OPINION:
Three years ago, in declaring Juneteenth a federal holiday, President Joe Biden hit all the right notes.
As he marked the day that the Union troops informed the remaining enslaved Black Americans of their emancipation, the President stressed his commitment to “an economy — and a Nation — that brings everyone along, and finally delivers our Nation’s founding promise to Black Americans.”
Stirring words, no doubt, but unfortunately, the ensuing years have seen more Black Americans fall behind economically, especially small business owners. From challenges accessing capital to a disproportionate impact stemming from the pandemic, Black small business owners face major obstacles.
One way to boost free enterprise for existing and aspiring Black entrepreneurs and, in doing so, close the wealth gap is through franchising, one of the most important business growth strategies in American history. Franchising – or the contractual relationship between a licensor (franchisor) who shares their brand with a licensee (franchisee) to reach more consumers – is a proven model and entry point to entrepreneurship, especially Black-owned and minority businesses.
According to Oxford Economics’ analysis, around 26% of franchises are owned by people of color, compared with 17% of independent businesses generally. On average, Black-owned franchises earn more than double their counterparts in non-franchise businesses. Black and Hispanic entrepreneurs remain underrepresented among minority business owners overall.
Here are three ways the Biden Administration can help the franchising industry and, in turn, boost Black entrepreneur growth.
First, they should abandon their ill-advised push for expanded joint employer, which would erode the independence between franchisors and franchisees and threaten the model’s viability. Last October, the National Labor Relations Board (NLRB), an agency controlled by Biden political appointees, announced a far-reaching joint employer standard that was favored by union bosses but opposed by small business groups.
According to Oxford Economics, during a previous iteration of expanded joint employer, franchise businesses lost $33 billion per year. Approximately 376,000 franchise jobs were never created. The economic harm was real.
Bipartisan coalitions in both chambers of Congress passed repeals of joint employer, only to be vetoed by President Biden. Thankfully, a federal judge sided with the business coalition and prevented the measure from taking effect, but the issue is still bouncing around the courts today.
Second, heed the lessons of California’s failed experiment and avoid implementing an unworkable federal minimum wage. In April, the Golden State’s $20 minimum wage mandate at quick service restaurants took effect, a 25% increase from the $16 dollar threshold required for everyone else.
The results have been as predictable as they have been damaging. According to one analysis, as many as 10,000 jobs have been lost in the fast food sector. One beloved chain filed for bankruptcy and closed more than a third of its branches. Prices for consumers have increased by 10% overall, higher than in any other state.
Earlier in his administration, President Biden had hinted at a $15 dollar federal minimum wage federally, an event that has not come to pass. Mr. Biden would be wise to let that sleeping dog lie.
Third, the President’s regulatory agencies need to slow down the rulemaking targeted at the small business community. For example, his Department of Labor (DOL) announced that workers making $58,656 annually would be eligible for overtime pay – up from the previous threshold of $35,568 annually. The mandate immediately met challenges in both the courts and Congress. This threshold is simply not workable in this era of elevated inflation, when many businesses are already operating on tight margins.
Or consider an attempt by the U.S. Occupational Safety and Health Administration to allow “third-party” representatives to accompany government inspectors around workplaces. These “third parties” could include union representatives, competitors or other activists’ access to places of business to collect worksite information and trade secrets. This so-called “walkaround” rule faced a lawsuit like the overtime rule.
I know the opportunities of the franchise model well because my family and I have lived in them. After my retirement from the U.S. Navy and contracting with the Department of Defense, I opened my first Tropical Smoothie Café in Capitol Heights, Maryland, with my wife and children—a true family business. I was drawn to the structure and standard operating procedures of franchising, which were familiar to me from the military.
The International Franchise Association, the nation’s official trade organization for franchises, launched an accelerator program with resources and training for underrepresented communities to explore their own franchise journey. With new data showing the wealth gap between white and Black families growing by 38%, it comes not a moment too soon.
Juneteenth is more than just a day off work or a moment to mark the end of an insidious era from our past. It should also be a time to look ahead and focus on ways to make America a more just and opportunity-filled land for all. Franchising can help, but only if elected leaders do their part in creating the right business environment.
- Clement Troutman is a U.S. Navy veteran, author, and Maryland-based Tropical Smoothie Cafe franchisee.
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