BY EDDY GOLDBERG
Regulatory Unburdening ?
An end to uncertainty — but what lies ahead ?
Headline : “ Donald Trump ’ s Cabinet Selections Signal Deregulation Moves Are Coming ” — Wall Street Journal , Dec . 9 , 2016 , p . 1
Uncertainty is the bane of business . Although the regulatory environment of the past few years seemed bent on attacking the franchise business model ( the NLRB ’ s joint employer decision , the DOL ’ s new overtime rule , and steep minimum wage hikes , to name just three ), the early drama and politics of the incoming administration seem to be creating a new kind of uncertainty . At least , as the headline above indicates , the prevailing feeling is that the legislative / regulatory environment is about to move in a more favorable direction for business in general and franchising in particular .
“ Uncertainty is always uncomfortable . What we
Zane Tankel don ’ t know is the scariest ,” says Zane Tankel , CEO and chair of Apple-Metro , which operates 36 Applebee ’ s and two Pizza Studios in and around New York City — including the world ’ s largest Applebee ’ s , in Times Square . “ What we do know is that Andy Puzder being Secretary of Labor will be friendly . He certainly knows the restaurant business .”
“ There will be somebody running the department that ’ s met a payroll . I think that will help ,” says John Metz , a multiunit franchisee and franchisor of Hurricane Grill & Wings .
Keith Miller , a Subway franchisee in Northern California and chair of the Coalition of Franchisee Associations , said he was in a good mood on Election Day — not because of who won or lost , but because no matter how it turned out , at least things would be more certain . “ As a policy wonk I knew what I ’ d be dealing with ,” he says .
Michael Lotito , a franchise attorney who co-chairs the Workplace Policy Institute at Littler Mendelson and is labor counsel to the IFA , echoed their concerns about having to make decisions , such as setting next year ’ s budget or adding units , when the ground rules are changing . “ Business uncertainty will continue ,” he says . “ The trend line is positive , but the timeline is not at all clear .”
As 2017 begins and the Republicancontrolled Congress and new president settle in , we look at some of the thorniest legislative and regulatory threats on the minds of franchisees and franchisors .
Minimum wage “ I ’ m not opposed to raising wages , but how you do it is more what I ’ m worried about ,” says Gary Robins , a Supercuts franchisee with 51 salons and 400 employees . Raising the minimum wage significantly in one fell swoop , from the federal minimum of $ 7.25 to $ 15 an hour , for example , is what raises the ire of employers , who suddenly find their labor costs more than doubling at the turn of the calendar .
The push for large hikes to minimum wages across the country “ will be more detrimental than people think ,” he says . “ There ’ s no way to do that .” Robins favors a phased-in approach as a more sensible route to addressing income inequality , while allowing employers a longer window to adjust without having to lay off workers . Massachusetts , for example , phased in its 2017 minimum wage of $ 11 / hour over three years , boosting it to $ 9 in 2015 and $ 10 in 2016 .
“ A higher minimum wage is technology ’ s best friend ,” says Tankel . “ As wages go up , people just replace that wage with technology .” In fact , as it has become increasingly clear , the more the minimum wage rises for unskilled , entry-level workers , the more businesses will turn to technology . Examples include online ordering , in-store kiosks , and tabletop ordering with tablets — even hamburgermaking machines .
In New York over the past year , faced with a wage hike for tipped workers to $ 7.50 / hour as of December 31 ( increasing to $ 10 / hour by the end of 2018 ), Tankel was forced to reduce his workforce from more than 3,500 to about 3,000 . He tried to do it through attrition , but there were layoffs . “ It breaks my heart to get rid of anybody . We ’ re very people-oriented ,” he says .
“ What ’ s happening is that labor is being taken out of practically everything we do ,” says Metz . “ Jobs are getting eliminated . Hopefully we will find new jobs .” As a franchisee , Metz has 40 Denny ’ s with 2 more in construction , 1 Dairy Queen , and 1 Marriott Residence Inn ; and as a franchisor about 75 Hurricane Grill & Wings ( 6 corporate ), plus his new fast casual brand , Hurricane BTW .
Metz says the variation in minimum wages across the U . S . for tipped workers is a particular problem for restaurant operators .“ I ’ m in favor of a federal minimum wage . If they want to move it up , do it on the federal level , not on a state or local
John Metz level . Why ? Because I ’ m in the full-service restaurant
business . With a federal minimum wage , I preserve my tip credit . With a state minimum wage above the federal level , I lose that .” Metz has a simple solution : abolish tipping and raise the minimum wage for
54 MULTI-UNIT FRANCHISEE ISSUE I , 2017