Franchise Job Losses Continue, ADP Reports
ADP National Franchise Report
Franchise businesses continued to shed workers in May as the industry lost 254,100 jobs, according to a report from payroll services provider ADP. That’s after franchise job losses of 1,082,200 in April and comes as pressures from the COVID-19 crisis persist.
The ADP Research Institute produces its National Franchise Report in collaboration with Moody’s Analytics and uses actual payroll data representing 15,000 franchisors and franchisees. The sample size of the overall ADP data set from which the ADP National Employment Report is derived is 406,000 U.S. companies and 23 million employees, which accounts for more than 20 percent of all U.S. private sector employees.
With dining restrictions still in place across many states, restaurant employees are enduring the brunt of the pandemic’s impacts, with franchises in this sector losing 149,400 jobs last month. Despite some small gains, demand in the hotel sector overall remained down and the accommodations segment lost 53,100 jobs in May, followed by businesses services with 9,500 job losses. Declines for food retailers (-5,100 jobs), auto parts and dealers (-3,700 jobs) and real estate (-1,300 jobs) were also reported.
“These are truly staggering numbers that show this pandemic’s impact on the franchise industry. Whether in hospitality, retail, personal services, or any of the many business lines that utilize the franchise model, it’s clear that franchise businesses and franchise employees have been among the hardest hit,” said Matt Haller, senior VP of public affairs and government relations at the International Franchise Association.
Prior to the pandemic, the IFA noted America’s 733,000 franchise businesses employed more than 8 million workers and contributed roughly $675 billion in economic output. “These astounding job losses are all the more reason for Congress to put aside differences and enact changes to the Paycheck Protection Program to provide additional relief for small businesses as soon as possible,” said Haller.
The changes referenced by Haller are part of the Paycheck Protection Program Flexibility Act recently passed by the U.S. House and, as of June 3, the Senate. It now goes to President Trump for his signature. Here’s how the bill, once in effect, will change the PPP:
• Adjusts the loan forgiveness requirements to allow business owners to use up to 40 percent of their loan for expenses other than payroll. The PPP currently allows businesses owners to use 25 percent of the loan for expenses such as rent and utilities, while requiring 75 percent to be used for payroll.
• Extends the loan use period from eight weeks to 24 weeks, while still allowing borrowers to elect an eight-week period.
• Extends the program expiration date from June 30, 2020 to December 31, 2020.
• Lengthens the loan term for new loans from two to five years.
• Allow PPP recipients to defer payroll taxes on PPP loan proceeds.