Rising health care premiums. Minimum wage increases. Paid sick leave. Bans on large sugary drinks and Styrofoam containers. Running a business has plenty of challenges even before the government gets involved.
And get involved they have: federal, state, and local governments are all looking for ways to squeeze more money out of businesses and individuals, while also passing laws designed to “help” people live better, healthier lives. Laws that are not always beneficial to the person who owns the local coffee and donut shop.
This is where DDIFO comes in. From states with a Dunkin’ Donuts on every corner to places where the brand is getting ready to make its first foray, the organization is newly focused on legislative and regulatory issues that can impact small business owners.
“We’re working to be a national organization,” said DDIFO Executive Director Ed Shanahan. “We’ve done an effective job in the Northeast establishing ourselves as a representative power working on behalf of individual franchise owners. We’re looking to expand that success to make sure each owner in every state within our footprint can benefit from that same level of expertise, energy and professionalism.”
So what issues are out there now that owners should be paying attention to? Well, let’s take a look.
Minimum wage could be going up
If the federal government gets its way, you could see minimum wage rise from its current $7.25 per hour to $9 per hour, with increases tied to inflation thereafter. For a business owner, that incremental hourly increase will quickly impact your labor budget.
And it’s not just at the federal level: ten states increased their minimum wage rate as of January 1, 2013, (see box) and there are at least two others contemplating minimum wage increases. New York, for example, is looking at raising the minimum wage to $8.75, while Illinois is considering an increase of almost $2, from $8.25 to $10, over the next four years.
In the state of Massachusetts, by law the state minimum wage must be higher than the federal minimum wage, by at least ten cents. With a current minimum wage of $8 an hour, legislators are considering an increase ahead of the federal one, to as much as $11 an hour, phased in over three years.
And in Florida, the state constitution includes a Florida Minimum Wage Act, where the state minimum wage is adjusted annually by the rate of inflation for the twelve months prior to September first of that year. Employers then need to make sure their address is up to date, so that they can receive notice of the new rate in a timely manner.
New Jersey lawmakers had proposed a $1.25 increase in the state’s minimum wage, but the measure was vetoed by Governor Chris Christie, who proposed a one dollar increase to phase in over three years. Currently, New Jersey’s state minimum wage is the same as the federal wage.
And while it seems only fair to adjust employees’ pay based on inflation, at least one franchise owner feels the pinch of having to pay a higher wage, explaining that his margins are fairly slim.
“There’s only so much I can charge for a cup of coffee,” said one New Jersey franchise owner. “At a certain price point, people aren’t going to buy it, no matter how much I’m paying my employees.”
He also felt strongly that the kinds of jobs he’s providing are meant to be side jobs, or secondary to an employee’s main wage-earning job, and therefore not one on which someone should expect to support a family.
Paid sick leave also on the table
Another hot topic between employers and employees is the issue around paid sick leave, and whether to institute regulations requiring business owners to offer some kind of sick leave to all employees, guaranteed pay when they can’t work.
In the food industry, having a sick employee come to work is more than just inconvenient to coworkers: it’s potentially harmful to customers. No one wants the potential spread of germs on fresh muffins and donuts, or employees sneezing as they hand over the cup of coffee. But, at the same time, paying an employee for hours not worked can become a costly proposition.
Right now, this issue is getting a lot of play in New York City, where the City Council has passed a bill requiring companies with 20 or more employees to require at least five paid sick days per year; smaller companies would need to provide unpaid sick days. The proposal is tied to the City’s economy—so it would not be in effect during a deep recession. Mayor Michael Bloomberg says he will veto the bill but there are enough supporters among the Council to override the veto.
Local taxes – up or down?
Every shop owner needs to stay on top of local tax rates, but a critical situation came up recently in Florida, where the question arose as to whether Dunkin’ Donuts shops are a bakery selling pastries or a restaurant. The distinction has an impact on how taxes are collected, since items consumed on the premises are taxed one way, and items packaged for consumption off-premises are taxed another.
Dunkin’ Donuts franchise owner and attorney David Daly requested a ruling from the Florida Department of Revenue. The ruling essentially states that all food items packaged for consumption away from the shop, including baked goods, bags of coffee, and K-cups, are exempt from restaurant taxes. Shops do need to ensure they have a way of tracking these sales and keeping them separate, either through a separate key on the cash register, or a separate cash register all together.
This ruling only applies to the state of Florida; however, Florida shop owners should pay attention and make sure they are collecting taxes appropriately.
In Ohio, Governor John Kasich is proposing to lower the state sales tax from 5.5% to a flat 5%. However, he also wants to broaden the sales tax to include a number of service industries, a move not popular with a majority of Ohioans. He is also proposing higher taxes on shale natural gases and oil drilling, a move that could cut income tax for small business up to 50% over three years. These talks bear watching.
ADA makes an impact
Any franchisee preparing for a remodel needs to pay attention to rules outlined in the Americans with Disabilities Act (ADA), and to require their architects do what they need to fulfill the requirements. According to Florida attorney Henry Roman, ADA lawsuits can add up to tens of thousands of dollars in renovation and attorney’s fees.
Roman and others tell stories of lawyers who enlist disabled people to purposely scope out violations, sending customers in wheelchairs into establishments to check out sink heights in the bathroom, or the ease of navigation into and out of the place. It’s far easier, and less expensive, to build these accommodations into your renovation than having to do a fix once everything is done.
David Daly also notes that owners need to think about their policy on service animals, which also falls under ADA. Being an establishment that serves food, says Daly, gives this issue even greater importance. An owner can get in trouble if people who come in with service dogs get kicked out, says Daly, and yet, Florida law says you can’t allow animals in a store with food.
“If someone comes in with an animal, you can ask what service the animal performs, (but) you can’t ask about the disability,” according to Daly. Owners should consider training people how to handle this situation—check with your attorney to be sure you know the rules..
Is Styrofoam doomed?
Recently New York City Mayor Michael Bloomberg attempted to enact legislation banning sales of sugary drinks in cups larger than sixteen ounces. A state judge shot it down, but it only spurred him to set his sights on another allegedly harmful substance: Styrofoam and polystyrene packaging. His argument is that these items are not biodegradable, and fill landfills unnecessarily.
Despite strong opposition from the restaurant industry—and others—Seattle and Brookline, Massachusetts have instituted Styrofoam cup bans; Portland, Oregon and Somerville, Massachusetts are currently considering such bans.
Mississippi, meantime, is heading in the opposite direction, working to file legislation that specifically bars cities and towns from enacting any local laws affecting what people can eat or drink without passing it by the state government first. Federal regulations notwithstanding, Mississippi wants to ensure its citizens can continue to have freedom of choice, and control over what they put in their bodies, despite local government’s best efforts to wrest control away.
Taking the reins
With all this going on, what’s a franchise owner to do? Well, for one thing, know that DDIFO has your back. From keeping an eye out for upcoming legislation that could impact the bottom line, to working with legislators to make changes before laws are final, DDIFO does the heavy lifting for franchise owners.
But that doesn’t mean you don’t have to pay attention. In fact, DDIFO Executive Director Ed Shanahan says it’s vitally important for owners to understand what is being considered by government at all levels, and to communicate their needs. Only by being aware, and early enough in the discussion, can they effectively protect their investment, their business, and their legacy.
“I’ve had more than a handful of legislators stress the importance of constituents getting in touch with them,” said Shanahan. “Two calls (on a subject) and they put an aide on it, five calls and they attend to it themselves, seven calls and they consider it a mandate. As busy as owners are, they should set aside the time to really get to know their legislators.”
He says CMLs in Rhode Island and Maine have retained lobbyists in their states, which they pay for by assessing each member a set amount of money; he thinks owners in other states may want to do this as well.
There’s always strength in numbers, and especially when dealing with the government, it’s nice to know you’re not alone.