US franchise association sues a city

The US franchise association has filed a lawsuit in the U.S. District Court to stop the implementation of Seattle’s new $15 an hour minimum wage law. The IFA argues argue that the new law, scheduled to go into effect in April, is unfair because it requires franchisees to implement the $15 an hour wage within three years, whereas most other small business owners have seven years to comply.

The new ordinance introduced by the Seattle City Council classifies local franchises along with big businesses because they are part of a national organisation. But this means that a hamburger franchisee, for example, will have to pay a higher hourly wage sooner than a local independent operator, and that’s not fair, says IFA president and CEO Steve Caldeira.

According to the IFA, ‘The City Councils decision to pass the ordinance could unfairly and unjustifiably destroy the established franchise model in Seattle. Moreover, hundreds of franchised small business owners are being punished simply because they chose to operate as franchised brands. Decades of legal precedent have held that franchise businesses are independently-owned businesses and are not operated by the brand’s corporate headquarters.’

‘This unfair definition of franchises would put many franchisees out of business and would also eviscerate a franchise business model that has been responsible for creating small business opportunities for millions of Americans.’

 The IFA calculates there are 600 or so franchisees in Seattle who between them operate 1,700 locations employing 19,000 workers.

The issue is similar to the controversy in New Zealand over Part 6a of the Employment Relations Act, changes to which were initially drafted to include both franchisor and franchisee employees when calculating a company’s size for the purposes of exemption. The proposal was later amended following strong lobbying by the Franchise Association of New Zealand, although it is still not without concerns for the franchise sector.