steve Caldeira, wrote a letter to the Chicago City Council and Mayor Rahm Emanuel urging them to remove a provision in a bill to raise the minimum wage that would discriminate against franchisees. 

"Franchisees are locally owned, small businesses not large, national businesses as the legislation suggests. Giving non-franchise small businesses extra time to increase their wages, but forcing franchisees to raise their wages along with large companies is unfair and unconstitutional" Caldeira says. 

IFA and five franchisees recently filed a lawsuit in U.S. District Court in Seattle seeking to block Seattle’s new law to increase to the city’s minimum wage to $15 per-hour. The complaint alleges the ordinance illegally discriminates against franchisees and improperly treats them not as the small, locally-owned businesses they are, but as large, national companies.   

Below is Caldeira’s letter: 

Sent via email and private delivery 

International Franchise Association Opposes Minimum Wage Proposals That Would Unfairly Discriminate Against Franchisees  

Members of the Chicago City Council: 

On behalf of the International Franchise Association (IFA), I write to express our opposition to the “Chicago Minimum Wage for Large Employers Draft Ordinance” dated May 28, 2014. Our opposition is to the language that unfairly and unjustifiably discriminates against franchisees by treating these small, independent business owners as large employers, not the small businesses that they are, simply because they choose to operate as a franchise. 

Our primary concerns with the ordinance lie in the following definitions: 

(f) “Franchisee” means any employer that operates in the city in the restaurant industry under a franchise agreement with large employer. 

and 

(g) (3) “Large Employer”shall include any franchisee or on-site contractor of a large employer, or airport employer, regardless of the revenue level of the franchisee or on-site contractor of the large employer, or of the airport employer. 

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. Under these definitions, franchisees will be forced raise their prices or lay off workers due to the unfair and unequal competitive marketplace created by to this ordinance. 

Likewise, the growth of new franchises within the boundaries of Chicago will drastically slow.  What new business startup is looking to enter a market where they would be subject to a drastically higher wage than their direct competitors?  Also, franchisors will be less willing to offer new franchise locations to potential owners of single establishments, as they will not be able to survive in such a skewed market. The net result will be a higher concentration of corporate owned and operated stores, eviscerating a business model responsible for creating small business ownership opportunities for millions of Americans within the city’s newly created “statutory walls.” 

As you are likely aware, the City of Seattle recently enacted a similar ordinance that discriminates against franchisees. However, it did not contain an unjust secondary provision that further penalizes franchisees whose businesses operate as restaurants. As a result of the Seattle ordinance’s unfair and discriminatory treatment of franchisees, the IFA filed a lawsuit in order to protect Seattle’s independent franchise owners  from the city’s violation of the the Equal Protection Clause and the Commerce Clause of the U.S. Constitution. 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. 

As you consider the draft ordinance, the IFA respectfully urges you not to disrupt the business format model that provides 228,871 jobs to local Chicago residents and helps franchise owners - including women, minorities and veterans - achieve their entrepreneurial dreams. 

Rest assured, the IFA recognizes the sincerity of your initiatives to reduce income inequality in Chicago, and we do not wish to thwart your efforts to create economic opportunity for Chicago’s citizens.  We respectfully request that minimum wage increases be applied fairly and evenly to all of the city’s small businesses, including the franchises that make up such an important part of the city’s small business community. 

Please do not hesitate to contact me for further information or assistance. 

Sincerely, 

Stephen J. Caldeira, CFE
President & CEO
International Franchise Association
 

The International Franchise Association is the world's oldest and largest organization representing franchising worldwide. Celebrating over 50 years of excellence, education and advocacy, IFA works through its government relations and public policy, media relations and educational programs to protect, enhance and promote franchising.  

ENC: 

The Seattle Times, Editorial: Redefine franchises under Seattle’s minimum-wage proposal 

The Seattle Times, Editorial: Seattle’s monitored minimum-wage experiment should be revisited 

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About the International Franchise Association
The International Franchise Association is the world's oldest and largest organization representing franchising worldwide. Celebrating over 50 years of excellence, education and advocacy, IFA works through its government relations and public policy, media relations and educational programs to protect, enhance and promote franchising. Through its media awareness campaign highlighting the theme, Franchising: Building Local Businesses, One Opportunity at a Time, IFA promotes the economic impact of the more than 825,000 franchise establishments, which support nearly 18 million jobs and $2.1 trillion of economic output for the U.S. economy. IFA members include franchise companies in over 300 different business format categories, individual franchisees and companies that support the industry in marketing, law and business development.
 

1501 K Street, N.W., Suite 350   Washington, DC 20005  USA 

Phone: +1 202/628-8000    Fax: +1 202/628-0812     www.franchise.org