The challenges just keep on coming on for Dunkin’ and other quick service franchise owners.
First there was the wave of minimum-wage hikes across the country, which have raised the cost of doing business in several major cities.
Now franchise owners are facing growing demands to provide paid sick leave and give their employees as much as two-weeks’ notice before changing their shifts.
To survive and thrive, franchise owners caught in the bull’s-eye of these changes will need to up their game, with ever smarter and more efficient management, experts say.
“You can do some indirect things that improve your employees’ quality of life and don’t necessarily cost you anything,” said John A. Gordon, principal of Pacific Management Consulting Group and DDIFO’s restaurant analyst.
Still, it’s hardly all bad news. The revival of fair franchising legislation in California is a big bright spot for Dunkin’ franchise owners. That proposal – which provides basic protections for all the time, money and labor franchise owners pump into their businesses – is moving steadily through the California Legislature after a disappointing, 11th hour veto last year by Gov. Jerry Brown.
Here’s our round-up of some of the latest mandates and proposals that may be headed your way.
Retail workers’ bill of rights
The new franchise group that is developing Dunkin’ Donuts in San Francisco finds themselves at the forefront of a new city ordinance that could impact franchisees throughout the system. It’s called the “Retail Workers Bill of Rights,” and will force more than 1,200 chain restaurants and stores to provide “more predictable” work schedules, according to Julia Trankiem, a labor relations attorney in the Los Angeles office of ReedSmith LLP.
Franchise owners must provide work schedules to all employees two weeks in advance, while also giving advance warning to workers if their shifts are about to change. Business owners who are forced to cancel an employee’s shift without sufficient notice will have to shell out as much as four hours in “predictability pay,” Trankiem says.
Critics say the law, which unanimously passed San Francisco’s Board of Supervisors and covers all chain franchise owners with at least 20 employees, makes it both more difficult – and more expensive – for franchise owners to make sudden changes in work schedules.
In fact, the requirements kick in even before a new employee starts work, with the franchise owner on the hook for providing a “good faith estimate” on how many shifts per month he or she can expect to work, as well as the hours and days scheduled, Trankiem recently wrote in an advisory piece aimed at San Francisco businesses.
Even subcontractors such as cleaning and security services are also covered.
“It’s definitely going to impact all employers,” she says, adding “I definitely think it is going to impact Dunkin’ Donuts.”
And it goes on from there.
The wide ranging new ordinance also tries to level the playing field between part-time and full-time workers, calling for the same starting wage for part-timers, paid or unpaid time off, and the ability to win promotion, Trankiem wrote.
Before hiring any new full-time workers, franchise owners must first offer, in writing, additional hours to part-time employees, she noted.
There is even a change of control clause protecting current workers from termination for 90 days after a franchise changes hands.
Whether San Francisco’s bill of rights becomes a trend setter remains to be seen. The city has been an early adopter of several progressive causes, including higher minimum wages and paid sick leave, which it mandated in 2007.
But an effort to pass a statewide bill that would have required franchise owners and other business to provide advanced warning of shift changes recently fizzled out in the California Legislature.
“It’s a continued movement by local governments to increase regulation in areas where they have absolutely no idea what the outcome is going to be on business owners,” contends Ben Litalien, founder and principal of FranchiseWell LLV, a consulting firm.
Paid sick leave
Suddenly, proposals to force franchise owners and other businesses to provide paid sick leave have become as ubiquitous as efforts to raise the minimum wage.
California became the latest state to mandate paid sick leave on July 1, with businesses required to provide three sick days a year for each employee. It joins Connecticut, the first state to put such a law on its books, and Massachusetts, which will also start mandating paid sick leave in July. Lawmakers in Maryland and New York are currently debating sick-leave bills.
Oregon’s legislature just approved a paid sick leave law requiring employers with at least 10 workers to offer up to 40 hours of paid leave per year. It follows similar mandates in the cities of Eugene and Portland.
In fact, cities across the nation are adopting paid sick leave rules ahead of their states, with as many as 20 across the country having passed sick-leave ordinances.
Philadelphia’s law, which went into action this spring, mandates one hour of sick leave for every 40 hours an employee works.
In Chicago, debate is heating up over a five-day-a-year sick leave proposal. Mayor Rahm Emanuel has formed a task force to study the issue after 82 percent of city voters endorsed paid sick leave in a referendum.
Aside from the obvious expenses, the biggest headache for business owners will be complying with the new sick leave laws, ReedSmith’s Trankiem contends.
Golden State employers have the option of either outright granting three days – or 24 hours – at the start of the year, or allowing staff to accrue sick time at a rate of one hour per every 30 worked. Staying out of trouble will require a major bookkeeping effort and accurate tracking of accrued time, Trankiem says of California’s new law.
Business owners are required to stick notices on employees’ paychecks notifying them how much sick time they have accrued or been granted. Records of paid sick leave accrued or granted for each employee must be kept for three years.
“It takes a significant amount of administrative work to be in compliance. It’s not enough that a company is providing sick leave – they have to track it,” Trankiem says, noting that businesses that fail to do so could open themselves up to lawsuits. “We see that as a hotbed of litigation.”
Fair franchising legislation
The fair franchising drive in California may very well turn out to be the legislative comeback story of the year. Fair franchising seemed permanently off
the menu in California just a few months ago, after a devastating veto by the state’s long-time Democratic governor, Jerry Brown.
But supporters regrouped, refocused their efforts, and recently had cause to celebrate after the California State Assembly passed revamped fair franchising legislation by a wide margin. The bill is expected to win the nod from the Senate before being sent once again to Brown’s desk.
This time, though, backers of the fair franchise bill are expecting a different outcome. They have held talks with Brown and his staff to help nail down his support by assuaging some of the legal concerns the governor had with the previous proposal.
This updated proposal would require quick service chains and other franchisors to give 60-days’ notice before terminating its business relationship with a local franchise owner. In addition, the franchise owner would also have a chance to correct any defects cited by the franchisor as the reason for its move to terminate.
Still, there is stiff opposition from a number of major franchisors.
“The bill has already been amended 11 times,” says Gordon, the restaurant analyst who is involved in the effort. “We continue to talk to the other side.”
The tricky road ahead
Franchisees may well wonder what they should do to help mitigate the many mandates that affect their business interests. Experts say the answer is two-fold: Speak up and get more creative in how you manage your employees.
According to Litalien of FranchiseWell, the speaking up part comes when proposals pop up in a franchisee’s hometown or state aimed at dictating how franchise owners should do business. At that point, he says, franchisees need to mobilize to make sure city councils and state legislatures hear their voices as they debate paid sick leave or minimum wage edicts.
“Certainly small business owners need to be more vocal in their concerns and to hold politicians accountable,” Litalien says.
But franchise owners, especially in cities or states where new sick leave or even shift-change policies have been adopted, have to up their game as well, Gordon argues and find quality of life improvements that won’t necessarily impact a business owner’s bottom line, like providing more scheduling predictability.
“There is this inexorable drive towards better wages and working conditions,” Gordon says. “What has to be balanced out is the cumulative effect and how you balance that out over time. Your management approach needs to be smarter and of a higher level,” he advises.