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Statement of Suzanne Beall, Vice President, Government Affairs and Public Policy International Franchise Association

Industry Leaders Roundtable Discussion on Harassment Prevention
March 20, 2019

I. Introduction

Thank you Acting Chair Lipnic and Commissioner Burrows. My name is Suzane Beall, and I am the Vice President of Public Policy and Government Relations for the International Franchise Association, or IFA. IFA is the oldest and largest organization representing franchising worldwide. Our industry consists of around 300 different types of businesses, ranging from household names like Marriott and McDonald's to small, up-and-coming concepts with two or three locations.

All told, America's 733,000 franchise businesses employ around 7.6 million Americans and contribute more than $404 billion to our nation's economy. This incredible success is due to the unique nature of our business model.

II. What is Franchising?

Franchising is an arrangement where a name brand company grants a local owner the right to use its trademark, business systems, and processes to produce and market a good or service. The business owner usually pays a one-time franchise fee and a percentage of sales revenue as royalty.

This structure allows for consistent quality and trust for consumers wherever they go, while allowing entrepreneurs the opportunity to fulfill their dream of starting and growing a business of their own.

Because of the structure and support we offer, franchises are the first choice of many first-time business owners. Statistically, minority business owners have higher ownership rates of franchises than non-franchise businesses. Further, veteran business owners see a higher rate of success within the franchise system, making it an ideal career choice after military service.

However, our business model's very structure makes it difficult to implement system-wide anti-harassment policies.

III. Conflict Between Trademark Laws and Labor Law Makes it a Challenge to Enforce Anti-Discriminatory Policies

Franchise businesses are caught in a Catch-22 between their responsibilities under trademark law and under labor law.

Trademark law requires brands to set standards - it's how our members ensure consistency, safety, and security.

Labor law, namely an expanded joint employer policy, means that a brand enforcing these policies may create the risk of lawsuits.

Specifically, an expand joint employer standard means that if a brand puts together a program, it cannot require franchisees to participate because that would be "indirect control over another company's workers," thus making the brand a joint employer. That said, franchisors can implement harassment programs across corporate locations, just not make the programs mandatory for franchisees.

Of course, franchisee owners can and do implement training programs in their own stores.

Unfortunately, this legal dynamic makes it legally risky for franchise brands and franchise business owners to work together to implement comprehensive anti-harassment policies across the franchise system.

IV. Brands and Business Owners are Finding Creative Ways to Ensure a Safe, Welcoming Environment

Despite this challenge, brands and business owners are working to ensure a safe, welcoming environment.

Many brands are working to increase diversity and representation at all levels. In fact, McDonald's just announced its "Better Together" campaign to increase gender balance and diversity.

Individual franchisees like El Pollo Loco's Michaela Mendelsohn are forming independent non-profits to increase training and sensitivity in their workplaces.

On an association level, IFA is partnering with the National LGBT Chamber of Commerce to leverage our resources to increase diversity and representation across franchise businesses.

V. Solution and Goal

Across the franchise sector, brands and business owners alike want to strengthen and implement anti-harassment policies. IFA wants to make it easier for them.

That's why we're pushing for policies that increase stability in the relationship between brand and business.

Far too often, unclear and ambiguous regulations prevent our franchise brands and franchise business owners from working together to ensure a safe, respectful workplace for all. IFA hopes to fix this problem, and we will continue to advocate for policies that help franchise businesses help franchise employees.

Thank you.