With IFA pushing lawmakers, franchises net huge help to ride out pandemic
The latest victory for franchise small businesses was announced today with an extension of the PPP application deadline from March 31 to May 31. The PPP Extension Act of 2021 gives the SBA an additional 30 days beyond May 31 to process those loans.
Throughout the pandemic, the The International Franchise Association (IFA) has rallied its resources to ensure that locally-owned franchise small businesses would be eligible for aid under federal relief. In an official statement, the IFA applauded the Senate’s bipartisan vote. “This critical legislation will help to keep countless workers employed all across the country and offers our nation its best chance at making a full recovery,” said Matthew Haller, IFA’s SVP of Government Relations and Public Affairs.
Early March 2020 saw lockdowns with businesses ordered to close until government officials gave the OK to reopen. Then customers were leery about venturing into stores, restaurants, hotels, shopping malls, and even medical-care establishments. Business owners had sleepless nights wondering whether they could meet payroll, rent/mortgage, and utility expenses.
A flurry of crucial programs have been moved by the IFA, and 75 percent of U.S. franchise owners have received federal Covid-19 pandemic relief. Some $16 billion has been paid to franchisees under the Paycheck Protection Program designed to stem unemployment, an amount that affects 2.5 million franchise jobs. IFA reports that more than 20,000 franchise small businesses were saved by the PPP.
The first help arrived when former President Donald Trump signed the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, into law on March 27, 2020. An important facet of this act was the PPP, which made available forgivable loans to small business owners, including franchisees, who kept their employees on their payrolls. IFA and grassroots franchise advocates in the Franchise Action Network successfully pushed lawmakers to allow small-business owners of franchises to take part in the program.
IFA and FAN also worked with members of Congress to develop the PPP Flexibility Act (passed in June 2020) that lowered the revenue-loss threshold for PPP applications and increased the limit on non-payroll expenses such as rent, mortgages and utilities to 40% of the loan amount. Previously the threshold was 25%.
In December 2020, Congress passed the Consolidated Appropriations Act that provided three huge boosts for small-business owners, among them locally owned franchises:
- Second draw on PPP loans with $284 billion in funding. With the IFA applying pressure, the revenue-loss threshold was reduced to 25% from 50% as initially proposed.
- Full deductibility of business expenses on forgiven first- and second-draw PPP loans.
- Expanded the types of forgivable expenses to cover money spent on computer essentials, human resources, accounting, personal protective equipment, and more.
On March 11, 2021, President Joe Biden signed the American Rescue Plan into law. Its passage, which followed IFA lobbying of Biden administration officials and congressional allies, expanded the Employee Retention Tax Credit to cover $7,000 per employee per quarter. In addition, franchise restaurants were included in the $28.6 billion restaurant revitalization fund that provides assistance under the new law.
Franchisors also help franchisees
Franchisees also celebrated much-needed assistance from franchisors, helped in various ways to keep doors open and workers paid. Key aid included:
- Helping franchise owners apply for funding through the federal Paycheck Protection Program.
- Advising franchisees how they could trim expenses. Franchisors also shared tips for how to negotiate reductions in rent and other costs.
- Assisting franchisees with obtaining “essential” status so they could stay open during lockdowns and/or reopen as early as possible when lockdowns were lifted in phases.
- Deferring or eliminating fees that franchisees are obligated to pay (royalties and marketing fund contributions, for example) under licensing agreements. For instance, Fajoli’s and Berberitos restaurant franchises threw their franchisees a lifeline by deferring, removing and/or cutting these fees, according to HospitalityTech.com.
- Supporting and sometimes matching franchisees’ community outreach efforts. Those efforts included donating masks, meals, etc., to first responders.
- Kept franchisees informed with regular updates, boosting morale so that everyone involved with the brand felt their striving was part of a valued team effort. Operating under the franchisor umbrella, the network of franchisees supported each other and shared clever, creative ideas. One example: Express Employment professionals created a drive-through interview service.