On April 3, 2020, banks commenced taking applications for the Small Business Administration’s (“SBA”), Paycheck Protection Program (the “PPP”) loans, as provided in the Coronavirus Aid, Relief, and Economic Security Act aka the CARES Act. At the highest level, the PPP allows eligible businesses to borrow up to 2.5x average monthly payroll costs
CARES ACT – A LIQUIDITY LIFELINE (With tough choices for franchising)
Let’s face it—COVID-19 has decimated the franchise industry, along with the rest of the economy. The food service, hospitality, travel and the service sectors had very tough decisions to make almost instantly, with very little guidance. Questions persist: Can or should franchise businesses continue to operate? How can workers be protected? How can business be supported and bills paid? How long will it last, and how quickly can the industry get back on its feet?
We still don’t know the answer to the last two questions. But the Coronavirus Aid, Relief and Economic Security (CARES) Act, signed on March 27, 2020 should help staunch the financial bleeding. CARES offers franchise businesses a liquidity lifeline in the form of loans (which can become grants), deferred payments, and tax relief. CARES is targeted to small businesses (fewer than 500 employees) but in a coup for franchising, franchises, specifically “any organization operating as a franchise that is assigned a franchise identifier code by the SBA,” are exempted from the size eligibility requirements. This is especially significant for multi-unit franchisees, whose multiple locations when combined would have exceeded the 500 employee limit. In an earlier parallel move, Congress enacted the Families First Coronavirus Response Act (FFRCA) to protect liquidity for individuals and families. The overarching intent of these massive spending bills, unprecedented in our nation’s history, is to help businesses and individuals weather the challenge of COVID-19. Neither law is intended to be a stimulus.
CARES poses tough choices to businesses that are already in shock, the result of an abrupt closure or dramatic sudden catastrophic decline in income. Should employees be laid off or retained? Is it better to off-load employee expense, normally a business’ greatest expense, or keep them employed and bear the potential burden of the increased sick pay and family medical leave payments mandated by FFRCA? If a business opts to maintain employees, will it be able to survive financially? If employees are laid off, how quickly will they return to the workplace in light of the greatly expanded and very generous unemployment benefits mandated by CARES? When the virus struck, the workforce was fully employed; there was no excess of workers. Thus, workers who are financially dissuaded from returning to work when the virus emergency ends may dampen or delay the economic recovery that is the goal of CARES.
The CARES Act and Small Business Administration Loans
There’s a big insurance company that uses the tag line: Life Comes at You Fast. I sure feel that life is coming at me very fast in this Brave New World of COVID-19. Congress seems to agree, as it worked in record time to enact the $2 Trillion Coronavirus Aid, Relief and Economic Security or
CARES Act: An Initial Review
As the effects of the COVID-19 outbreak evolve, we here at Fox Rothschild continue to update our Coronavirus Resource Center. Today, we’ve been hard at work reviewing the historic CARES Act and its over 800 pages of provisions.
Learn what’s contained in the $2.2 trillion CARES Act stimulus package and how it will affect
You’re Worried? What To Do. NOW.
A recession is coming, if it is not already here. But this won’t be a recession like 2008. Back then, the banks threw you under the bus so that they could survive. Today, they are stronger. More importantly, they know they must partner with you. So your strategy must be different now.
Bottom line? Flexibility
Webinar: Preserving Your Franchise System in the Face of California AB-5
So we’ve talked a bit over the last couple of weeks about California’s AB-5 and the implications for franchising. But maybe you would like to learn more? Then you’re in luck! On Monday, October 28, 2019, at 9 am PT (12 noon ET), my colleagues Tami McKnew and Nancy Yaffe will be presenting a webinar
California’s AB-5 Implications (Part 2)
As noted in our first post on this topic, California’s AB-5 codified the employment test set forth in Dynamex Operations West v. Superior Court of Los Angeles, 4 Cal. 5th 903 (2018). Although the full implications of this new law are unclear, it will like have a major impact on the franchise industry.
If, as
California’s AB-5 Implications (Part 1)
“Some day, California’s going to fall into the ocean” usually refers to the San Andreas fault. Now it may refer to AB-5, and the future of the franchise industry in California.
The California legislature has now passed AB-5, and Governor Newsom has signed it into law. AB-5 codifies the Court’s decision in Dynamex Operations West
Takeaways from the IFA Philadelphia International Franchise Association Summer Event at Rita’s Franchise Company
The Philadelphia Chapter of the International Franchise Association’s Women’s Franchise Network hosted its annual summer meeting this past week. For those of you who do not know, the local chapters of the IFA WFN’s is a local community designed to create, promote and inspire a network of female franchise business professionals dedicated to strengthening the
Just Signed! New Washington State Law Limits Use of Non-Competes and No-Poach Agreements
Yesterday, Washington’s Governor, Jay Inslee signed HB1450 [PDF] which targets the use of restrictive covenants in the State of Washington (the “Non-Compete Act”). The signing of the Non-Compete Act follows the recent settlement on March 18, 2019 of three cases filed by private plaintiffs challenging the no-poaching provisions in franchise agreements of Auntie Anne’s, Arby’s