Common Employer: it’s a constant game of Whack-A-Mole

Common employer or joint employer hits at the heart of the franchise business model. It can leave franchisors exposed to claims by franchisee employees for unpaid wages, overtime, vacation pay, benefits, termination notice, pay in lieu of notice, severance pay, wrongful and constructive dismissal, human rights viola- tions, and payroll taxes.

In the United States, the expansion of common/joint employer has led to increased costs, less equity, and less support for franchisees. There are several bills in several states across America that could have a serious impact on franchising and franchised business.

While there is no legislation in Canada, there is a very concern- ing case at the BC Labour Relations Board that the CFA is monitor- ing closely.

You need to be engaged

The CFA needs your support – be active, be engaged because this is an issue that is always just under the surface.

We are constantly looking out for issues that could negatively affect franchising in Canada. It’s a constant game  of  Whack-A- Mole to protect you and your business.

Pushing for improvements to the Canada Small Business Finance Program

The CFA continues to work with the federal government to improve the Canada Small Business Finance Program (CSBFP). Many franchisors and franchisees use this  program  to  finance new businesses in communities across Canada.

While the program works very well and has helped finance thousands of franchised businesses, there are a few areas  that need improvement so that it can work even more effectively.

Increase maximum loan amount

Under the current program criteria, the maximum loan amount a borrower can access under the CSBFP program is $1 million with

$350,000 for equipment and leasehold improvements.

The CFA is advocating that the maximum loan, which has been unchanged for almost a decade, be increased to at least $1.5 mil- lion, with borrowers being allowed to use up to $1 million for equipment and leasehold improvements.

Allow working capital to be financed

One of the largest concerns for a franchise is working capital, especially as they get started. Government statistics show that thousands of companies fail in Canada every year because they have no access to additional working capital.

In boom times, access to working capital was a challenge for many businesses, and COVID-19 has exacerbated this. During COVID-19, cash reserves have become more important than ever before and many companies are now taking longer to pay  for goods and services to preserve cash. This has put more pressure on franchised and non-franchised businesses who must finance their day-to-day operations.

This is why we are pushing government to allow a portion of the CSBFP to be used for working capital. This move would help fran- chises to solve temporary cash flow issues and fund investments.

Allow soft costs such as franchise fees to be eligible expenses under the CSBFP

In franchising, brands are the foundation for economic development and job creation. A franchise brand is more than its name; it is the entire experience that customers receive at each location, from the products or services received, to the interaction with the employees.

Franchise fees are an intrinsic part of the franchise system. These fees helps fund the training and support to new fran- chisees, which help get the new franchised location up and running.

The CFA is urging government to expand the CSBFP to include soft costs such as training, franchise fees, and some working capital to be considered eligible expenses under the program, which will allow traditional business, bricks and mortar franchised businesses, and non-traditional/home- based/service-based franchises to benefit from the program.

These changes will help with the recovery

The  changes  we  are  proposing  will  help  more  businesses to take advantage of the program, helping spur economic growth as we recover from COVID-19.

Government must continue to use 2019 as the baseline for support programs

It’s been just over a year since the first case of COVID-19 was detected in Canada. Since then, it has impacted every aspect of our lives.

Franchised businesses across the country have faced unprecedented challenges and many have benefited from the support programs put in place by the federal and provincial governments.

Many of these programs are based on a business compar- ing their revenues between this month and the same month the year before or by comparing this month to an average of January and February.

When these programs were created, none of us would have expected that almost 12 months later, we would be in differ- ent stages of lockdown and stay-at-home orders across the country.

The CFA and other business organizations are actively lob- bying governments to ensure that the baseline for qualifying for these programs should be a comparison between this month and the same month of 2019.

That means, if your business was down in March 2021 com- pared to March 2019, then you would continue to qualify for the Canada Emergency Wage Subsidy (CEWS), Canada Emer- gency Rent Subsidy (CERS), etc.

Trying to help new businesses qualify

One major flaw in the federal and provincial support pro- grams is that new business do not qualify for support.

Many franchised and non-franchised businesses started businesses, signed leases, took out loans, and made  plans long before COVID-19 landed in Canada and no one  could have foreseen how severe and long the pandemic has lasted. The CFA is lobbying government  to  try  and  get  a  change that would allow these new businesses to qualify for some of the government support programs such as the CEWS and CERS to help them stay in businesses as the stay-at-home orders end and the economy recovers.