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IFA President & CEO Matthew Shay Submits Policy Recommendations to help Franchise Businesses
WASHINGTON, Nov. 18, 2009—International Franchise Association President & CEO Matthew Shay today will present IFA’s public policy recommendations during a White House sponsored Small Business Financing Forum to help franchise businesses create more sustainable jobs.
Treasury Secretary Tim Geithner and Small Business Administrator Karen G. Mills convened the forum on small business financing issues to explore new ideas and strategies for expanding access to financing for small businesses. The event, which President Obama called for last month during the announcement of his proposal to increase financing, included many of IFA’s recommendations. The forum is being billed as part of a larger effort to help small businesses grow, create new jobs and contribute to the economic recovery and to challenge the private sector to increase lending to small businesses.
During the invitation-only event attended by lenders, policymakers and stakeholders, Shay outlined IFA’s proposal, “Solutions for the Economy: Leveraging the Strength of Franchising to Expedite Job Growth.”
“We appreciate the Administration holding this event and the recognition by many policymakers of the importance of franchise businesses in our economic recovery,” Shay said. “We recommend that before new stimulus measures are passed, Congress quickly enact the SBA program enhancements the President called for last month, including a new maximum loan limit of $5 million. This one action item could create 650,000 new, sustainable jobs.”
The IFA policy paper included the following recommendations:
Increase Small Business Access to Credit
The IFA is recommending a renewed emphasis on loan programs for small business start-ups, expansions and acquisitions that will promote faster job creation and lead to a stronger recovery.
Fifteen percent of all small business franchisees in the United States own between two and five units, and this category of franchise ownership is the fastest growing. If these businesses can grow at the five percent annual rate that we saw between 2001 and 2005, franchising will grow 16,250 new businesses per year. These new businesses will create 243,750 to 325,000 jobs (assuming 15-20 direct jobs per store) plus an additional 245,000 to 325,000 indirect jobs. Therefore, a larger loan limit, $5 million up from $2 million, will enable some of these franchise small business owners to expand into new markets and help the U.S. create between 450,000 to 650,000 new jobs within the next 12 to 18 months.
Eliminate Tax Uncertainties for Small Business
Measures enacted in 2001 and 2003 provided essential tax relief for small businesses, and helped to kick start the economy after the attacks of September 11, 2001. This tax relief, however, is scheduled to end after 2010. Without action by Congress, for example, taxes will increase for 116 million income tax payers by an average of $1,800. Moreover, 27 million small business owners will face an average increase of $4,066.
In addition IFA recommends enacting a permanent solution to the estate tax; extending the current capital gains tax rate of 15 percent, and permanently shortening the depreciation schedule for restaurant buildings to 15 years. If tax relief is permanently enacted, franchised businesses will be better positioned to invest in growth strategies that create more jobs.
Reduce the Cost of Health Insurance
There is no doubt that the status quo is untenable and makes health insurance unaffordable for many small employers and their employees. For several years, the IFA has recommended legislation that would enable small employers to band together through national associations or franchise systems to purchase health insurance. Federal and state regulations often keep affordable healthcare coverage from being available to small employers or individuals. IFA is committed to any solution that increases access, improves quality and decreases the cost of health insurance.
Support Veterans as Small Business Owners
IFA recommends enhancing franchise business opportunities for returning military veterans by passing two key pieces of legislation.
Help Veterans Own Franchises Act–The bill establishes a tax credit for franchisors equal to 50 percent of the total franchise discount offered to veterans, capped at $25,000 per unit. The military veteran franchisee would also realize a tax benefit of 25 percent of the remaining franchise fee.
Veterans Self-Employment Act – This legislation would allow veterans to use a portion of their Montgomery GI education benefits to defray the training costs associated with purchasing a franchise agreement.
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About The International Franchise Association
The International Franchise Association, the world’s oldest and largest organization representing franchising, is the preeminent voice and acknowledged leader for the industry worldwide. Approaching a half-century of service with a growing membership of more than 1,250 franchise systems, 10,000-plus franchisees and more than 500 firms that supply goods and services to the industry, IFA protects, enhances and promotes franchising by advancing the values of integrity, respect, trust, commitment to excellence, honesty and diversity. For more information, visit the IFA Web site at www.franchise.org.
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