Council Post: What PPP Round Two Means For Small Business Franchise Owners

Don Daszkowski is the Founder of IFPG. IFPG trains individuals to become Certified Franchise Consultants and earn money selling franchises.  

The second Coronavirus relief package came in the nick of time, reopening the Paycheck Protection Plan (PPP) for small businesses. Among the eligible are franchises.

While some people equate franchises with big-name, corporate giants, that’s not exactly accurate. Sure, some of the more well-known brands with hundreds of locations have large corporate teams, but each franchise location is still considered a small business and is owned and operated by individuals like your neighbors, family and friends. Just like traditional mom-and-pops, franchises are the cornerstones of communities. They do business locally and support local causes like youth sports teams and food drives. Franchises are small businesses that create jobs — and they create a lot of them.  

If you’re not convinced that franchises are small businesses, you can check out the Small Business Administration’s (SBA) guidelines and table of small business size standards. It takes into account the number of employees and/or average annual receipts a business has. The SBA’s guidelines vary depending on the industry, but in general, having fewer than 250 employees or less than $7.5 million in annual sales defines a small business.

According to industry research firm FRANdata, 75% of all franchise owners have fewer than 20 employees, which falls well within SBA’s definition of a small business. Even though franchises are small businesses, collectively, they have a huge impact on our economy. The International Franchise Association (IFA) says that franchising’s economic output was more than $600 billion in 2019, with an overall GDP contribution of more than $400 billion.

As big as the franchise industry is collectively, it is made up of people who have invested significant parts of their life savings and time into building their businesses. Relief and assistance have been crucial for these folks. There are 733,000 franchise establishments across the country that employ more than 7.6 million Americans — that’s a lot of people who rely on franchising to make a living. And they were hit hard by Covid-19.

An IFA study showed that 74% of franchise businesses in the U.S. were at one point closed due to Covid-19 mandates. Without the second round of PPP, the IFA estimated that 36,000 franchise small businesses might have closed their doors for good. The IFA called the second PPP package a lifeline for small businesses and their employees. 

The Franchise Action Network (FAN), IFA’s grassroots network of advocates, made sure Congress was aware of Covid-19’s impact on franchises and pushed for the second federal Coronavirus aid package with its #SaveSmallBiz campaign. Rallying the entire franchise community, FAN prompted franchise professionals everywhere to make a difference. Their efforts resulted in more than 100,000 letters to senators and congressional representatives. Calls for action were sent out through social media, editorials, ads and via telephone.

After months of debate in Congress and last-minute pushback from former President Trump, the second $900 billion Covid-19 relief package was finally signed into law on December 21, 2020. Included is a new $284 billion PPP.

The Small Business Administration and the Department of Treasury announced the re-launch of the PPP on January 11, 2021, which include an additional round of PPP for the most affected businesses, PPP tax deductibility, simplified PPP loan forgiveness, enhancements to the SBA 7a program and an expanded Employee Retention Tax Credit. To help the franchise community decipher the details, the IFA published a FAQ on PPP covering issues such as eligibility and forgiveness. 

Although local franchised businesses are considered small businesses, they do have a leg up on mom-and-pops. Since the start of the Covid-19 pandemic, franchisors helped their franchisees navigate the PPP process and offered advice and guidance to stay afloat through the crisis. Meanwhile, mom-and-pops had to figure it all out themselves. Not only are local franchisees supported by their franchisors, but the entire industry is advocated for by the IFA.

Franchise owners get the best of both worlds by being part of a local community as business owners and as part of the larger franchise community. Franchising’s motto of being in business for yourself, but not by yourself has proven itself once again, especially this past year.

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