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Originally published Wednesday, June 11, 2014 at 8:20 PM

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Franchisees sue city over transition period under new wage law

The International Franchise Association and five Seattle franchisees sue to block the city’s new minimum-wage law, saying it unfairly treats them as large businesses.

Seattle Times staff reporter

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Five local Seattle franchisees and their trade association Wednesday filed a lawsuit to block the city’s new minimum-wage ordinance from taking effect in April.

The International Franchise Association argues that the $15 minimum-wage law unfairly treats its franchisees as large businesses, although they are independently owned and operated as small businesses. Under the new rules, they must increase their minimum wage to $15 in three or four years, rather than up to seven years as a small business.

“We think the law that was passed by the City Council and signed by the mayor discriminates against small-business owners,” said Steve Caldeira, president and CEO of the association. “They are independently owned franchises. They’re part of a national chain that gives them support in certain areas, but at the end of the day, they put in their own money, their life savings and investments to try to achieve the American dream.”

The lawsuit says franchisees are independent business owners who operate separately from the corporation that provides them brand and marketing materials. The association estimates there are 600 franchisees in the city employing 19,000 workers.

Local franchise owners who joined the lawsuit said they take all the financial risks in opening their businesses and are required to send a percent of the profits to the corporate parent.

Chuck Stempler, owner of two AlphaGraphics franchises, which employs 69 people, said he doesn’t object to Seattle’s higher minimum wage.

“Our issue is with the transition period. I’m a small company. All we ask is that we be treated like all the hundreds and hundreds of other small companies in the city and be given the seven-year schedule,” Stempler said.

The other plaintiffs are the owners of a home-health-care franchise and the owners of two Holiday Inn franchises.

An attorney for SEIU, a union instrumental in passage of the $15 minimum wage here and in SeaTac, called the lawsuit frivolous.

Dmitri Iglitzen, a Seattle lawyer, said the city must have a rational basis to treat one business differently from another; the advertising, marketing, training and brand identity that franchisees get from their corporate parent make them different from other small-business owners.

“Franchises are a legal construct. It’s rational for government to draw a distinction,” he said.

The lawsuit, filed in U.S. District Court, seeks an injunction to stop the minimum-wage law from taking effect. The City Council approved the ordinance June 2. Murray signed it the following day.

Lynn Thompson: or 206-464-8305. On Twitter @lthompsontimes

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