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Oregon Office:

Douglas D. Smith

16300 SW Langer Drive #1034

Sherwood, Oregon 97140-1034

Phone: (503) 840-0000

 

Utah Offices:

Bradley D. Smith

FranchiseSmith Utah, LLC

5508 West Kensington Circle

Highland, Utah 84003

Phone: (801) 615-1564

 

Douglas D. Smith

Franchise Smith, LLC

6517 W. Muirfield Road

Highland, Utah 84003-5533

Phone: (503) 840-0000

 

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Upcoming International Franchise Association Webinars on COVID-19 and Franchising; Federal Families First Coronavirus Response Act and related tax credits; FDD Updates and State Registration Renewals

March 23, 2020

Starting last week (online recordings are available), today, and over the next few weeks the International Franchise Association will provide free webinars on timely topics related to COVID-19 (the “Coronavirus”) and concerning the impact of the current financial collapse upon franchising. Here is the link with information about the planned topics and times for the webinars: https://www.franchise.org/coronavirus-webinar-series.  

 

Last week’s programs were “US Government Response, State of Play, and What You Can Do” and “Landlords and Rent Relief – Outside the Government Relief Package.”

 

Among the current topics are:

 

crisis management,

building your brand in times of crisis,

cash flow management,

credit access,

labor implications,

customer retention,

franchisee response to coronavirus,

international issues,

etc.

 

I will review most of these programs and will be happy to discuss any of these topics, as well as others with which you and your franchisees are wrestling, at your convenience. Among many others, these can include pertinent topics such as negotiating lease rent forbearance, trends in royalty fee reductions by franchisors, franchisee bankruptcy, updating your franchise disclosure document and state registrations, preparing to quickly sell new franchises and expand existing ones when the dust clears, etc.

 

I look forward to hearing about your experiences and perspectives. I am excited to share with you my experience, thoughts, analysis, and help.

 

I am working every day from my home office and I am readily available by phone and email. I will be happy to meet via online technology at your convenience if that helps.

 

In my 40 years of experience in the franchise industry, I have seen the economy and the franchise world go through several of these scary, game-changing times. In each instance, continuation of franchise systems and renewed interest in and the sale and opening of new franchises increased significantly following the crisis. There are several reasons:

 

  1. Many employees and business-persons will lose their jobs and trades.
  2. A large number of them will have severance packages, savings, 401-Ks, family resources, personal and business incentives, and a desire to move on to greener pastures. Often they decide to change their life path and move into business ownership opportunities that hold particular personal interest.
  3. Franchise systems that work hard to survive the catastrophe, sustain and adapt their franchise programs, and maintain and augment  their franchise documentation and state registrations, can successfully position themselves to respond quickly, effectively, and profitably when the time comes.  
  4. Many franchisors use the crisis time to carefully craft incentives, promotional programs, and roll-out processes designed to continue, expand, and create franchises, to retain franchisees, and to attract new franchisees.
  5. Franchising is based upon win-win attitudes and synergistic team work. It is a highly-flexible-overlay to business concepts that by its very nature allows community advantage from individual insights, motivation, resources, and evolution.
  6. Credit and governmental programs will be offered to help both existing and new businesses and franchisees. I am certain that innovative business survival and expansion programs will be adopted comparable to the new Federal Families First Coronavirus Response Act for employees that was passed by congress and signed by President Trump on March 18. NOTE THIS ACT PROBABLY APPLIES DIRECTLY TO YOU AND TO YOUR FRANCHISEES:
    1. The law goes into effect in 15 days (April 2, 2020 through December 31, 2020) and the US Department of Labor is supposed to issue regulations to interpret the law (together with a form notice for employers to use). For private employers with 500 or fewer employees, the law provides the following:
    2. Covid-19 Sick Leave: Full-time employees receive 80 hours of emergency paid sick leave if:
      1. The employee is subject to a federal, state, or local quarantine or isolation order related to the Coronavirus
      2. The employee is advised by a health care provider to self-quarantine due to concerns related to the Coronavirus
      3. The employee is experiencing symptoms of the Coronavirus and seeking a medical diagnosis
      4. The employee is caring for an individual who is under a federal, state, or local quarantine or isolation order or who has been advised by a health care provider to self-quarantine
      5. The employee is caring for a child whose school has been closed, or whose child provider is unavailable, due to the Coronavirus precautions
      6. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretaries of Treasury and Labor.
  • Covid-19 Sick leave for the first three listed reasons is paid at an employee’s regular rate of pay up to $511 per day. Covid-19 Sick leave for the last three reasons is paid at 2/3rds an employee’s regular rate of pay up to $200 per day.
  1. Employers may not require an employee to use other paid leave prior to using Coronavirus Sick Time or require an employee to find a replacement to cover hours when they are using Covid-19 Sick Time.
  2. Among the more pertinent details of the Act:

DIVISION C – Provides Emergency Paid FMLA leave

  • applicable to all employers with less than 500 employees (even if there is only 1 employee)
  • available to employees who have worked for 30 days or more
  • available if employee is unable to work (or telework) due to a need for leave to care for the son or daughter under 18 years of age if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.
  • Up to 12 weeks of leave
    • 1st10 days are unpaid
    • After 10 days, pay 2/3 regular pay up to $200 per day, up to $10,000 per employee
  • Possible Hardship exemption if you have fewer than 50 employees and imposition of such requirements would jeopardize the viability of the business as a going concern.

 DIVISION E – EMERGENCY PAID SICK LEAVE ACT

  • All employers with less than 500 employees (even there is only 1 employee) must provide paid sick leave (in addition to any PTO or sick leave already provided and in addition to the Emergency FMLA leave)
  • Available to all employees (regardless of how long they have worked for the employer) if employee is unable to work (or telework) due to a need for leave because:
    • (1) The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID–19.
    • (2) The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID– 19.
    • (3) The employee is experiencing symptoms of COVID– 19 and seeking a medical diagnosis.
    • (4) The employee is caring for an individual who is subject to an order as described in subparagraph (1) or has been advised as described in paragraph (2).
    • (5) The employee is caring for a son or daughter of such employee if the school or place of care of the son or daughter has been closed, or the child care provider of such son or daughter is unavailable, due to COVID–19 precautions.
    • (6) The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.
  • Amount of sick leave: 80 hours for full time or average hours for 2 weeks for part-time
  • Amount of pay:
    • employee's regular rate of pay capped at $511 per day and $5,110 in the aggregate for a use described in paragraph (1), (2), or (3) of section 5102(a);
    • 2/3 of regular pay capped at $200 per day and $2,000 in the aggregate for a use described in paragraph (4), (5), or (6) of section 5102(a).
  • an employer cannot require an employee to use accrued sick leave, vacation, or other PTO, but the employee may elect to do so.
  • Employee may be entitled to: voluntary PTO or sick leave + Emergency Paid FMLA + Emergency Sick Leave

 TAX CREDITS FOR EMERGENCY FMLA AND SICK LEAVE WAGES PAID

  • Credit against taxes owed for every dollar paid for family leave wages
  • Credit against taxes owed for every dollar paid for sick leave wages
  • Credit against self-employment tax for the family leave equivalent amount for self-employed individuals

 HARDSHIP EXEMPTION FROM EMERGENCY FMLA LEAVE REQUIREMENTS

  • The Act authorizes the Secretary of Labor to exempt small businesses with fewer than 50 employees from the requirements of paying the emergency FMLA leave when the imposition of such requirements would jeopardize the viability of the business as a going concern. (Department of Labor regulations should clarify how this will work)
    1. Many states have adopted or are considering similar and corresponding rules, regulations, laws, and credits.

 

If your fiscal year end is coming soon and you have not yet completed year-end audited financial statements and your annual FDD updates, I strongly recommend you continue to move forward with the updates and the related state franchise renewal filings. The cost to do so now is much less than the cost to resurrect them later. In this way, your system, your status, and your FDD will be active and ready when franchise activity starts up again after the pandemic subsides. This is also a great time to put newly-available personal and staff time to use to update, adapt, and re-energize your systems, manuals, sources, plans, and business strategies.  Also remember that many of your business advisors, suppliers, financial partners, and resource managers similarly have new-found-availability and a shared desire to come out on top when the time arrives.

 

Note that some states have already extended their deadlines for filing franchise renewal applications (Maryland and Virginia for example with significant sales restrictions); it is possible some other states will do so soon.  

 

As always, your health, happiness, and well being, together with the success of your franchise business system and stake-holders, are top priorities for me. Please let me know how I can help.



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