Franchisees are suing the state of California, claiming the new law would force them to lay off workers.
The law will require them to pay franchise tax and raise the minimum wage, which are already tied to the prices of ingredients and other goods.
The state says this is to make up for a loss of revenue that could be caused by the changes, which were made by a state law signed by Governor Jerry Brown in January.
Franchisees, who account for about 15% of the US workforce, say they are already facing an onslaught of changes, including lower wages, lower hours, and fewer workers.
What’s at stake?
The law, called the Franchise Tax Reduction Act of 2019, requires franchisers to pay $1.9 billion in franchise tax over 10 years, a levy that will increase to $1 billion in 2020.
It also imposes a new state wage tax on food service and other businesses.
It will take effect Jan. 1, 2019.
In addition, the state will create a $15 minimum wage and a new statewide minimum wage of $10 per hour for restaurant and other service workers.
But the biggest change comes in the form of a 10% increase in the franchise tax.
The franchise tax will rise from 5.5% to 6.25% of revenues for every $1 franchised, up from 5% to 7.5%.
Franchisees argue the tax increase will lower the prices for goods and services.
The bill would also exempt restaurant and similar businesses that operate more than 50 restaurants from paying the franchise taxes.
The restaurant and service industries are currently subject to an excise tax, which is levied on restaurant and foodservice businesses in California.
The excise tax also applies to all food service businesses in the state, which also include fast-casual chains like Chipotle, Olive Garden, and Papa John’s.
What are the challenges?
In a statement, the Franchise Council of California said: The Franchise Tax Reform Act of 2018 does not change the fundamental structure of the state’s franchised restaurants.
Franchisee fees and costs are based on franchisees’ net income and sales.
The Act does not create any new revenue stream.
It does not eliminate any taxes that are currently levied by the state.
Franchise owners are encouraged to contact their elected representatives and legislators to express their concerns and request that the Franchise Reform Act be removed from the 2018 budget.
The Council of Franchisees has a mission to help increase competition and provide the best possible service to our members.
Franchise and restaurant owners also have the opportunity to participate in the process by calling their representatives.
The Franchise Council will continue to monitor the proposed law.
How do I contact my state representatives?
Call your state representative’s office to file a protest.