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Legislators lobby to add small-business franchisees to COVID grant program

But Baker administration says it aims to help local companies without ties to big corporations

Governor Baker at a press conference on Thursday talked about the pandemic and the small-business grant program. He appeared at Ristorante Saraceno in the North End with owner Frank Pezzano (left).
Governor Baker at a press conference on Thursday talked about the pandemic and the small-business grant program. He appeared at Ristorante Saraceno in the North End with owner Frank Pezzano (left).David L. Ryan/Globe Staff

At first glance, Steve Stabile might seem like a perfect candidate for the Baker administration’s nearly $720 million grant program to help small businesses get through the COVID-19 pandemic.

Stabile owns two gyms in Medford and Beverly that were closed from March through early July, causing steep losses; they are now open again, but at 25 percent capacity. Many regulars are eager to come back, often waiting in line to do so, but it’s tough to find new customers in this climate.

Here’s one more problem for Stabile: His gyms are franchises of the Blink Fitness chain, and the state grant program excludes franchisees from participating.

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“They want to help all these small businesses,” Stabile said of the Baker administration. “But there are a lot of small businesses that are franchisees in the fitness industry alone.”

After this discovery played out across the state in recent weeks, more than 40 lawmakers sent a letter on Tuesday to Governor Charlie Baker, top economic aide Mike Kennealy, and Lawrence Andrews, chief executive of the quasi-public Massachusetts Growth Capital Corporation. In that letter, the legislators pleaded for flexibility in the program, which Mass. Growth Capital runs.

They argue the rules should be amended to accommodate small-business owners that are franchisees and experiencing severe economic hardships because of the pandemic and related capacity restrictions. To sum it up, the legislators say: “They are truly small businesses in every sense.”

A Baker administration spokesman said the eligibility criteria were developed to ensure the grant funds could be focused on Massachusetts-based businesses that are in the sectors most affected by the pandemic and have no connection to a corporate network that could advocate for individual franchisees. He said franchisees with connections to such a network are generally better positioned to apply for aid through the federal Paycheck Protection Program, which is reopening this month for applicants.

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Meanwhile, the deadline to apply for the state grant program is 11:59 p.m. Friday. (On Friday, the deadline was extended to Monday, due to a website outage.)

Senator Eric Lesser, one of the legislators who signed the letter to Baker, said it’s unfair not to include franchisees.

“I think everybody agrees that big chains are not who should be helped,” said Lesser, cochair of the Legislature’s economic development committee. “But it feels arbitrary for someone that is set up as a franchisee, but is in every other respect set up as a small business and a locally owned business, to be left out.”

Stabile, the gym owner, applied for a state grant in October and is still waiting for an answer. He was on the outside looking in as he watched Baker’s latest press conference on his computer on Thursday, in which the governor touted another round of $78.5 million in grants, to nearly 1,600 additional small businesses. Including the latest total, about $195 million has been awarded, to about 4,100 businesses. Baker described this program as the largest such small-business program in any state, established with federal COVID-19 relief funds.

“I really feel like they don’t understand what franchising is,” Stabile said. “When you buy a franchise, you’re just buying a playbook. But everything else is your investment, everything from the loans to the employees.”

Few small-business owners have done more to spread the word in recent weeks about this issue among franchisees and lawmakers than Ron Levin, who owns an Elements Massage center in Burlington and co-owns Elements locations in Andover and East Longmeadow. Levin’s centers were closed from mid-March through mid-June. Afterward, revenue was down significantly at all three. For example, he said revenue fell 45 percent in the fourth quarter, year-over-year, at the Andover location.

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There are nearly 25 other Elements locations in the state, with about 15 different owners. He said he pays royalties of 6 percent to the Elements franchisor as well as marketing fees, but does not receive financial support from the parent company, Elements Therapeutic Massage LLC in Englewood, Colo.

“There’s really no reason why my business as a franchise [can’t get a grant] while another independent non-franchise business could be supported by the state,” Levin said. “We’re all independent business owners. We just license a brand.”


Jon Chesto can be reached at jon.chesto@globe.com. Follow him on Twitter @jonchesto.