Recently, 500 franchise leaders descended on Capitol Hill for the 11th Annual International Franchise Association Public Affairs Conference to lobby Congress on a variety of issues that are currently impacting the franchise industry. It was a successful event by all accounts. But the most important lesson demonstrated by those IFA members who took the time to go to Washington and lobby on behalf of the entire industry is that advocacy is a year-round activity. While meeting with members of Congress in Washington is very important, success in Washington takes time, diligence, and focus on the part of any industry trying to make changes in public policy.
For example, increasing access to credit has been a top priority for IFA during this depressed economy. The lack of lending has slowed the growth of the franchise industry in 2009 and 2010, and will likely spill over into 2011 and possibly beyond. That’s why IFA has worked to make changes in the Small Business Administration’s loan programs so that more franchise businesses can benefit from this resource. It seems like a reasonable solution to spur our economic recovery, but things take time in Washington.
A provision included in the recently enacted Small Business Jobs and Credit Act will increase the SBA loan limit from $2 million to $5 million and extend the 90 percent loan guarantee rate through the end of 2010, which will help encourage banks to participate in the SBA program. IFA analysis shows that with the loan limit increase, 450,000 to 600,000 new jobs could be created by franchise businesses.
These provisions did not end up in the bill by chance. IFA’s aggressive lobbying activities by its small business members were instrumental in ensuring that these provisions were included in the final bill. Through congressional testimony at multiple hearings over the past 18 months, intensive media outreach, and paid advertising, along with interaction with White House, Treasury, SBA, and Federal Reserve officials, IFA has worked relentlessly to explain that if more capital was available, franchise businesses could create hundreds of thousands of new jobs. IFA studies show that for every $1 billion in lending, franchise businesses can create over 40,000 jobs and $4.2 billion in economic output.
An important part of the franchise industry’s advocacy efforts is to demonstrate the importance of franchise businesses to local economies all across the country. This was the key message during the IFA Public Affairs Conference, “Franchising Counts,” as members met with congressional representatives. To be successful in these efforts through our public relations and government relations programs, we need credible research to demonstrate our impact.
To develop the information, in 2002 IFA’s Board of Directors approved funding for the first comprehensive report on the economic impact of franchise businesses. The report, prepared by PricewaterhouseCoopers (PwC) for the IFA Educational Foundation, documented the number of establishments, jobs, payroll, and economic output contributed by franchises to the U.S. economy. The report was published in February 2004 and was shared with the U.S. Census Bureau officials to demonstrate economic activity by franchise businesses compared to non-franchise businesses.
Seeing the economic impact of franchising, the Census Bureau agreed to include franchise-related questions in the economic census. This recognition alone shows how, by reaching out to policymakers, you can educate them on behalf of an industry. In this case, for the first time, the federal government agreed to develop comprehensive data on franchise businesses.
IFA members, staff, and PwC staff worked with the Census Bureau staff to identify business sectors that include franchise businesses, to refine survey questions, and to clarify definitions. Eight years later, the first-ever comprehensive report by the U.S. Census Bureau for businesses engaged in franchising was released during IFA Public Affairs Conference in September.
The report is based on the 2007 Economic Census, which covers more than 7.3 million employer businesses in the U.S., in more than 1,000 industries at the national, state, and local level. The Economic Census is conducted every five years. The Census report does not include non-employer businesses (businesses without paid employees).
Businesses operating in 295 industries received the Economic Census survey with a question about whether the business was “operating under a trademark authorized by a franchisor during the year.” Census reported that in 2007 franchise businesses accounted for 10.5 percent of businesses with paid employees in those industries, or more than 453,000 franchisee or franchisor-owned establishments out of a total of 4.3 million establishments.
Additionally, franchise businesses accounted for nearly 17 per cent of total sales for these industries ($1.3 trillion out of $7.7 trillion) and 13 per cent of the total work force (7.9 million workers out of 59 million). Franchise businesses accounted for more than 10 percent of total payroll ($153.7 billion out of $1.6 trillion).
Volume 2 of The Economic Impact of Franchised Businesses was released in 2008, and Volume 3, scheduled for release in February 2011, will expand on the 2007 Census report, with additional data from businesses without paid employees. Like the previous reports, Volume 3 will also include estimates of the indirect impact of franchising due to the products and services that franchises purchase from other businesses. Volume 3 will include measures of both GDP (Gross Domestic Product) and economic output. The report will include breakouts by line of business, by state, and by Congressional District.
This updated economic data, which will be developed after years of efforts with the Census Bureau, will further help in IFA’s ongoing advocacy efforts to ensure that federal and state policy do not adversely impact the franchise industry.
Advocacy is a year-round effort. Whether you own a franchise business, run a franchise company, or are an independent business owner looking to expand, getting involved in grass-roots advocacy activities at the local, state, and federal level will help ensure that the business environment encourages innovation and growth. This is critical for any business to succeed.
Ken Walker, CFE, is chairman of the International Franchise Association and chairman and CEO of Driven Brands.