Why the health-care ruling may stop franchises from opening new stores, creating new jobs


The Supreme Court on Thursday upheld the vast majority of President Obama’s health-care law, including the controversial individual mandate. (Andrew Harrer/BLOOMBERG)
June 29, 2012

While it may have been ruled constitutional, the Affordable Care Act is truly unworkable and unaffordable for our country’s small business owners - particularly franchise owners.

Since my appointment as CEO of FASTSIGNS International, Inc in early 2009, I have been on a mission to advance our brand, from that of a sign and banner provider to a visual ideas company for all kinds of businesses. We have been able to solidify our company as the top sign and graphics company inthe country, but that doesn’t mean that we stop looking for ways to evolve, improve and expand our franchise businesses.

The Supreme Court’s decision to uphold the Affordable Care Act not only amounts to one of the largest tax hikes in U.S. history on the backs of our small businesses, but it also impedes our potential growth at a time when we could be contributing to the country’s much-needed economic recovery.

The Hudson Institute conducted a study last year for the International Franchise Association that showed that the franchise industry will be particularly hard hit by the employer mandate provision of the health-care law. In fact, by upholding it, 3.2 million jobs at franchise businesses remain at risk, according to the report.

I also serve as a member of the IFA Board of Directors, and in that capacity, I know hundreds of franchisors and multi-unit franchisees that have 50 or more employees. They will now be at a significant disadvantage compared to their smaller competitors who qualify for breaks under the law.

Some will reduce staff or choose to hire more part time workers to get below that threshhold. Others who are close to 50 employees have said they will choose not to grow their businesses — either by not expanding staff at current locations or not developing additional locations — to remain below the critical 50-employee mark.

Bottom line: the law will deter growth by unintentionally discouraging franchisees from owning and operating multiple locations, creating a competitive disadvantage for our franchisees who do own more than one or two locations (and who may want to open additional stores), and barriers to entrepreneurs who are looking to capitalize on the franchise business model to grow their business and hire more workers.

The Hudson Institute study also shows that the employer mandate provides an incentive for franchisors and franchisees to replace current fulltime workers with part-time and temporary workers. This is the wrong direction for both our economy and for millions of unemployed and underemployed Americans.

The real irony is that in the name of expanding health care coverage, the mandate really makes it more difficult for workers to enter and eventually be promoted in the workforce at a time when we need job growth.

Employers play a central role in the nation’s health care system. Our company and our franchisees should be able to make their own choices in health care – these decisions should not be made by the government. As we look to expand our franchise system throughout the country, the decision creates increased uncertainty in our long term business planning by forcing me as an employer to choose between absorbing rising premiums or paying mandated penalties.

Neither is a good option for growth, and the Affordable Care Act creates further uncertainty for franchise candidates considering getting into business. This will result in fewer new franchise locations and fewer jobs.

This is a pivotal time for the franchise and small business community. Without the challenges accessing capital for small businesses and prospective franchisees. If not for the uncertainty surrounding taxes (which could clear up by year’s end) and this new health care ruling, our industry could be growing more quickly and playing a more central role in our country’s much-needed economic recovery.

Ms. Monson is the CEO of FASTSIGNS International, Inc. and a member of the Board of Directors of the International Franchise Association.

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