How Regulations Hurt Small Businesses

What do McDonald's, 7-Eleven, and Subway have in common? They're all franchisors that license franchises to small business people, who in turn employ countless Americans. But the federal government is endangering this hugely successful business model. Learn how in this short video.

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Script:

Government regulations and rules sometimes help level the playing field for businesses. But in other cases, unelected bureaucrats can hurt businesses that are creating jobs for you and me. New rules coming out of Washington may hurt franchised businesses.

When it comes to business ownership, you often hear the terms franchisee and franchisor. A franchisor is like Subway Sandwiches. They own the brand and license it to small business people who might own one or two stores. There are literally thousands of franchisors in many different industries.

Currently, if you want to open a franchised restaurant or retail store, you sign a deal with the franchisor (the company that owns the rights to the name, menu or products, and business model). The franchisee pays for those rights and agrees to maintain quality and follow certain standards.

However, the franchisee is a separate business that makes its own decisions on who to hire, how much to pay, and what benefits to offer. This system has worked really well, creating more than 770,000 small businesses and supporting more than 18 million direct and indirect American jobs. Importantly, minority franchisees make up 20% of those businesses often locating in minority communities and employing minorities in those communities.

Right now the National Labor Relations Board, a group of unelected bureaucrats, is trying to redefine the relationship between franchisees and their corporate partners (the franchisor). The idea is to make the bigger company and the smaller companies jointly liable for employee complaints and other legal issues.

If the National Labor Relations Board successfully redefines the relationship between franchisees and franchisors, there may be far fewer new businesses and the jobs they create… because franchisors will be much more hesitant to give inexperienced people a chance at opening a franchise. After all, why would they want to be in any relationship where they were responsible for thousands of decisions made by smaller companies every week. And franchisees didn't risk their life savings to open a business, only to find out they now essentially work for the franchisor.

Botton line: this new definition slams the door shut on one of the proven paths to break into the business world.

Make Sense?

Sometimes Washington needs to understand “if it’s not broken, don’t fix it.”

Now that makes sense.

[etucker]

if it ain't broke, fix it 'till it is

[michaelragaee]

The bigger the government, the smaller the citizen!

[hydrogenone]

"If it ain't broke don't fix it"

[antigonostiggokarchedonios]

Can we focus regulation again on the really important stuff like product and worker safety again?
We really have bigger problems than this.

[gilbet]

A government-planned economy is the same as a planned economy. The more government we have, the more they will chase that illusion.

[Teleportcom]

Franchise takes would be entrepreneurs and turns them into commissioned employees with their own money on the line. if a real entrepreneur wanted to start an intelligent business based on supply and demand, that owner would see profit based on the quality of the product offered. this measure will diversify business and make the real owners responsible, since you as a franchisee are simply a commissioned employee with heavy investment and full legal responsibility for one specific location.

[tholo.nkadimeng]

I think "if its not broken don't fix it" should be a well heard message

[Bearssuperfan]

I'm a random US citizen and I approve this message

[mikemac]

And that is why I hate the government.

[AtheistsClaw]

you know what else hurts small businesses? monopolies that are allowed by the corporate bought politicians. want to help small businesses? get money out of politics

[randominternetguy]

I normally don't like Prager U but this is spot on

[xanokothe]

This reminds me of outsourcing jobs here in Brazil, the government is trying to reduce the distance between separate business (the main business and the outsourcers)

[johnc]

Government should stay completely out of the economy. The only time they should get involved in our lives is to protect the people's rights to their own person and property through law enforcement, a justice system, and a military. Everything else should be left to the people to decide for themselves as they see fit. The interaction between franchisors and franchises is none of the government's business.

[coopsnz]

Regulations hurt any business, there only $10000 profit in a premium pick up truck built for general.motors after government pricks take there share, pay workers, pay expenses

[Gucci-djko]

How about the government stays out of the way and puts a system into place, that it is easier to unionize. That would be a free market, with at least no government intervention and the unions know what they are doing

[tomassmith]

term limits help but lobbying from corporate interest needs to end.

[Thomas-erxg]

I don't tend to agree with Prager U, but I agree with this.

[diggity]

Before addressing the federal regulations, you have to fix corruption and lobbying laws. Regulate or deregulate, corporate interests will make the laws to help them, not small business owners and workers.

[coopsnz]

Government grown since 1970, why wages haven't grown private sector

[NorBdelta]

The government solution is usually just as bad as the problem itself