The International Franchise Association Working on Many Fronts to Help Small & Mid-Size Enterprises

Some of the biggest names in small business are franchise enterprises.  There are more than nine hundred thousand franchise establishments in the nation! These franchise businesses generate two point three TRILLION dollars in economic output and create twenty one million American jobs. The International Franchise Association, also known as IFA, is the world’s oldest and largest organization representing franchising! IFA represents thirteen hundred franchise systems and more than ten thousand franchise owners.

The IFA is among the business organizations taking part in the “Employers for a Healthy Economy” media campaign to increase awareness about issues facing employers. This is one of the commercials now running from the business advocacy group.

IFAssociation Chairwoman Dina Dwyer-Owens testified on behalf of small business and franchise owners earlier this year at a House Small Business Committee hearing on expiring tax incentives. Dwyer-Owens, chairwoman and CEO of The Dwyer Group in Waco, Texas, told committee members the more incentives and tax credits available, the more jobs created, leading to a faster economic recovery. 

“Since the economy went into recession, Congress has enacted numerous provisions that have helped small businesses avoid some of the worst effects of the downturn,” Dwyer-Owens said. “The nation is only now starting to see signs of recovery and fragile businesses need these programs to continue.”

Dwyer-Owens urged Congress to consider the following measures to help small businesses: 
 
Extend Bonus Depreciation.  The Emergency Economic Stabilization Act of 2008 extended the provision of 15-year straight-line recovery for qualified leasehold and restaurant improvements for 2008 and 2009.  In addition, the Act added a 15-year schedule for new construction and improvements placed in service in 2009. 

“These provisions must be extended beyond 2009 for the benefits of lower real estate costs to coincide with construction spending in the franchise industry,” Dwyer-Owens said. “Extending these provisions will entice franchise business owners to reinvest in their facilities, which creates a tremendous spill-over effect on other industries.  The Bureau of Labor and Statistics estimates that every $1 spent on construction generates another $2.39 in economic activity; and every $1 million spent in the construction industry creates more than 28 jobs in the overall economy.”

Extend the Work Opportunity Tax Credit & Capital Gains Tax Relief.  The American Reinvestment and Recovery Act of 2009 includes the Work Opportunity Tax Credit and relief for businesses organized as S Corporations from capital gains taxes.  The Work Opportunity Tax Credit, has helped many franchise businesses to hire unemployed veterans or youth who are not in school or already employed.  “This tax credit should be extended until our national unemployment rate returns to pre-recession levels,” Dwyer-Owens said.  

Extend Death Tax Relief: The death tax has long cost our economy more than the revenue it generates for the federal government.  According to the Joint Economic Committee (JEC), the death tax has brought in only $761 billion in revenue since 1942, while reducing the stock of capital in the economy by $847 billion. The JEC study finds no compelling reason to keep the tax and a number of compelling reasons to reduce or abolish it.  “The IFA has advocated for a permanent solution to the estate tax and I urge Congress to address this situation now before the tax returns to its pre-2001 level,” Dwyer-Owens said. 

Pass the Help Veterans Own Franchises Act. The American Recovery and Reinvestment Act of 2009 provides a tax credit to employers who hire qualified veterans. To extend this effort, Congressmen Leonard Boswell (D-IA) and Aaron Schock (R-IL) proposed a bill in June that establishes a tax credit for franchise businesses that choose to offer qualified veterans a discounted initial franchise fee.  The tax credit would amount to 50 percent of the total franchise fee discount offered by the franchisor to the franchisee and would be capped at $25,000 per unit.  The bill also provides a tax credit to veterans who purchase a franchise and open a business in their local community, equal to 25 percent of the remaining franchise fee.  Eligibility for both the franchisor and franchisee is capped at franchise fees of $100,000. 

“Given the current economic climate, many franchised businesses are finding it harder to access the capital they need to open new stores and recruit new investors,” Dwyer-Owens said.  “The Help Veterans Own Franchises Act is a natural compliment to IFA’s Veterans Transition Franchise Initiative (VetFran), a program established to help those who have so honorably served their country to seek the dream of business ownership.  To date, purchases of franchised businesses by former military personnel have reached 1,500 and 228 others are in negotiation.  There are 395 franchise businesses from which to choose and most offer significant reductions of the initial franchise fee required at purchase.”

Increase Access to Credit.  Dwyer-Owens said that unlike many jobs created by federal infrastructure spending, franchise jobs are more sustainable. “Congress can create jobs faster and support small businesses by extending the 90% SBA 7(a) loan program guarantee rate through 2010, increasing the maximum 7(a) loan size to $5 million and improving access to SBA loan programs specifically for small business start-up and expansion.

She added that a recent study by the IFA Educational Foundation revealed that for every $1 billion of lending obtained by franchised businesses, 34,100 jobs, sustainable jobs, are created and $3.6 billion in annual total economic output is realized.  Only 1/800th percent of the money allocated in The American Recovery and Reinvestment Act of 2009 was dedicated toward helping small businesses. 

“While Congress and the Administration have taken important steps to address the challenges small businesses are facing in accessing credit, franchised businesses and prospective franchise investors with strong credit histories continue to have loan applications denied,” Dwyer-Owen said.  “Under normal circumstances, the Small Business Administration typically guarantees approximately $20 billion in loans annually; however, new lending in 2009 is predicted to be less than half of that.”