How Have Lower Taxes Impacted Franchises?

The first in a three-part series about how franchise businesses are investing in the U.S. economy and local communities.

By Andrew Parker, CFE, and Sarah Eustace

The impacts of tax reform on U.S. businesses big and small is helping to jumpstart jobs, increase wages and result in other positive impacts to local communities. Stories are emerging of a wide range of companies taking various paths to turning tax savings into economic expansion while helping people directly. Examples include higher salaries, increased 401K matches, career benefit and apprentice programs, additional training for employees and community enrichment. Some organizations are even returning tax benefits directly to consumers, such as local utilities reducing bills.

A group of IFA members visited the White House in August 2017 to discuss tax reform.

Multinational corporations such as Apple, AT&T, Disney, Home Depot, Honeywell, Pepsi, Verizon and Visa have reported large initiatives in response to the passage of tax reform. Across franchising, companies are stepping up in a variety of ways to serve employees and local communities. Here are some of their stories:

Express Employment Professionals

Lower taxes mean that Michael Brady, franchisee of Express Employment Professionals in Jacksonville, Fla., is able to give raises to all of his employees. “It allows me to seek higher wages for temps as well, upgrade technology and make lease hold payments,” he said.

Joseph Clancy is an Express Employment Professionals franchisee based in Sanford, N.C. He’s interview candidates to hire additional staff and is investing in workforce development through training courses for existing employees.

Ecolab Inc.

St. Paul, Minn.-based Ecolab, a water, hygiene and energy technology company and IFA member, decided to turn tax savings into a $25-million contribution to the Ecolab Foundation. The Ecolab Foundation provides basic needs to local communities including hunger relief, affordable housing, education, arts and environmental conservation.

Popeyes

Popeyes Louisiana Kitchen franchisee Danny Gililand of Little Rock, Ark., plans to invest in a new location, replace outdated equipment and raise the pay scale for all of his employees. “I will also be enhancing our benefit package for our management team,” he said.

Postcard Portables

Investment in the U.S. is on the table for Canadian 12-unit franchise Postcard Portables due to tax relief, according to Chief Operating Officer Aubrey Huber. “We would certainly consider U.S. expansion more heavily when these tax changes become formal and finalized,” she said. “As Canada is trending toward more corporate taxation, the proposed lower tax thresholds in the United States are becoming more and more attractive.”

Sport Clips

Gordon Logan, founder and CEO of Texas-based franchisor Sport Clips, said the company will dedicate additional resources to digital learning systems, hire more than 20 people to its support team, build additional stores and hire more employees for the new locations. Logan, a member of the IFA Board of Directors and a U.S. Air Force Veteran, also noted the ability to invest in technology, such as apps for online check-in and applicant tracking.

Debra Sawyer, a Sport Clips multi-unit franchisee in Florida Virginia, is taking a unique approach to the tax savings by buying two more locations. The previous owner wanted to move out of state to be closer to her kids, and Sawyer quickly took action to purchase the locations and make a swift impact.

“I am giving her 18 team members raises to bring them up to my pay plan for the rest of my stores,” she said. Sawyer currently owns 20 Sport Clips, 11 in Florida and nine in Virginia, with plans for another Florida location scheduled to open during the second quarter. She’s also looking for three additional sites in Florida. “The ability to write off the assets acquired in a purchase or a build out make it financially easier to expand with the bonus depreciation and the higher Section 179 deduction limits,” Sawyer said.

Fellow Sport Clips franchisee Marl Carson is also giving raises. “I have implemented a new pay and incentive plan that will increase employee compensation. The benefit to the business is being more competitive in recruiting and retaining employees.”

Visiting Angels

Visiting Angels franchisee John Spang is incentivizing his employees who stay with the company throughout 2018 with an extra bonus as a result of the money created through tax reform.

Andrew Parker is Editor-in-Chief and Sarah Eustace is Associate Editor of IFA’s Franchising World magazine. Join IFA’s Franchise Action Network at www.franchiseactionnetwork.com to get involved with issues that impact the franchise business model.