Small Companies Fearful of Obamacare's Hit

Best industries for job growth include fast food and dry cleaning.

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America's 750,000 franchises, a $440 billion sector employing nearly 8 million, worry that Washington's "lack of leadership" and the potential of a financial hit from the president's health reform act and other policies will crater their businesses, according to a comprehensive new survey of the industry.

Concerns about anti-business regulations in Washington have many of the small firms expecting another recession, slowed economic growth and anemic hiring.

In a review of their survey provided to Whispers, the International Franchise Association said, "the less optimistic outlook stems from franchise business owners who are frustrated with the pace of the economic recovery and the 'lack of leadership in Washington, D.C.' that is 'making things worse, not better.' "

The association added that "Franchisors and franchisees revealed concerns about how a range of issues are impacting their bottom line—with weak consumer sales, limited credit access, energy price increases (especially commodities), and the impending health care law—all ranking highly. Survey comments revealed frustration with the 'lack of support for pro-growth small business policies,' and the 'uncertainty created among consumers and investors' by the 'negative rhetoric coming out of Washington.' "

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Members include Hardees, Dairy Queen, Liberty Tax Sevice, Sears auto centers, Sylvan Learning Center and Jiffy Lube.

The franchise industry has stepped up [http://www.franchise.org/Franchise-News-Detail.aspx?id=55008] its attack on health care reform, recently saying that unless the law is repealed, 3.2 million full-time employees at tens of thousands of franchise businesses will be at risk of losing their jobs. The reason, they say, is that the new law mandates that businesses with 50 or more full-time employees provide health insurance or pay $2,000 penalty and some will cut full-time staff to avoid the added expense of providing health care or facing the fine.

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Nonetheless, the industry overall expects to boost job creation by about 2.1 percent next year, for a total of about 168,000 new jobs added. Growth will come in several areas like fast food and sit-down restaurants, real estate, automotive sales and laundry and dry cleaning outfits.

"The forecast for modest growth is good news for the franchise industry and the overall economy, given franchising supports 12 percent of the U.S. private sector workforce," said association President Stephen Caldeira. "However, the rate of growth is far below the growth trends we experienced before the recession. Pro-growth policies out of Washington, D.C., to provide certainty to the franchise industry, such as comprehensive tax reform that lowers the corporate and individual tax rates, as well as increasing the flow of credit to small businesses by the lending community, will help to get us on a more aggressive path of growth and job creation."

Their report surveyed franchise owners and operators to get their take on expectations for 2012. Among the findings:

-Real GDP growth will nudge up to 1.8 percent from 1.7 percent.

-Consumer spending will hold steady at 2.2 percent.

-Housing will continue to lag and prices will continue to fall.

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