With Franchise Creation Down, IFA President Urges Obama to Reconsider Tax Proposal
The Franchise Business Index (FBI) fell in June for the first time since August of 2011, according to the International Franchise Association. The index reflects declines in small business optimism and the index of self employment in the economy, the IFA said.
The index combines indicators of growth in the industries where franchising is most prevalant, along with measures of general economic environment for franchising. The FBI for june was -0.1%, and in May the index grew by 0.1%, revised downward from an original 0.3% growth. April’s growth was 0.6%, and the 12-month growth rate from June 2011 to June 2012 was 1.6%.
"Plain and simple, Washington is making it tougher for franchise businesses to create jobs," IFA President & CEO Steve Caldeira said in a statement. "It is becoming increasingly difficult for prospective franchisees and investors to get into franchising, for existing franchisees to expand their operations or make capital investments in their current establishments, and for franchisors to make decisions about growth plans due to the ongoing uncertainty in the tax code, regulations stemming from the health care law and the lack of a full recovery in the credit markets which has affected access to capital."
The FBI found that there were more than 735,000 franchises in operation in 2011 in more than 300 lines of business. These businesses employed 7.9 million workers, or 6.2% of the nonfarm workforce, accounting for $745 billion in sales.
Caldeiria wrote a letter to President Obama last week on behalf of the IFA to counter his proposal to raise taxes on those making more than $250,000 annually, claiming this will negatively impact small business job creators. More than 80% of the IFA’s owners file their taxes as LLCs, partnerships, S-corporations or sole proprietorships, meaning they do not pay corporate income tax. Business profits are rolled into their individual tax rates, and this rate will hinder their ability to expand post-2013.
“Without action to reform the tax code at both the corporate and individual levels, combined with limited access to capital for new business start-ups, the pending ‘fiscal cliff’ at the end of this year and new health care regulations, it is becoming increasingly difficult for prospective investors to get into franchising, for existing franchisees to expand their operations or make capital investments in their current establishments and for franchisors to make decisions about growth plans. These decisions are at the heart of this tax debate,” he wrote.