Franchisors and franchisees urge legal certainty as debate flares over Corporate Transparency Act enforcement

At a House Small Business Committee hearing, franchisors, franchisees and anti‑corruption advocates testified that franchising remains an engine of small‑business job creation but said uncertainty over federal rules — from beneficial‑ownership reporting under the Corporate Transparency Act to changing joint‑employer standards — threatens franchise investment and expansion.

The hearing brought together franchisors and multi‑unit franchise owners, who described franchising as predominantly a small‑business model, and a Transparency International U.S. representative who defended continued enforcement of the Corporate Transparency Act (CTA). "Franchising is small business," said Randy Cross, president of Fish Window Cleaning, testifying that most franchise owners run a single location and that franchising supports nearly 9 million jobs and about $897 billion in economic output, figures he attributed to the franchise sector.

The disagreement centered on the CTA's beneficial ownership information (BOI) reporting. Gary Kalman, executive director of Transparency International U.S., argued enforcement remains critical for law enforcement and national security, warning that anonymous shell companies can be used to evade tariffs or launder criminal proceeds. "Without the CTA, this tariff dodge creates gaps for law enforcement," Kalman said. Ranking Member Nydia Velázquez told the panel the CTA "is the law of the land and must be enforced," while several franchise witnesses said the current BOI rules and penalties create compliance fears for very small businesses.

Why it matters: witnesses and members said franchised businesses are locally owned and sensitive to regulatory and tax changes. Franchisors and franchisees urged Congress to preserve a clear joint‑employer standard, restore or maintain favorable tax provisions such as section 199A and bonus depreciation, and improve SBA lending tools for prospective franchisees.

Key testimony and proposals

- Franchising as small business: Randy Cross, president of Fish Window Cleaning and an International Franchise Association board member, said "over 80% of franchise owners own and operate just a single location" and that franchisees generally pay an average 6% royalty to franchisors. Cross urged lawmakers to pass legislation like the Save Local Business Act to lock in a narrower joint‑employer test and to extend tax provisions he said benefit small owners.

- Joint‑employer concern: Craig Wright, chief executive officer of AquaTots Swim Schools, described franchisor support systems — training, franchise advisory councils and recurring contact — and said frequent changes in the joint‑employer standard have harmed franchise planning. "A franchise relationship is a long term relationship that spans a decade," Wright said, arguing for a stable standard so franchisors can continue trainings and operational support without exposure to litigation risk.

- Franchise owner perspective: Jennifer Bowden, a long‑time Buffalo Wild Wings franchisee, described franchising as a pathway for multi‑generational small business ownership and told lawmakers she relies on tax provisions and access to capital to remodel locations, hire staff and expand. She said in states that attribute franchisor employee counts to franchisees, owners face higher labor‑cost pressures and operational changes.

- Corporate Transparency Act defense: Gary Kalman (Transparency International U.S.) said law enforcement and procurement officials rely on BOI to detect fraud, money laundering and tariff evasion. He cited GAO and press reporting suggesting anonymous companies have been used to hide illicit activity and called for a risk‑based approach that retains BOI reporting for domestic and foreign entities.

Policy and administrative issues raised

- Tax provisions: witnesses repeatedly urged extension or permanence of section 199A (pass‑through deduction), 100% bonus depreciation and certain estate tax provisions, saying the incentives put capital in the hands of small owners and support growth and succession planning.

- SBA lending and franchise directory: witnesses welcomed the Small Business Administration's reported reinstatement of a franchise directory as a helpful tool for lenders and prospective franchisees and asked Congress and the SBA to streamline loan processing for small franchise owners.

- Compliance burdens: franchise witnesses said many small franchisees lack in‑house counsel and rely on associations or franchisors for compliance guidance. Several asked for simplified reporting forms, outreach and instant verification for BOI filings if enforcement is maintained.

Actions and formal submissions

A motion was made during the hearing to include a statement of administration policy and supporting letters in the hearing record; the transcript records the motion being offered but does not specify the committee's disposition. No committee votes or final actions on legislation were recorded in the hearing transcript.

Ending: Members indicated they will continue oversight and pursue legislative fixes. Committee leaders allowed five legislative days for additional materials and written questions; witnesses were asked to respond to follow‑up inquiries.