International Franchise Association President & CEO Robert Cresanti joins Yahoo Finance’s Zack Guzman to discuss why over 100 CEOs are pushing lawmakers for additional COVID-19 relief for small businesses.
ZACK GUZMAN: Overall, the broader market continues to wait and watch as we see what Republicans and Democrats might do in the latest round of debates over that fourth round of aid. Latest clip, House Speaker Nancy Pelosi telling Fox News earlier today she doesn't think a deal will be reached this week. That was, of course, after we heard the back and forth going on and some progress there with White House Chief of Staff Mark Meadows meeting both with Pelosi as well as Senate Minority Leader Chuck Schumer. Talks will continue today. But we will see what comes out of those.
Of course, the main reason why this is so important, we're waiting as businesses continue to struggle through all this as well. And as we've seen that play out, some rather large names in the business community are coming to small businesses' aid. More than 100 business groups and past and present big name CEOs including Salesforce CEO Marc Benioff and Starbucks founder Howard Schultz, signed a new letter pleading with Congress to come out and pass more aid for small businesses on the brink.
That letter calls for more loans for small businesses that might convert grants and longer-term support, saying, quote, "To survive until a vaccine is widely available, millions of small businesses will require longer-term support from the federal government."
Joining us now for more on that, though, is one of the Hancocks on that letter, that being president and CEO of the International Franchise Association, the world's oldest and largest organization representing the franchising industry, Robert Cresanti. Welcome to the program. And of course, you represent three big name brands with franchises. We're talking Mariott, Subway, Orangetheory, Dunkin'. Many of the constituents already got PPP funding. But that hasn't really been fully tapped out yet. So what are you hearing from the people you represent about why more aid is so urgent right now?
ROBERT CRESANTI: Thanks, Zack. It's wonderful to be with you today. Yeah, I think I want to clear up just the sort of the mass confusion because most of these franchise brands are owned by individuals, mom and pops, you know, in small towns, a very high percentage owned by racial minorities. And so these are the businesses that have been actively seeking assistance from the government.
96% of the franchise businesses we polled have applied for and received PPP lending. So it was a very good thing the government did, putting politics aside early on and cooperating, neither side forcing their way into the process and wanting to win. And so we're now at a spot where the crisis is-- the wolf is, so to speak, at the door again for these small businesses.
And I think it goes without saying that if you're out there, you know that your hairstylist, you know, the folks that have your dog service or other personal service providers around the country, you know, children, you know, places that educate small children, they've been closed. They're looking for help from the government to keep their employees active and back at the jobs.
ZACK GUZMAN: Yeah. I mean, the letter here that was penned by you, signed by you here, and signed by others, I mean, kind of limited in what it was asking for, focusing on loan forgiveness for the smallest and hardest-hit businesses out there, saying, public companies shouldn't get that aid. That was a problem that plagued the PPP program early on. We've kind of seen that roll off.
But it does seem tricky when we think about this. This is a discussion we've had on the show. To your point, I mean, we talk about some of these big name brands, even though they're owned by those local entities, of course, they work with the big companies here at a Dunkin' or a Marriott, some companies that have been involved in share buybacks. So why shouldn't they have built up reserves here to save these franchises themselves?
I understand wanting to save jobs now. But does it not incentivize maybe not preparing for something like this in the future?
ROBERT CRESANTI: That's a great question. So the answer lies in the fact that each one of those small mom and pops own their own business. And the company is not allowed, by law, to help engage with them. They would be joint employers if they did that. And so the businesses don't do that that. Each of these guys run on their own cash flow.
They have to qualify financially to be able to open up these businesses. And many of them are suffering just like every other small business that's out there. The franchise businesses are no different. And none of the major brands that are members of IFA have taken any PPP lending money. And I think that's the whole point of the letter is that without the little guys, there are no big guys.
And so these big CEOs that have gotten together understand that this ecosystem has to be preserved if you want people to come and have jobs. And right now, we're seeing that we have about 100,000 small businesses in the franchise space that have lost between 25% and 50% of their revenue, which doesn't sound like all that much. But when your profit margins are very narrow, which they are in these small businesses, it just destroys you. The landlords still want their rent. The utilities companies still want their utilities. The refrigerators still have to be stocked and restocked.
So it is a difficult exercise. And some have been shut down that I've talked to, Zack, multiple times because, you know, they were allowed to open again, rehired all the people, brought them in, retrained them to go. And then, you know, a few weeks later, they were closed. So it's challenging.
ZACK GUZMAN: Yeah, you talk about the start-stop. We've seen that play out in a number of states here. But when we think about that change as well, you mentioned too there, mainly tying that threshold for a second PPP loan to less than 50% drops in revenue, of course, that being the thresholds that are out there. Why would that be so important? I mean, when we talk about those businesses on the brink, obviously you have to draw the line somewhere. But why do you think that's the right spot?
ROBERT CRESANTI: Well, I think that's what the numbers tell us. So you know, of the 1 million Americans who work for the 100,000 franchise locations that are down between 25% and 50%, lowering the eligibility threshold for the loans would help increase those businesses and those workers make it through the pandemic. And three out of four of those businesses with revenue losses like that are, you know, as I said, was sort of in the business of play places for kids, music, you know, art stores, spas, exercise gyms, you know? It's been a little while, the last time I was in a gym. And that wasn't true in March.
ZACK GUZMAN: No, very true for me too. I mean, we got the workout equipment down here now in the house. But when we think about what we might do, I mean, you've been in the rooms, right? You've had these conversations. You chatted with Secretary Mnuchin, the treasury secretary, not too long ago, a few weeks ago. It was before we started to get into the thrust of these discussions going on about phase four right now.
But when you talked with him and you were representing, of course, all these franchises out there, what was the sense you got from him in terms of what might actually get through, the things you're pushing for here, and whether or not Democrats might be on board to kind of agree to changes to PPP as something that has worked on a bipartisan level?
ROBERT CRESANTI: Yeah, I think there's an ever-increasing threat from the election that looms here. And that is playing a huge part in the goodwill that people are pushing forward. You know, politics are naturally at play in a way that they weren't earlier when we were in the full on crisis of this. So people are seeking to push a political advantage at the moment.
And so Democrats have an interest in wanting to make sure that people continue to survive. And just like we're worried about small businesses, they're worried about independent, you know, individuals who are working in these businesses so that they continue to have jobs and continue to have pay. And our small business owners, of those that are open and working, the number one problem right now is not getting PPE equipment, the personal protective equipment. It's not anything else other than getting workers to come back out of their, you know, leave because they have childcare issues. They have all of these other things.
So we're sadly in the middle of an experiment that says, what happens when you shut an entire economy down for a period of time. How do you start it again? And my argument in this letter is fundamentally this. You have to preserve these businesses so that people who want to go back to work have a place to go to work.
ZACK GUZMAN: Yeah. And it's always easier to do that rather than have everything start from scratch all over again. And obviously, a lot of people concerned about that right now. But Robert Cresanti, really appreciate you taking the time, International Franchise Association president and CEO, thanks again.
ROBERT CRESANTI: Thank you, Zack.