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International Franchise Association's federal and state issues: a year in review.

The International Franchise Association, through its Government Relations Department, conducts an extensive, comprehensive program designed to preserve and enhance the legislative and regulatory climate for the growth of franchising.

The department achieves these goals in several ways, including educating policymakers on the valuable importance of franchising and supporting the election of pro-franchising candidates through its political action committee, FranPAC. The department participates in leading national and local coalitions, conducts lobbying and grassroots campaigns and creates forums and educational tools for the franchising community. In addition, the department promotes positive relations between franchisors, franchisees, and elected and appointed government officials and employees.

Political Involvement of the Franchise Community


FranPAC is IFA's political action committee. Through FranPAC, the franchising community is able to support federal candidates who advance franchising and small business issues. During the 2003-2004 election cycle, FranPAC shattered all previous records for fundraising and candidates supported and raised $200,000. Half-way through the 2005-2006 election cycle, FranPAC is again on track for a record-breaking cycle with more than $170,000 in contributions.

FranPAC contributed to many House and Senate candidates in 2005. The candidates were selected by the FranPAC advisory board, which is a 19-member panel composed of franchisee, franchisor and supplier leaders.

Franchise Appreciation Day

More than 320 franchisee, franchisor, and supplier members of IFA came to Washington in September to tell government officials about the importance of franchising to the U.S. economy. In addition to meeting senators and representatives, attendees also heard from Reps. Stephanie Herseth (D-S.D.), and Chris Cannon (R-Utah), as well as U.S. Small Business Administration Administrator Hector Barreto, Watergate reporter Bob Woodward and others.

Franchise Appreciation Day 2006 will be Sept. 26 and IFA strongly encourages its members to consider hosting franchisee Advisory Council meetings and other company functions in Washington, D.C., in conjunction with this important opportunity to lobby members of Congress.


To help IFA-member companies weigh in on the issues and learn more about the candidates, the association partnered with the U.S. Chamber of Commerce to create and administer This Web site allows IFA members to send letters directly to their federal and state legislators. Out of 96 trade association and local chamber partners who used such sites leading up to the 2004 elections, had the eighth highest number of registered users, and more than 20,000 visits by Web users. An improved and expanded was launched in January. In addition to sending messages directly to elected federal or state lawmakers, can be used to register to vote, learn more about specific candidates, and to obtain information about FranPAC.

U.S. Census Data

The Census Bureau announced in October that it has agreed to include questions about franchising in the design of the 2007 Census of Business (Economic Census). This is a great accomplishment for franchising and IFA, made possible by the association's investment in the "Economic Impact of Franchised Businesses" study conducted by PricewaterhouseCoopers. In 2004, the IFA Educational Foundation released the groundbreaking $500,000 study that revealed the impact of franchising on the economy. Gathering franchise data through the Economic Census will help ensure that policymakers will better understand the stakes involved and the central role franchising plays in the U.S. economy. IFA's next step in 2006 is to help the Census Bureau receive adequate funding in Fiscal Year 2007.

The study was later condensed into a "Policy-Maker Digest," which not only gave national figures for franchised establishments, jobs and economic output, but also provides statistics by state and congressional district. The digest provides a tool for explaining to members of Congress, the media, and others the important role franchising plays. To view the impact of franchising on a state congressional district or to see the entire digest, visit

Franchise Legislation and Regulation

FTC Franchise Rule

Although there was no activity in 2005, the Federal Trade Commission issued its long-awaited staff report on the revision of the Franchise Rule in 2004. The new rule seems to support a proper balance between the legitimate disclosure needs of prospective franchisees and the compliance burdens and costs that such disclosure inevitably requires. The IFA, which has been an active participant in the formulation of franchise regulation by the FTC since the development of the first Franchise Rule promulgated in 1978, submitted formal comment on the rule in November 2004. IFA has continued to work with the FTC and the state regulators as the rule is finalized.

Franchise Relationship Legislation

No federal legislation regulating the franchise relationship was introduced in 2005 but, last year both Georgia and the territory of Puerto Rico introduced franchise relationship legislation. The legislation in Georgia was aimed at the hotel industry but after outreach efforts by IFA and others, the bill was not pursued.

At the time of this summary, the legislation in Puerto Rico is still active and being evaluated.

Franchise Regulatory Reform

No franchise regulatory reform was proposed in 2005.

Other Federal Legislation and Regulation

After recessing in late December, Congress reconvened last month. What follows is a listing of the issues to be weighed by Congress this year, which were central to IFA's 2005 legislative priorities. This information can also be found at

Death Tax Repeal

In 2005, the House passed IFA-backed H.R. 8, legislation to permanently repeal the Death Tax, but the Senate balked. While the 2001 tax relief legislation phases out the tax by the year 2010, due to a technical measure passed by the Senate, the tax relief provisions will expire and the estate tax will return in 2011. The Senate is slated to consider the legislation (S. 420) in the spring.

Depreciation Reform

IFA supports a realistic depreciation policy for all businesses. In 2005, IFA joined a coalition of small business associations supporting the Realistic Roofing Tax Treatment Act. The legislation (H.R. 1510/S. 1200), introduced by Reps. Mark Foley (R-Fla.) and Stephanie Tubbs Jones (D-Ohio) and Sen. Jim Bunning (R-Ky.), would shorten the depreciation schedule from 39 years to 20 years for roofs on commercial buildings, because it is widely recognized that the average lifespan of a commercial roof is much less than 39 years. H.R. 1510 and S. 1200 have broad support from both business groups and unions, because supporters agree that it would create jobs, help small businesses and the manufacturing sector, and save energy. There are no opponents to the proposal.

Health Care Reform

Small Business Health Plan legislation, formerly known as association health plan legislation remains a top priority for IFA in 2006. Some progress was made in 2005 as the House passed legislation to allow associations to offer health insurance to their members through such plans. Historically, the measure has languished in the Senate, but in 2005, Sen. Mike Enzi (R-Wy.), chairman of the Health, Education, Labor and Pensions Committee, introduced S. 1955, a healthcare reform package that incorporates the legislative language, as well as broader health insurance reform measures. IFA strongly supports the Senate companion legislation, as sponsored by Sen. Snowe, S. 406. But IFA gives qualified support to S. 1955, which appears to have the support it needs to move forward in 2006.

Immigration Reform

Despite an opposition from an extremely diverse group of interests, including the IFA, the House passed H.R. 4437 in late December. The measure is an enforcement-only approach to immigration reform, which does not include a guest worker provision, or address undocumented workers and their families who are already contributing to our economy. The legislation contains such onerous provisions as mandates that employers verify the employment eligibility of all current employees, as well as new hires.

In addition to posing serious practical and legal challenges for employers, the retroactivity of the mandate would force employers to re-verify millions of employees, most of whose documentation is still maintained in paper form. H.R. 4437 would also expand a government administered pilot-program employee verification database from 3,000 employers to more than eight million employers, despite the fact that the database has performed with significant error rates which have not been remedied. H.R. 4437 would also increase, by 25 times, the penalties for employers who are deemed out of compliance, even for paperwork violations, which are very often unavoidable.

In May, Sens. John McCain (R-Ariz.), Edward Kennedy (D-Mass.) and Reps. Jim Kolbe (R-Ariz.), Jeff Flake (R-Ariz.), and Luis Gutierrez (D-Ill.) introduced H.R. 2330/S. 1033, which IFA, along with the Essential Worker Immigration Coalition, strongly supports. The legislation is a comprehensive approach to immigration reform and calls for the development and implementation of a national strategy for border security to ensure the integrity of America's borders and proposes creating a new temporary worker visa program. The IFA will continue to work for comprehensive immigration reform that will have lasting benefits for franchisors and franchisees.

Lawsuit Abuse Reform: ADA, LARA and Obesity

Freeing franchisees and franchisors from the burdens of frivolous lawsuits is a top priority of IFA. The association is an active member of the Litigation Fairness Campaign sponsored by the Institute for Legal Reform of the U.S. Chamber of Commerce.

ADA Reform-The Americans with Disabilities Notification Act was introduced by Rep. Mark Foley (R-FL) in 2005. H.R. 2804 would provide businesses with an opportunity to "cure" or correct any alleged Americans with Disabilities Act violations before civil lawsuits could be filed against them. As an active member of the ADA Reform Coalition, IFA will continue to support H.R. 2804 and seek a Senate sponsor in 2006.

The Lawsuit Abuse Reduction Act-Along with more than 125 associations in the Lawsuit Abuse Reform Coalition, IFA seeks to prevent junk lawsuits and litigation tourism. The coalition supports the Lawsuit Abuse Reduction Act, H.R. 420, which would impose mandatory sanctions on lawyers who file frivolous lawsuits and crack down on "forum shopping." Introduced by Rep. Lamar Smith (R-Texas), H.R. 420 passed the House on Oct. 27. A companion bill is expected to be introduced in the Senate in 2006.

Obesity Reform-The Personal Responsibility in Food Consumption Act, H.R. 554, passed the House on Oct. 19. A companion bill, S. 908, introduced by Senate Majority Whip Mitch McConnell (R-Ky.) now awaits consideration by the Senate Committee on the Judiciary. Both H.R. 554 and S. 908 would prohibit frivolous lawsuits against food manufacturers, distributors and restaurants. IFA is an active member of the Obesity Reform Coalition, working to eliminate frivolous lawsuits against businesses.

Minimum Wage

In 2005, the IFA again helped thwart several attempts to increase the minimum wage by more than $1.00 an hour. It is certain that proponents of a wage hike will continue their efforts in 2006.

"No Fax" Legislation

A Federal Communications Commission ban on unsolicited commercial faxes, even to those with whom a business had an "established business relationship," was set to go into effect June 30. IFA and other business groups worked to advocate legislation to overturn the ban.

The Junk Fax Prevention Act, which was signed into law in June 2005, calls for preserving the right of a business to send communications to those with whom it has an established business relationship and requires an "op-out" on the first page of the fax that must be free. The FCC is expected to issue regulations on the opt-out requirements by February. However, the legislation does not preempt state laws on commercial faxes, and several states have proposed restrictions on unsolicited faxes, even between those who have an established business relationship. IFA will continue to monitor states' attempts to regulate faxes between those with an established business relationship.

Small Business Administration 7(A) Loan Program

The IFA will continue to work actively to ensure that the U.S. Small Business Administration has the resources necessary to continue the 7(a) program without interruption in 2006 and beyond. SBA's 7(a) program, the agency's largest and most important loan program, in terms of number of loans and program level supported, operates through private-sector lenders.

Terrorism Risk insurance Act Extension

After Sept. 11, some insurance companies were seeking to exclude acts of terrorism from their coverage. In response, Congress enacted the Terrorism Risk Insurance Act of 2002, which mandated that insurance companies provide terrorism risk coverage. It also provided a federal backstop for amounts greater than the insurance industry was deemed able to pay. The act expired on Dec. 31 and was intended to be a temporary solution to ensure the availability and affordability of insurance for terrorism risks, to maintain state regulation of insurance, and to maintain market stability after Sept. 11. IFA, along with the Coalition to Insure Against Terror, pushed for a two-year extension to TRIA, until a permanent solution could be determined. Congress passed the extension and the president signed it into law in December. IFA will continue to work with the coalition to devise the proper, permanent solution.

Veterans Sell-Employment Act

Veterans will be able to use a portion of their education benefits to defray the training costs associated with purchasing a franchise if the legislation that was introduced in 2005 by Rep. Richard Baker (R-La.) as the Veterans Self-Employment Act, H.R. 745 becomes law. IFA President Matthew Shay testified before the House Veterans Affairs Committee on the merits of H.R. 745. IFA will continue to work with Congress and the U.S. Department of Veterans Affairs to make franchising more accessible to veterans.

State Legislation and Regulation

Most state legislatures are in session from January through May. As earlier noted, in 2005, no state, other than Georgia, considered franchise relationship legislation. In addition, there is a live franchise relationship bill in the territory of Puerto Rico. Instead, health care legislation took center stage, as well as lower profile policy issues such as the definition of independent contractor in Massachusetts.

Health Care

In 2005, a number of states considered legislation that would either require employers to pay for employee health care or require them to dedicate a certain percentage of payroll toward employee health benefits. Connecticut, Maryland, Massachusetts, Vermont and Washington all considered these kinds of bills. Of those, bills were enacted but vetoed in Maryland and Vermont while as of this writing both chambers of the Massachusetts legislature have passed differing versions of employer health mandates which were expected to be resolved in a conference committee in January. IFA, with the help of the Connecticut Retail Merchants Association, defeated a bill in Connecticut that would have required franchisors to count franchisee employees toward a threshold where "pay or play" health care would have kicked in should the bill have passed.

Independent Contractor Law

In 2004, the Massachusetts legislature enacted a measure that significantly tightened the definition of independent contractor so that the majority of business relationships would be considered an employer-employee relationship--not an independent contractor relationship. As a result, IFA has been working with the Retailers Association of Massachusetts and other business groups to change the law to make it clear that franchise relationships are indeed independent.

Jessica Bonanno is manager of government relations and political education at the International Franchise Association. She can be reached at 202- 662-0775 or
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Author:Bonanno, Jessica
Publication:Franchising World
Geographic Code:1USA
Date:Feb 1, 2006
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