By David Black – Director, Government Relations and Public Policy

It has been an incredibly busy 6 weeks on the advocacy front for the Canadian Franchise Association (CFA). We’ve been working day and night to keep you, our members, updated on everything governments across the country have been doing. We’ve also been actively lobbying governments to ensure that franchised businesses have the supports they need to get through the unprecedented COVID-19 crisis.

Government program development has been significantly accelerated

As someone who has spent his career working inside and outside government, I am amazed at the speed at which the government is introducing and changing programs to adapt to the current circumstances. Normally a single government program would take 6 to 8 months to create and another 6 months to roll out. In the past 6-7 weeks, federal and provincial governments have rolled out dozens of programs to help businesses and workers through this difficult time.

Governments across the country would admit that the programs are not perfect. That’s because they have been trying to provide support to people and businesses quickly. The programs are constantly being updated as new information comes forward from stakeholders and new programs are being created in real-time to address the challenges of the situation.

That is why the CFA has been doing Daily Updates and regular webinars to keep franchisors and franchisees up to date on all the available programs.

CFA worked to get the wage subsidies changed to help franchised businesses

A prime example of the fast pace of program development was the Temporary Emergency Wage Subsidy (TEWS) which was announced in mid-March and allowed employers to reduce their income tax remittances to the Canada Revenue Agency (CRA) by 10 per cent of the remuneration paid to their employees. The program is self-administered meaning that you do your payroll as normal but instead of sending 100 per cent of your payroll taxes to the CRA, you only send 90 per cent. That 10 per cent stays in your pocket to cover other expenses.

The CFA and many other groups complained loudly that a 10 per cent wage subsidy was not enough and that it needed to rise to 75 per cent. A week later, the Prime Minister announced the creation of the Canada Emergency Wage Subsidy (CEWS), a 75 per cent rebate on the remuneration paid to all employees.

When it was first announced businesses needed to have seen a drop of 30 per cent or more to qualify, the CFA and others felt that the threshold was too high. We successfully lobbied to have the threshold dropped to 15 per cent for March. That helped many more businesses qualify.

Unfortunately, the CEWS is not a self-administered program. Instead, it is being run by the CRA which creates some complexity and slows down how fast employers will get their rebates. The portal for applications opened on April 27 and they expect over 1 million Canadian businesses to apply for the subsidy.

CFA working to improve commercial rent programs

On April 24, Prime Minister Justin Trudeau announced the new rent subsidy program, jointly funded by the provinces, that is supposed to help businesses through the crisis. To be for eligible for the Canada Emergency Commercial Rent Assistance (CECRA) program, a small business must pay less than $50,000 a month in rent and have had revenue decline at least 70 per cent from pre-COVID-19 levels.

At first the program only applied to base rent, not CAM or TMI. The CFA lobbied over the course of that weekend and the federal government clarified on April 29 that the program applies to gross rent (base rent plus CAM/TMI).

This program is a good start, but there needs to be some significant changes to make it work.

• The 70 per cent threshold is too high and needs to be lowered. We believe the threshold should be lowered to 30 per cent so it is in line with all the other support programs for small business.
• The program must apply to non-mortgaged landlords too. Unfortunately, the current program only applies to landlords who have a mortgage on their property. Landlords that do not have a mortgage on their property do not qualify.

CFA gets franchised businesses access to provincial rent programs

In late March, New Brunswick and PEI both introduced Rent Deferral Programs. Under each program, landlords were being asked (but not compelled) to sign rent deferral agreements where the provincial government may guarantee up to $5,000/month if that business tenant must shut its doors. Landlords were also encouraged to defer rent payments from their commercial tenants for the next three months (April, May, and June), and to spread the deferred amount over the remainder of the lease term.

In the first iteration of both programs, franchised businesses were expressly excluded from participating. The CFA actively lobbied both the New Brunswick and PEI governments and changes were made to allow franchised businesses the same treatment as other businesses.

Working to make the CEBA work better

The federal government also created a number of finance programs to help small businesses survive COVID-19. Some of these programs are working well and others still need changes to work better.

The Canada Emergency Business Account (CEBA) will provide qualifying businesses with a $40,000 interest-free, government-guaranteed loan to help pay for operating costs that can’t be deferred as a result of COVID‑19. $10,000 or 25 per cent is eligible for complete forgiveness if 75% of the loan is fully repaid before December 31, 20‍22.

While the principle of the CEBA is sound there are some significant problems with the eligibility criteria that are hurting its effectiveness, which is why the CFA is lobbying for changes.

• Change the definition to allow other types of labour compensation to be eligible – The current program requires businesses to have a payroll of between $20,000 and $1.5 million based on T4 salaries. Most franchisees do not take a salary when they are operating their businesses. Instead they pay themselves based on the profitability of the business using shareholder dividends (T4A or T5 income) which under the current criteria mean they are not eligible for the CEBA loans. We believe that these other types of compensation should be allowed under the program so that more businesses become eligible for CEBA loans.
• Allow multi-unit owners to qualify for more than one loan – Many franchisees own multiple locations under a single corporate entity. Unfortunately, under the current program’s criteria, they are limited to one CEBA loan per corporate entity. We believe that loans should be allowed for multiple locations based on business licenses, HST/GST accounts, WSIB accounts, etc., instead of simple corporate entities.
• Let new businesses access CEBA loans – Under the current criteria if a business started operations in late 2019 they probably won’t have a payroll that is high enough to qualify for the CEBA loans. We are working to get the program criteria changed to so that new business can use an average of their January and February 2020 revenue.

To keep pushing the above changes, the CFA worked with the Ontario Chamber of Commerce to pen an op-ed to pressure government to make these changes because franchised businesses are an essential part of Canada’s economic and social fabric.

Expanding the CEBA loan program will help more of these businesses and without this support, recovery will be tougher than it needs to be.

Still more to do

We not just focused on today but we are also looking to tomorrow. To that end we are advocating for programs that will help support the economic recovery that will come.

We are working with governments across Canada to create an incentive/subsidy for new hires to help employers bring their employees back more quickly.

We are also work to get changes to the Canada Small Business Finance Program (CSBFP) so that more franchisors, franchisees have sufficient financial supports to survive and prosper in a post-COVID-19 world. Stay tuned.