Lessons Learned in Franchising in 2018 Robert Cresanti, CFE - - PowerPoint PPT Presentation

Lessons Learned in Franchising in 2018

Robert Cresanti, CFE President & CEO

• Founded in 1960, IFA is the world's oldest and

largest organization representing franchising worldwide

• IFA’s Mission: to protect, enhance and promote

franchising

• IFA members include franchise companies in
• ver 300 different business sectors, individual

franchisees, and suppliers that provide products and services to the industry

International Franchise Association

How did we get to where we are today?

Source: Pew Research

What we learned: major wins are possible

• Passed H.R. 3441, Save Local

Business Act, in the House. 8 Democrats voted in favor, record number in four years

• DOL rescinded its joint employer

guidance in June 2017

• Over 50 in-district events and

meetings have been held with Members of Congress and their local business communities to discuss joint employer

• Met FranPAC fundraising target
• f $1.2 million for the cycle
• Broadened giving to 70/30

Republican to Democratic split

• Saved franchised businesses an

estimated $8 billion in federal tax savings each year as part of TCJA

• Administration rules on AHPs

and Association 401(k)s

• NLRB & DOL rulemaking on

joint employer

• IFA will soon announce

significant economic research as part of the regulatory process

• Introduced H.R. 4473, Veteran

Entrepreneurs Act of 2017, in the House, and S. 2950 companion bill in the Senate

• Introduced H.R. 6695,

Trademark Licensing Protection Act, in the House

• Increased number of states with

proactive joint employer legislation to 19. Fended off discriminatory minimum wage increase in Saint Paul, currently holding the line in NYC

• Multiple events with IFA leaders

and members with the President, Congressional leadership, and cabinet officials including Sec. Acosta, Sec. Mnuchin, SBA Administrator McMahon, and many more

• FASB issued guidance on

financial accounting standards which saved more 104,000 franchises from bankruptcy, and 1.1 million jobs, in the next three years

But there are significant challenges ahead

• A Democratic House and a Republican Senate will likely lead to

greater gridlock for all non-essential legislation

• While there may be areas of bipartisan compromise on infrastructure,

education, and workforce development, many of the bills passed by this Congress will reauthorize important programs or extend the nation’s creditworthiness

• To further muddy the legislative waters, the shadow campaign for the

2020 elections is well underway – More than a dozen Democrats are rumored or announced to be running for their party’s nomination

• At the state level, we can expect similar legislative issues as we expect

at the federal level, namely the opposition to non-solicitation clauses, wage issues, and potential franchise relationship legislation

The 116th Congress

• The Democratic House will aggressively use its oversight and

subpoena powers over federal agencies – including those who have been focusing on franchise issues like joint employment – to slow down the Trump Administration’s agenda

• With a base that largely supports organized labor, House

Democrats will want to forge ahead with so-called “pro- worker” legislation, such as the Workplace Democracy Act or

• ther bills that also codify expanded joint employer standards,

promote a $15 per hour minimum wage, address non- solicitation clauses, or mandate card check.

Key takeaway: build a “Gatehouse Defense”

• IFA has worked to strengthen and increase
• ur relationships with lawmakers on both

sides of the aisle – Increased bipartisan support for our priorities – Blue Dogs, New Dems, and Diversity caucuses all key to defensive posture

• IFA has strengthened our relationship with

incoming senators Josh Hawley in Missouri, Mike Braun of Indiana, Rick Scott of Florida, and Martha McSally of Arizona

• Senate map in 2020 favors Democrats

– GOP defending demographically changing states like GA, NC, CO where Trump’s approval is lower than 2016

• Continue to work closely with the

administration on regulatory changes that benefit franchise businesses

• We anticipate continued positive regulatory

news from the administration, particularly related to the joint employer standard

These are important successes and strategies, but we can’t do it without you!

Text “FAN” to 52886 to join the Franchise Action Network and protect franchising across the country!

Market Metrics: Unit Growth

• 4.0%
• 2.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%

• 50,000

100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* % Change Units Food Non-Food Total Unit Change

* Including estimates due to a lag in data availability. Courtesy of FRANData

New Brands Entering the Market

50 100 150 200 250 300 350 400 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Courtesy of FRANData

• 65% of brands entering the market are in nonfood

and service sectors

Top Sectors for New Franchise Brands

20 40 60 80 100 120 Cosmetic Aids/Services Pet-Related Fast Food - other Frozen Desserts Health - General

Top Ten Sectors for New Franchise Brands

Courtesy of FRANData

M&As in Franchising

10 20 30 40 50 60 2012 2013 2014 2015 2016 2017

M&As by PE Firms in Franchise*

$0 $50 $100 $150 $200 $250 $300 $350 $400 $450 200 400 600 800 1,000 1,200 1,400 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 Deal Volume Aggregate Deal Value (bn)

* Only include PE firms acquiring franchisors.

Courtesy of FRANData

February 24-27, 2019 | Mandalay Bay, Las Vegas | www.franchise.org/convention

Thank You