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Originally published Saturday, June 21, 2014 at 4:23 PM

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Guest: Franchises are also small businesses when it comes to the minimum wage

Punishing small business owners who went into franchising is simply unfair in the new minimum wage law, writes guest columnist Matthew Hollek.

Special to The Times

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Matthew, if you are reading this some free advise. Presuming that each of your individual units are owned by separate... MORE
The messes are created due to lack of economic understanding making a wage the purview of government. If price is... MORE
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SEATTLE consumers win when businesses compete on an even playing field. Unfortunately, the Seattle City Council and Mayor Ed Murray’s minimum-wage ordinance, signed into law by the mayor in June, picks winners and losers among Seattle’s small businesses. I fear that as a franchise business owner, I am in the latter camp.

Under the wage increase, businesses with fewer than 500 employees will have to adjust to a $15-an-hour minimum wage in seven years. Meanwhile, large businesses and “all franchises associated with a franchiser” — regardless of employee count — will be forced to do so in three years. Therefore, franchise small-business owners like myself will have to adjust to the new minimum wage at a much faster pace than similar non-franchise small-business owners, the same businesses we work hard to compete with every day.

This inequity in the minimum-wage ordinance is why five Seattle franchise business owners and the International Franchise Association filed a lawsuit against the city last week in U.S. District Court. The suit seeks to overturn the provision of the ordinance that forces small franchise businesses to adopt the new wage in the same time frame as large corporations. I am not a party to the lawsuit, but I, like many of my fellow franchise business owners, support the legal challenge wholeheartedly.

Punishing small-business owners who went into franchising is simply unfair — to us, our employees and our customers. Yet, advocates for this type of discrimination continue to wrongly argue that small franchise business owners should be considered large businesses simply because they choose to operate under a corporate name. This view fundamentally misunderstands the franchise business model.

While the franchiser — the McDonald’s or Subway corporation, for example — administers marketing, administrative and technical assistance, franchisees must pay for all of these services. Franchisees own and operate each store or restaurant, determining hiring, setting wages, providing training and managing day-to-day operations. These franchisees face the same challenges as local small-business owners, file taxes in the same way small-business owners do and pay their employees as small-business owners do. Franchisees like me choose to go into business for ourselves, just not by ourselves, using a road map developed by the franchiser that has proved to work.

Unfortunately, advocates for a higher wage continue to cherry-pick data to make their argument against franchise businesses. For example, they argue franchises are most often owned by large companies that operate many franchise units and rake in millions of dollars a year. But these cases are rare, and many franchisees, such as myself, own one or a handful of stores. We are working just to turn a profit. I had to put up equity on my home to open my first Subway store in the Seattle area and have worked through many of the same challenges other small businesses face, such as debt and theft, to reach profitability.

What’s worse, by legislating that a franchise business, no matter how many employees it has, is more like a large retailer than other small businesses it competes with, Murray and the City Council harm not only franchise business owners, but the entire franchise business model.

By inequitably implementing the wage hike on franchisees, the law will restrict business growth, forcing franchise owners to cut jobs or limit hiring. It will also ensure that franchise brand expansion in the Seattle area will be limited in the future, as chains will look to more attractive markets for expansion, and prospective franchise owners will look for more profitable business opportunities elsewhere. Given franchises’ positive impact on Seattle’s economy, this is an outcome that no one should want.

The franchise business model has helped thousands of us to become our own boss and realize the American dream of running our own business. It’s insulting to hear advocates suggest that I am not my own boss.

Let’s make sure the playing field is at least fair and doesn’t create a rule that threatens the financial and sweat equity I have put into starting and growing my business.

Matthew Hollek owns seven Subway stores in King and Snohomish counties, including one in Seattle’s Ballard neighborhood.

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