Size Stnd Comment

Jason

Informations

• Publié par: Naphug
• Nombre de lectures: 30
• Langue: English

Extrait

April 1, 2005

Mr. Gary M. Jackson

Assistant Administrator for Size Standards

United States Small Business Administration

409 Third Street, SW

Mail Code 6530

Washington, DC 20416

RE: Comments/

RIN 3245-AF22

Dear Mr. Jackson:

The International Franchise Association (IFA) appreciates the opportunity to

submit comments regarding the SBA size standards revisions, as codified at 13

CFR Part 121.

Background. The IFA was organized in 1960 and is the oldest and largest

association representing the franchising community for the purpose of protecting,

enhancing and promoting franchising. Our membership includes in excess of

1000 franchisor members and 8000 franchisees that collectively represent a

“who’s-who” of American industry. Our members conduct business in over 75

different industry areas – from hotels to quick service restaurants to lawn care

and personnel services. The pervasive economic impact and vitality of the

franchise method of business in the United States is extensive. In March 2004,

the International Franchise Association Educational Foundation released a study

that was conducted by PricewaterhouseCoopers, entitled “The Economic Impact

of Franchised Business.” Among other things, this study found that:

•

Franchised businesses directly employ 9,797,000 people in the U.S.,

about the same number as the U.S. durable goods manufacturing sector.

Franchising employment is almost as large as that of the information and

construction sectors combined.

•

Franchised businesses, in turn, generate jobs for more than 18 million

Americans, about one out of every seven jobs in the private sector in the

U.S.

•

More than 760,000 franchised businesses operate in the U.S., and

generate a total economic output of more than $1.53 trillion – representing

nearly 10 percent of the U.S. private-sector economy.

The IFA commends the SBA for attempting to simplify the process of determining

what constitutes a small business. Franchised businesses, the majority of which

are small businesses, routinely utilize federal and state small business financing

and procurement programs that base their eligibility requirements on these

standards. For example, in 2004, the SBA’s two main loan programs, 7(a) and

504, helped franchise businesses secure 5,281 loans worth $1.4 billion and 576

loans worth $394 million, respectively. The elements that constitute a small

business, whether the numbers of employees, the total receipts for businesses,

or some combination of these factors, need to be clear, fair and reasonable.

Because IFA represents franchisees and franchisors in some 75 very diverse

industries these new standards would have varying degrees of impact on IFA

members. IFA, however, has some specific concerns about the fairness and

adequacy of this new proposal. The following are two examples of how we

believe this proposal will adversely impact two heavily franchised industries:

The Restaurant Industry

Our first concern is with the disproportionately negative impact this proposal has

on the restaurant industry. The SBA proposes to change Full Service and

Limited Service Restaurant standards from its current receipts based criteria of

$6 million annually to an employee based standard of 50 employees. We

believe, however, this fails to take into account the unique aspects of restaurant

human resources policies and business operations, which can differ substantially

from other industries. In the end, thousands of food service providers will lose

their small business status under this proposed standard.

In fact, according to SBA estimates, 16,000 food service businesses will lose

their small business status – the most out of any industry included in this

proposal. Worse, businesses in the restaurant industry, many of them

franchised, account for almost half of all of the businesses the SBA projects to

lose small business status under the new proposal, which IFA believes to be

grossly unfair.

Therefore, IFA proposes that the SBA revise these criteria to compensate for the

unique human resources practices in the restaurant industry, especially the use

of many part-time workers, so that restaurateurs are not squeezed out of SBA

programs.

The Independence Test and the Temporary Help Services Industry

Our second concern is that franchisees be regarded as independent small

businesses and not affiliates of the franchisor. This is a particularly acute

problem for franchisees in the Temporary Help Services industry. In this

industry, the SBA appears to have abandoned its historical view, and now views

franchisees as affiliates rather than independent businesses, due to the

administrative functions that the franchisor typically performs for the franchisee.

However, franchisees are solely responsible for the profits of their business, as

well as all other liabilities, and the day to day functioning of the business. As a

result of the SBA’s view of franchisees as affiliates, franchisees are not eligible

for SBA programs, or other programs that use these size standards as their

qualification criteria, because the franchise system typically exceeds the small

business size standard of 500 employees.

IFA believes this puts franchisees at an unfair disadvantage compared to others

in this industry that are not part of franchise systems.

Therefore, IFA recommends that the SBA change how it views franchisees in the

temporary staffing industry, by implementing criterion for determining if the

franchisee bears the responsibility for profit, responsibility for day-to-day

operations of the business, including hiring, training and terminating employees,

and is the bearer of liability for that business. Moreover, the SBA should deem

franchisees to be independent business people and evaluate their eligibility for

SBA programs based upon this criterion. If SBA chooses not to address

affiliation, then IFA recommends that the standard of 500 employees is

inadequate and needs to be raised significantly to more accurately reflect the

actual size of the entire franchise system.

Thank you for considering our comments concerning the proposed size

standards reform. The IFA looks forward to working with you to address the

concerns we have outlined in this letter. If you have any questions, please feel

free to contact IFA’s Manager of Government Relations, Jessica Bonanno, at

[phone] or by email at

[e-mail]

. She will be happy to

assist you in any way possible.

Sincerely,

John Gay

Vice President, Government Relations