I was driving through Grand Rapids and noticed a new Biggby Coffee billboard. The billboard says something like “maybe you’ve heard, Biggby Coffe is accepting new franchise locations.” While I’m a big fan of Michigan businesses, I am not a fan of Biggby Coffee. Here is why.
You may remember that I ripped Biggby Coffee co-owner Mary Roszel for being a cheerleader at the signing of Governor Snyder’s business tax cut legislation. The Bloomberg Businessweek article that covered the signing noted that each new franchise would employ 15 to 20 people. Because of the business tax cut, Roszel suggests more people will buy franchise locations from Biggby for the low fee of $30,000, plus a yearly cut of their profits. Not only will Biggby make a killing on franchise fees, Biggby’s profits are also tax free! This is because Biggby Coffee operates as a limited liability company under the name Global Orange Development, LLC. Sure, rich owners Bob Fish, Mary Roszel, Michael McFall and Sandy Green will have to pay the standard 4.25% income tax on whatever they take home like you and I do. If they take in an additional million dollars between them this year because they don’t have to pay taxes, that will amount to $42,500 dollars in additional personal income tax. So they pay $42,500 in taxes in order to take in an additional $957,500! That is some sacrifice! Some say we have to give this ginormous tax cut to help private sector businessess because they have “taken it on the chin these past few years.” According to Biggby’s website, their sales grew 65% ($23 million to $38 million) from 2006 to 2009. The past year and a half must not have been too painful as they went from 109 stores to 130 stores. I’ll take some of that chin music!
So Biggby Coffee is putting up billboards and handing out freebies on the street to get people to pay them $30,000 to open up a coffee shop. Michigan taxpayers are subsidizing both the franchisee and the franchiser by giving them a tax break at the expense of public school kids, seniors, and the poor. It seems to me that public school kids are getting left with the coffee grounds while big business is sipping latte and praising Rick Snyder’s “reinvention.”