▶ 0:05:29button. When you're completed
▶ 0:06:15Red is on.
▶ 0:20:10Okay, good morning. And uh before we get started, uh I want to recognize Congressman Petronis from the great state of Florida to lead us in the pledge and the prayer. Please stand.
▶ 0:21:20Good morning everyone and I will now call the committee on small business to order. Without the without without objection, the chair is authorized to declare a recess of the committee at any time. I now recognize myself for my opening statement. Uh, welcome to today's hearing, a small part in a big company, examining the power in franchising in the American economy. In today's hearing, we will hear from franchiseors and franchises on all aspects of the franchise business model.
▶ 0:21:47We will focus on how we in Congress can protect this model to ensure generations of Americans have a chance to achieve the American dream. Franchises operate in every corner of America. Uh my family has been a part of the franchise model for over 80 years in the car business. I've seen firsthand the benefits to consumers, manufacturers, uh in local communities, and mo most importantly individual citizens and people in the community.
▶ 0:22:12Whether you're in a small town or a big city, you are likely to encounter locally owned franchises that uh support and drive the local economy. Across the United States, there are an estimated 831,000 franchise businesses employing nearly 9 million workers. These franchise establishments generate close to $900 billion in economic output, which is roughly 3% of the US GDP. When the franchises thrive, the American economy thrives.
▶ 0:22:39Unfortunately, the franchise business model came under attack under the prior administration. The Biden Harris National Labor Relations Board, the NLRB, issued its disastrous joint employer ruling, which threatened to upend the franchise business model. Congress fought this misguided attack on a bipartisan basis, only to be met with Biden's veto. If the courts had not struck down this joint employer rule, franchise franchises would have incurred an estimated $33 billion in additional costs each year.
▶ 0:23:09Franchises face yet another uphill battle as Democrats are fighting tooth and nail to oppose extending President Trump's pro small business tax cuts and jobs act. Failing to extend the CCJA will result in the greatest tax hike on the American people in its history. Rather than being under undermined through excessive regulation and being subject to Democrat tax hikes, the franchise business model should be supported.
▶ 0:23:34This model offers small business owners access to resources and tools to assist with many challenges and make the dream of becoming a business owner more attainable and also reliable. It's an honor to work alongside my colleagues and President Trump to create common sense policies uplift our nation's small businesses through deregulation, lower taxes, and greater access to capital. I'd like to thank businesses to to participate in this important hearing. Uh we look forward to your testimony.
▶ 0:24:02Now with that, I want to yield to my friend and distinguished member, ranking member from New York, Miss Velasquez, for her opening remarks. Thank you, Mr. Chairman. Today's hearing on the franchise business model give us the opportunity to assess the issues franchises and other small businesses face in today's economy. So, let me give you the facts. President Trump's economic on and off again economic policies are setting off alarm burls.
▶ 0:24:32Americans are becoming increasingly worried about the health and future of our economy. Recent economic data showed that our economy shrank by 0.3% in the first quarter as the president's policies created significant uncertainty. Growth in consumer spending slowed considerably with GDP down from the 2.4% growth the economy experienced in the fourth quarter of 2024.
▶ 0:25:02Despite lowering costs on day one, prices remain high. GDP data released at the end of April confirmed that prices are climbing as consumer inflation jumped 3.6% 6% in the first quarter and core inflation rose 3.5%.
▶ 0:25:21When combined with a generally weakening economy, the uncertainty and highest costs caused by the president's tariff policies are beginning to force franchises and other small business owners to make difficult choices. 30% of small business owners indicated in March that they plan to increase prices, the highest amount reported over the last year.
▶ 0:25:46Employment of small employers declined by 3% since President Trump took office, and five out of 12 Federal Reserve districts recently reported weakening manufacturing activity. Perhaps worse, small businesses report that they anticipate these challenges to grow and forecasters from across the spectrum are increasingly concerned about the chances of an economic recession.
▶ 0:26:15JP Morgan now places the odds of a US and global recession at 60% and directly attributes that forecast to President Trump's tariff policy. Again, these are the facts. And combined with the Trump's administration's decision not to enforce the beneficial ownership reporting requirements under the Corporate Transparency Act, the American economies left in a particularly vulnerable state.
▶ 0:26:45passed in 2021 with wide bipartisan support from a broad array of stakeholders including from President Trump. The CTA requires the Treasury Department to develop and maintain a registry of the real beneficial owners of established businesses in order to crack down on the use of anonymous shell companies in the US. Mr.
▶ 0:27:11Chairman, I would like to include for the record a statement of administration policy from the Trump uh supporting passage of the CTA in 2019 letter signed by National District Attorneys Association, the National Narcotic Officers Association, and a list of 583 law enforcement, business, human rights, national security, and other experts supporting ing
▶ 0:27:41passage of the So moved. While there is no doubt that there were problems with Vincson's roll out, establishment of the registry and education to small businesses of their reporting obligation. That is not justification for not enforcing the statute.
▶ 0:28:01I will soon be leading other House and Senate Democrats in introducing legislation to improve the BOI reporting process for small businesses and I encourage anyone who is interested to join me in this effort. The CTA is the law of the land and must be enforced. Franchises and other small businesses are especially vulnerable to tariffs and economic uncertainty.
▶ 0:28:26And the Trump administration decision not to enforce the CTA expand the use of anonymous shell companies which harms fair competition for legitimate small businesses looking to compete in the marketplace. I look forward to exploring all of these and other issues here this morning. Thank you. I yield back. Gentle lady yields back. And we will now move to witness introductions.
▶ 0:28:51I recognize my colleague, Representative Sculton, from the great state of Michigan to briefly introduce her constituent who is testifying before the committee today. Thank you so much, Mr. Chairman. Uh I really appreciate the spirit of bipartisanship that uh dominates this committee uh and the opportunity to introduce uh my constituent here today. I am so pleased to introduce uh Mr. Randy Cross, the president of Fish Window Cleaning. Mr. Cross is a constituent of mine.
▶ 0:29:21We enjoyed uh a great conversation over at Fish Window Cleaning uh just a few weeks ago uh and my my boys are uh very interested in getting into the squeegee business uh at at some point in the future. Uh I have to say they're very fascinated. Um thank you for your hospitality. Um after opening his first fish window cleaning franchise location in 2003, Mr. Cross has gained years of experience in the franchising world.
▶ 0:29:48He is now both a franchiseor and a franchisee, providing a unique perspective on the ins and outs of this business model. As co-chair of the franchise caucus myself, I look forward to hearing from Mr. Cross on how Congress can do more to help entrepreneurs like him build up their businesses and by extension our nation's economy. Thank you. I yield back. Lady yields back. Our next witness here with us today is Mr. Craig Wright. Mr.
▶ 0:30:14Wright is the chief executive officer of Aquat Swim School in Phoenix, Arizona. Mr. Wright has over 30 years of executive leadership experience and joined Aquat Swim School in 2017. Prior to that, he served in multiple positions for Leslie's Pool Supplies as senior vice president for Meard Refrigerated Services. He worked his way up uh in his career starting as a box boy at Butry Food and Drug all the way up to vice president of distribution, merchandising, and support. Mr.
▶ 0:30:43Wright graduated from Montana State University in Billings. I want to thank you for being here today and uh uh thank you for taking the time to bring your family with you, too. Our next witness here with us today is Miss Jennifer Bowden. Did I say that right, Jennifer? Uh, Miss Bowden is a franchise owner of multiple Buffalo Wild Wings locations in West Virginia and Virginia. Miss Bowden has been a Buffalo Wild Wings franchisee for more than 25 years, founding her first restaurant with her family in 1999.
▶ 0:31:13Miss Bowden serves as vice chair of the franchise business services board of directors and is a co-owner of Black Rock Bar and Grill. Uh, she is a graduate of West Virginia University. And thank you for joining us today. and I'm looking forward to hearing your uh conversation. I now recognize the ranking member from New York, Miss Velasquez, to briefly introduce our last witness appear appearing before us today. Thank you, Mr. Chairman. I would like to introduce Mr. Gary Coleman, executive director of Transparency International US.
▶ 0:31:42In this role, he oversees the organization's US operations, focusing on illicit finance and the US role in global anti-corruption efforts. He was a founding member of the financial accountability and corporate transparency, fact coalition, a nonpartisan alliance promoting policies to combat the harmful impacts of corruption financial practices and serve as executive director from 2016 to 2019.
▶ 0:32:12He's currently an advisory council member for the International Coalition Against Illicit Economies. Mr. Coleman, it is nice to see you again. Welcome back to the committee. Thank you. Lady heels back and uh so thank again all of you for being here. Now before recognizing the witnesses, I would like to remind them that their old testimony is restricted to 5 minutes in length and we do stick with that. If you see the light turn red in front of you, it's over with. Okay?
▶ 0:32:40Means your five minutes have included and you should wrap up your testimony. Uh if you continue to go, you'll hear this reminding you that uh you need to stop. Uh I now recognize Mr. Cross for his fiveminute opening remarks. First of all, thank you to my Congresswoman Hillary Scolton for the introduction. And thank you, Chairman Williams, Ranking Member Velasquez, and distinguished members of the committee for inviting me here today.
▶ 0:33:05My name is Randy Cross, and I am the president of Fish Window Cleaning, which is the nation's premier window cleaning service with more than 275 franchise locations nationwide. It is a unique privilege to appear before you today alongside our fellow franchise business leaders to talk about this incredible all-American business model of franchising. Mr. Chairman, as a franchiseor, it is my honor to help aspiring entrepreneurs open and operate their own window cleaning business. But perhaps more importantly, I am also a franchisee in Grand Rapids, Michigan.
▶ 0:33:35And I opened the second fish window cleaning location back in 2003. Today, I proudly employ 31 employees at my fish franchise. I appear before you today on behalf of the International Franchise Association, where I also serve on the board of directors. Today's hearing is a great opportunity to highlight the power of franchising, a business model that supports nearly 9 million jobs at 831,000 establishments in America, contributing a staggering 897 billion to our economy.
▶ 0:34:04Franchising is perhaps the most important business growth strategy in American history. Mr. Chairman and friends of the committee, my message today is this. Franchising is small business. When you see in your communities a fish window cleaning business, an aquat swim school, or a Buffalo Wild Wings restaurant, what you are looking at is small business. The vast majority of our fr of our franchises in the country are like me and they operate a tiny enterprise.
▶ 0:34:30Over 80% of franchise owners own and operate just a single location. And for all the benefits of operating under that established brand, franchises pay an average of 6% royalty to a brand to sell that brand's products or services. This means franchises retain an average of 94% of their business revenue. So now that you understand most franchises are very small, you also need to understand that the vast majority of franchiseors are also very small enterprises.
▶ 0:34:58The majority of the nearly 3,500 franchise brands in operation today have less than 20 franchise units in their system. So franchising truly is a small business. And because we are a small business, we are far more affected by the government policies than multinational corporations are. The franchise community is very pleased that Congress is advancing tax policy that allows small businesses to flourish.
▶ 0:35:23Specifically, we are excited that the House Ways and Means Committee is advancing a bill to extend, increase, and make to permanent the section 199A deduction for pass through businesses. This benefit will provide monumental certainty to small business franchises franchiseors. Franchise business people are also very pleased about the extension of the bonus depreciation and estate tax provisions from the 2017 tax laws.
▶ 0:35:48These two policies respectively will allow businesses to immediately write off 100% of the cost of capital investments and prevent an unimaginable burden to a family in the event of the death of a franchise owner. Another policy I'd like to discuss is the unnecessary impact of the corporate transparency act enacted by Congress in 2021. The CTA would require the smallest franchises in America to report sensitive and personal information to the federal government.
▶ 0:36:14And while I certainly support the goal of reducing illicit activity, it is rare that policymakers pass a regulation that only affects the smallest businesses who are least able to understand how to comply. The IFA was pleased that the Treasury Department will not enforce that law, and we support a full repeal of the Corporate Transparency Act.
▶ 0:36:34Last but not least, the most important action Cong Congress can ever take to pave a clear future for franchise small businesses is to finally write a common sense law for what constitutes a joint employer. While franchise businesses are predominantly small, they are also independent businesses and franchises like me want to stay independent forever. That's why we entered into this line of work.
▶ 0:36:58Last year's expansive joint employer standard made no sense for the franchise or franchisee relationship and we can all be relieved that the IFA defeated that rule in court. The court defeat came after Congress also rejected the rule on a bipartisan basis last year through a congressional re review act resolution that passed both the House and the Senate last year.
▶ 0:37:20This year, Congress still has an opportunity to pass legislation like the Save Local Business Act to provide economic safety and security for franchise business families everywhere. Mr. Chairman, I cannot thank you enough for the invitation to appear at this hearing on franchising. And I look forward to our discussion. Thank you very much. Now recognize Mr. Craig Wright, who I You can swim, can't you? I can swim. I can swim. Yes. I now recognize Mr. Craig Wright for his fiveminute opening remarks. Thank you.
▶ 0:37:48Good morning, Chairman Williams, ranking member of Velasquez, and distinguished members of the committee. My name is Craig Wright, and I'm the CEO for Aquat Swim Schools, a franchise based in Mesa, Arizona. Aquat Swim Schools is a family-owned business that began in 1991 with a simple goal to make quality swim lessons accessible, safe, and convenient for families. What started as a single lesson taught by a teenage lifeguard in Tempe, Arizona, has grown into one of the world's largest swim school franchises.
▶ 0:38:14Initially operating in backyard and hotel pools, Aquats pioneered one of Arizona's first indoor year-round facilities, the success of this business laid the concept and foundation for the brand's expansion under the franchise model. In 2007, Aquats launched its first franchise. Today, Aquats is over in over 170 locations, 14 countries. We've taught over 47 million swim lessons to 2 and a half million children worldwide.
▶ 0:38:42The majority of our 75 franchise owner groups are made up of firsttime business owners and families who are passionate about water safety and childhood development. Since 2017, I've had the privilege of leading Aquat as the CEO. It's an honor to be here today and give my perspective on the impact of franchising and its hundreds and thousands of small businesses. At its core, franchising is about the relationship between the franchise or and the franchises.
▶ 0:39:08Specifically, how the franchiser supports its franchises and how the franchises meet their obligations to deliver products and services in accordance with the systems brand standards. A franchise relationship is a long-term relationship that spans a decade and in many cases more than 20 or 30 years. These long-term relationships only work when the parties can trust that the relationship and expectation each party has of the other will remain stable.
▶ 0:39:35While the franchiser provides the brand and the operating system and the training and the ongoing support, the franchisee is the one on the front lines making the daily operational decisions, managing their team and building relationships with their customers. We see our franchises as partners who bring the brand to life in their unique local markets. Their success is our success and that success is built on the foundation of their individual small business.
▶ 0:39:59The collective network of a franchise brand can be substantial comprised of hundreds if not thousands of individual small business owners. These entrepreneurs are the backbone of the franchise model and significantly contribute to their local economies. As franchiseors, we are proud to empower these individuals to achieve their dreams of business ownership and witness the positive impact that they have every single day. When franchising is mistakenly painted with a broad big business brush, it can lead to misguided policies and regulations.
▶ 0:40:29Legislation aimed at large corporate corporations can inadvertently hard harm the small small business owner, hindering their ability to grow, create jobs, and serve their communities. To that end, I would like to now highlight an issue that has clouded the franchise community for decades, notably the everchanging joint employer standard. Franchise businesses have faced four different definitions of the joint employer standard over the past decade.
▶ 0:40:51And while there is reprieve from previous NLRB's joint employer rule, I want to stress the importance that the current common sense standard and federal labor law has on franchise businesses like aquats and state that any action towards permanently preserving the current NLRB rule would not only protect both businesses and workers, but also create the regulatory conditions that would allow both franchiseores and franchises to thrive, grow, create jobs, and serve in the opportunities in their local communities.
▶ 0:41:19Lastly, the SBA plays a critical role in the franchising success. The SBA and the access to capital that its lending programs provide are an instrumental part of the franchise success story. Historically, franchises have represented about 20% of the billions of dollars in SBA loans. On April 25th, we welcomed the SBA's news that it would be reinstating the franchise directory.
▶ 0:41:42This directory, which was unfortunately eliminated in 2023, is an essential and centralized tool for lenders to access SBA loan eligibility and financing for franchises. It also serves as a beneficial tool for prospective franchises as they evaluate franchise opportunities. I appreciate the attention that this committee has to this issue given the critical importance of SBA lending to new franchises.
▶ 0:42:08I also appreciate your efforts to once again make the franchise of uh director available to both banks and borrowers. Mr. Chairman and distinguished members of the committee, thank you again for the opportunity to testify. I am happy to answer any questions that you might Thank you. Gentleman yields back. I now recognize Jennifer Bowden for her fiveinut opening remarks. Good morning, Chair Williams, Ranking Member Velasquez, and distinguished members of the committee. My name is Jenny Bodwin and I am a proud small business owner.
▶ 0:42:37I operate four Buffalo Wild Wings restaurants, three in Virginia and one in West Virginia as well as a steakhouse in Maryland. My story, like that of many small business owners, is a personal one. I literally grew up in a rest the restaurant my parents owned. We lived in the apartment above it. I saw firsthand the long hours, the financial risks, and the sheer grit it takes to make a small business succeed. There were no days off, no paid vacations, and every dollar earned was a victory.
▶ 0:43:02That experience shaped my understanding of entrepreneurship and instilled in me a deep appreciation for the challenges and rewards of owning a business. I learned that being a small business owner isn't just about making a profit. It's about being part of a community, providing for your family and creating opportunities for others. When I was in college, my father, a seasoned restaurant owner, was looking to expand, but he wasn't sure how to do it. He was hesitant to take on more debt and replicate the challenges of starting from scratch. That's when I suggested franchising.
▶ 0:43:31I remember inviting him to a local Buffalo Wild Wings near my college campus. He was struck by the vibrant atmosphere, the loyal customer base, and the efficient systems. He saw a model that offered a potential for growth with a proven framework. In fact, he was so impressed that he called the number on the back of the menu to inquire about franchise opportunities. That decision changed our lives. We became part of the Buffalo Wild Wings brand 26 years ago. We were the 97th location and I opened my first franchise 24 years ago.
▶ 0:44:00Over the years, I've expanded my operations, always reinvesting in my business and my people. And now, I'm incredibly proud to say that my daughter has recently graduated from James Madison University and is preparing to join our family business. She also got engaged yesterday. Impressively, not uncommon in the franchising industry. She represents the third generation of our family dedicated to serving our communities, creating jobs, and building a legacy. This personal history is important because it highlights a fundamental truth. Franchises are small business owners.
▶ 0:44:30We are not simply managers of corporate stores. We are entrepreneurs who invest our own capital, take on significant financial risk, and are deeply committed to our local communities. The franchise model offers a unique opportunity for individuals to achieve the American dream of business ownership. It combines the support and brand recognition of a larger entity with the entrepreneurial drive and local knowledge of individual owners. It's a model that has proven to be a powerful engine for economic growth and job creation.
▶ 0:44:56However, it's crucial that policymakers understand the realities of franchising and recognize that franchises are in fact small business owners. Policies that treat franchises as large corporations or employees of the franchise or can have unintended consequences, harming the very small businesses that this committee is intended to support.
▶ 0:45:13To that end, some of the governmental policies that help my business and others like it thrive include a clear and consistent joint employer standard that protects my business from the franchiseor's legal liability, affirming that I am in fact a business owner and not solely a manager of my restaurants. A strong qualified business income deduction 199A that allows me to free up capital to reinvest in my restaurants and team members.
▶ 0:45:37100% bonus depreciation of assets that allowed me to recently remodel two locations and which allows me to pay my equipment suppliers upon delivery like they expect in interest deductibility based on IBIDA not just IBIT 163J that allows me and my fellow franchises to secure access to capital to expand our businesses which I hope to do soon by building two more restaurants with my family. I appear today on behalf of myself as a franchise owner of Buffalo Wild Wings through SNJ Enterprises LLC.
▶ 0:46:07I also appear as vice chair of the Association of Buffalo Wild Wings franchises, the Buffalo Wild Wings franchise business services. I'm grateful for the opportunity to share my story and advocate for pro- franchising policies for me, my daughter, and for countless other franchise owners in the US supporting their communities and their families and their dreams. Thank you for your time and attention. I would be happy to answer any questions that you have. Gentle lady yields back. I now recognize Mr. Gary Calman for his five-minute opening remarks. Thank you.
▶ 0:46:37Um, Chairman Williams, rank member of Velasquez, and distinguished members of the committee. Thank you for inviting me to testify today. On behalf of Transparency International US, I appreciate the opportunity to to discuss the critical role of the Corporate Transparency Act in providing law enforcement with necessary tools to do their jobs and keep us safe. I also hope to share how this law benefits small business and to help dispel some of the unfortunate misconceptions that have surfaced.
▶ 0:47:04When I testified before this committee last spring, I offered more than a dozen examples in my written testimony in which anonymous companies were used to cover up the laundering of proceeds of drug trafficking, human trafficking, sanctions evasion, counterfeiting operations, and scams that harm harm small businesses, including stolen contracts and disruptions to supply chains. The current administration has made clear its prioritization of disrupting disrupting even dismantling drug cartels and transnational criminal organizations.
▶ 0:47:34Any suspension of enforcement or weakening of our anti-moneylaundering rules undermines their ability to deliver on that promise. Since then, studies and investigations with new and previously underreported evidence continue to surface. Consider that a new April 2025 GAO study found that fraud is significant and persistent problem in federal procurement practices and that some of this fraud is perpetuated by companies obscuring beneficial ownership information when they uh compete for contracts and apply for federal benefits.
▶ 0:48:05The GAO detailed several examples, including anonymous companies implicated in the diversion of contracts for small businesses and for veterans owned businesses that were otherwise ineligible for the um that were ineligible for those contracts. The effective implementation of the CTA is also uh integral to the president's tariffs plans.
▶ 0:48:26Whether one supports or opposes tariffs, we should all be able to agree that additional uncertainties in supply chain integrity and price variability created by tariff dodging via anonymous shell companies is harmful to small businesses already trying to navigate the policy change. The Financial Times recently reported that Chinese logistics managers told Asian media last month that they were creating shell companies to evade the tariffs.
▶ 0:48:51The FT also reported that Customs and Border Protection said that enforcement will include the most severe penalties permitted by law. While the intention is no doubt genuine, they cannot prosecute what they cannot find. Without the CTA, this tariff dodge creates gaps for law enforcement and raises uh serious questions for small businesses about their role in undermining federal tax policy.
▶ 0:49:15Since this week is police week and tens of thousands of officers and their families are in DC, it seems fitting to mention the strong support for the CTA from police associations and law enforcement officials in all levels of government. I would also add that prior to the House vote, the first Trump administration issued uh as the ranking member suggested, a statement of administrative policy uh that said the CTA would assist law enforcement in detecting and preventing illicit activities such as terrorist financing and money laundering.
▶ 0:49:44On March 21st, the Treasury Department issued an interim final rule that narrows the scope of the law to apply only to certain foreign companies that register to do business in the United States. The exemption for domestic companies from the CTA is not consistent with a riskbased approach to countering financial crime. We strongly urge the the Treasury Department to return to the scope return the scope to the intent of Congress and provide law enforcement with the tools necessary to protect Americans from both foreign and domestic threats.
▶ 0:50:12the current law, the current rule does. Some small business trade associations, they seem to agree that compliance is not actually a major concern for their members. Small business majority wrote that small businesses across America are grappling with the impact of tariffs and cuts to vital programs supporting entrepreneurial innovation. Enforcement of this law is quite simply not close to a major concern for the main street small business owners with whom we are in contact every day.
▶ 0:50:37I would suggest that there seems to be a disconnect between the K Street and Main Street on the top challenges facing America's entrepreneurs. Finally, we recognize that there are improvements to the implementation that could be made. We have suggested Fininsson simplify the reporting form for the smallest businesses and adopt instant verification to reduce filing times and improve data quality. And Congress should provide these financial police with the resources to make these changes and expand outreach and education to small businesses.
▶ 0:51:06Thank you for the opportunity to present this testimony and I look forward to answering your Neil's back. And before we get started, just as a reminder, you may see some members coming and going and back and forth. It's not because they're mad at anybody or whatever. A lot of times there's other hearings going on, so you'll see even possibly me and the ranking member will have to get up and come back. So, be aware of that. I now recognize myself for five minutes. Mr.
▶ 0:51:30Cross uh you began your career as a franchisee in 20 or 2003 and transitioned in a corporate structure of fish window cleaning in 2008 as you said and this experience provides you with a unique perspective from both the franchisee and the franchiser side because there is a big difference. So how has your experience as a franchisee impacted your thoughts and decision-making as a franchiseor? Thank you congressman. Uh, I would say that I live and breathe the business each and every day.
▶ 0:52:00And as a franchisee myself, I'm blessed to help lead the the corporation. So, um, my overall answer is I know what it takes to be a successful small business uh, in this country and a franchise owner out of West Michigan. So, um, just what we want to do is support our franchises in any way possible. And this I know we keep coming back to this joint employer. That's why I'm here today. That's what's on my heart as this joint employer issue.
▶ 0:52:25These regulations are getting in the way of my ability as a franchiseor to be able to support our franchises. We would like to do more. Uh I should have brought two hats. One as a franchisee and one as a franchise or sometimes it's difficult but as a franchisee I want as much support as possible from the franchise headquarters offices. And as a franchiseor I want to provide as much support to our franchises. They send royalty dollars our way and they expect and demand support for them.
▶ 0:52:51So, I'm here to hopefully clear up this issue and uh so we can get back to just providing window cleaning services to our great customers all across the country. Thank you. Uh Mr. Wright, one bene one benefit to owning a franchise is that it provides a means for ambitious entrepreneurs to enter into business ownership with structure and a developed business model. uh at the same time laws and regulations uh such as the franchise act and the joint employer rule place limitations on the relationship between franchises and franchiseors.
▶ 0:53:21So how do you currently work with your franchise or franchise ees to help them develop and be successful? Oh, that's a great question. That's that's really the what we do every day. It's the core of what I do and my team does. And you know, a lot of times we're using the word communication like back and forth and that's not what we want to do. We want to build community.
▶ 0:53:39We want to build relationships with our franchise owners and it's a it's a formal process where we have monthly monthly calls, we have roundts, we have owners forms and it's a process where uh my team uh on a weekly on a monthly basis has specific schools that they're calling and working with and communicating to.
▶ 0:53:58We also have a franchise advisory council made up of nine franchise owners where we talk about operations, training, and marketing because it's really important to us that the processes that we're putting in place, the new technology that we have all aligns with what's in the best interest of our franchise Um, as a car dealer and franchise owner myself, uh, I've noticed there is a misconception that franchises are just extensions of the franchiseor and certainly not in my business.
▶ 0:54:27And when people see a Chrysler, Dodge, Jeep, or Ram dealership, they often think it's owned and operated by Chrysler. Uh, this couldn't be further from the truth. In fact, back in the 1930s, my father, Jack Williams, started a car dealership that is still in the family today, fourth generation. And our dealership is active in our community. We support local charities, first responders, and more. And simply put, our business operates just as any other non-franchiseed business. So, Mr.
▶ 0:54:52or Miss Bowen, could you please tell us uh how your f how your business positively inspect inspects the impacts the community that you serve in West Virginia and Virginia? Yes, sir. We are honored to that we are the place that people come to when they need something whether it's a meal for a football team before a game or if it's um we took wings this week to the police local police force just as a thank you. We we make ourselves visible in the community as much as possible.
▶ 0:55:20We recently had a um sponsored a community day within our locations where each location got to pick a um charity that was on their heart. Um anywhere from a local animal shelter to the Boys and Girls Club and we paid our team to go and actually volunteer at those locations. Um so we we really do pride ourselves and we are the place that people come to after their little league games or um just to celebrate whatever it is that's going on in their lives and we we value the opportunity to do that.
▶ 0:55:46I was and you're al also the first one to get to work and the last one to leave, right? Absolutely. My team works harder than anybody I know. I especially during COVID um that was a time where we really shine within our communities and gave people a respit and a place to come and relax. Sometimes the last to get paid. Yeah. Right. Yeah, for sure. Yeah. The franchisee definitely is the last to get. So, quickly in the time remaining, what what are your future plans for the future of your business? Uh we're hoping to expand two more locations.
▶ 0:56:14We are looking at two locations in Virginia um that we're hoping to expand. Okay. Uh I yield back and now I recognize the ranking member for five minutes of questions. Thank you, Mr. Chairman. Mr. comment. Shortly after the Trump administration announced, the Treasury Department will not enforce the legally mandated penalties of fines against domestic reporting companies and individuals that intentionally failed to complete their beneficial ownership information reports.
▶ 0:56:44The Treasury Department quickly turned to exempting all US companies and individuals while maintaining their requirements so solely for foreign firms. This announcement is contrary to Congress intent. Correct. Yes, we believe it is. And what was Congress intent?
▶ 0:57:05Um, Congress when it passed the law created a risk what we call riskbased approach that is where are the greatest risks for money laundering that could harm the American people. Um there are numerous examples of and case studies and other reports uh where companies were created in the United States both from US citizens but also from foreign actors that simply create a company in the United States. Um Iran created companies in New York and California.
▶ 0:57:36Uh you have Venezuela creating companies in Miami. So there's numerous examples of of where that risk exists. And the Corporate Transparency Act passed by a wide bipartisan uh vote, didn't it? Yes. And what was the vote? I believe it was uh two uh 260 27 269 to 173 over 70 votes.
▶ 0:58:02and and the Trump administration supported it during House passage, arguing, and I quote, "Represents important progress in strengthening national security, supporting law enforcement, and clarifying regulatory requirements." Correct. Yes. So, Mr.
▶ 0:58:20Chairman would like to enter into the record an article from um the Financial Times uh that at the end says Chinese logistics managers told Nikki Asia last month that they were creating shell companies to evade tariffs. The FT also reported that Chinese exporters were attempting to avoid tariffs by shipping goods via third countries. So move Mr.
▶ 0:58:47Homeman, in my opening statement, you heard me mention that the presence on again offagain tariffs policy is causing significant uncertainty for small businesses and their suppliers. Can you speak to why the CTA and BOI reporting is even more important in this uncertain economic environment? Yes.
▶ 0:59:09So, as you mentioned, the Chinese companies are already telling Asian media that they are setting up companies to avoid tariffs. They could they could set them up overseas and create a web of companies. They could also set them up in the United States. Um, we've also seen other reporting in the Washington Post and other media uh showing that other countries are trying to figure out how they could gain the system using anonymous companies. Mr. comment.
▶ 0:59:34This committee recently passed HR 2966, the American Enterprise Act, which requires this SBA 7A and 504 program loans only be made to small businesses that are 100% owned by a US citizen, national or lawful permanent resin.
▶ 0:59:58Can you explain how the SBA is supposed to certify that business is 100% owned by a US citizen, national or permanent resident without knowing who the beneficial owner is. I I don't see how they can do that. I think they would have to set up a parallel system and businesses would have to both uh you know enter their data to the Treasury Department and the Small Business Administration redundantly.
▶ 1:00:26So then you agree that it is inconsistent to be supportive of HR 2966 while opposing the corporate transparency acts beneficial ownership information reporting requirements. It does seem to be an inconsistency. Yes. If you take the position that 7A and 504 program loans should only be extended to small businesses that are 100% owned by US citizen, national resident.
▶ 1:00:57How the beneficial can you explain how the beneficial ownership information registration process can help requirement is carried out? Well, having a central register means that businesses would only have to register once. I think the intent of the bill shows the value of the information uh and that the SBA may find it valuable and other agencies may find it valuable to ensure that they're dealing with US citizens. So having a central register that agencies can check I think simplifies the bureaucracy. Thank you.
▶ 1:01:28I yield Gentle lady yields back. I now recognize Mr. Finstead from the great state of Minnesota for five minutes. Thank you, Chairman Williams. Uh thank you for holding this important hearing today and thank you to our witnesses for being here. Uh across Rural America, entrepreneurs have worked hard to pursue the dream of owning their own businesses. The franchise model provides entrepreneurs with that opportunity, the opportunity to achieve this goal and to bring an established brand to their local communities.
▶ 1:01:54I represent a a pretty rural district and it's and it's on the front page of the news when a when an O'Reilly's Auto Parts comes to town or when a Culver's or when a Buffalo Wild Wings comes to our communities. And so we're very appreciative of this model. On main streets across our country, franchise owners collectively employ thousands of Americans. Uh you all sit on local of chamber of commerce boards, other community organizations, and Mr. Chair, most importantly, uh they sponsor things like local town ball teams.
▶ 1:02:25Uh unfortunately, for years, franchise owners have been subject to misguided regulations, as was pointed out in your opening testimonies. uh these regulations coming from bureaucrats at the federal and state levels which limit your ability to grow and operate. So with that being said, uh Mr.
▶ 1:02:39Wright, uh someone who's fostered significant growth in your businesses throughout the franchise model, can you maybe talk to us about uh how challenging uh the changing regulatory environment on the federal and state level have been to to you and what impacts uh that has had on your ability to expand and to grow? Yeah, sure. um especially the uh joint employer uh act is probably the greatest impact on us.
▶ 1:03:04As I as I stated in my opening remarks, a franchise uh e purchases a franchise because they need the help. They want the help and that's what we want to do. That's what we're that's what we're created for. It's what we're wired for. That's what they pay us to do it in their royalties. So, anything that puts in jeopardy our ability to give them 100% of our attention and our training and our operations because with the joint employer there is risk associated with that. There have been many lawsuits associated with that.
▶ 1:03:33We conduct uh trainings in our in our headquarters where uh owners fly in general managers and aquatics managers and we don't want to stop doing that. We think it's critical that we continue to do that. And so any rule that puts that in jeopardy hurts us, hurts the franchise owner, and hurts the communities in which they're serving. Thank you for that. Uh in your uh opening comments, uh you also talked, Mr. Wright, about uh having locations, uh many locations across several states.
▶ 1:04:02Uh I believe you have two locations in the state of Minnesota. So my question is in your experience in multi-state franchise model what uh what has been some challenges uh and do some states work better than others uh in regards to this model your model?
▶ 1:04:18Uh certainly the biggest challenge we have within the states is the local health uh rules and regulations uh because in a lot of times they don't understand what a commercial swimming pool is and so they put rules and regulations that are more like a hotel swimming pool and that absolutely causes us to have uh lots of conversations and issues and making adjustments to both the physical pool itself and the entry and exit into the pool. Thank you for that. Uh all right, now going to um Mrs. Bodwin.
▶ 1:04:46Um, I'd like to say that this body was in part built by Buffalo Wild Wings, but I don't want to hurt your brand, so I won't say that. But, uh, I appreciate, uh, all of the the risks that you've taken, uh, and the, uh, you know, the the story that you talked about in regards to, uh, your family and, and I think that's great. So, you mentioned that your, uh, hope is that your newly engaged daughter, newly graduated daughter was, uh, was going to come into the family business. I'm a small uh, business owner myself. I have seven children.
▶ 1:05:16So, it uh it's something that's on my mind quite a bit. What are the biggest challenges that you face or that you are facing in regards to bringing that next generation into My So, in regards to bringing her in, um one of the concerns we have is really and we haven't addressed it yet is with the estate tax um and what that's going to mean for her taking over our business and even for me taking over when my parents my parents are um 50% owners in my business and what the business that I already own.
▶ 1:05:44what I'm going to have to pay on the estate tax to just acquire the rest of my business. Um, so I would say that's a big concern. Another one is um just around the administrative burden that I have I've had to acquire lately. And then with joint employer um our franchiseor cannot provide any human resources related um anything human resources related.
▶ 1:06:08I have to provide um take an additional expense to get outside counsel for handbooks and anything else with our team members where we run into issues. I appreciate that. Uh thank you again for each and every one of you for being here. Thank you for the risks that you take day in day out. Thank you for the jobs that you provide our neighbors uh and just the great uh really part of the fabric of our local communities that you really bring uh each and every day. So with that, Mr. Chair, I yield back. Gentleman yields back.
▶ 1:06:36I now recognize Miss Sculton from the great state of Michigan for 5 minutes. Thank you so much, uh, Mr. Chairman, and thank you to all of our great witnesses. Uh, I am a huge fan of B-Dubs. Uh, my, uh, constituent services director is a former B-Dub server. Uh, he says nothing prepared him more for this job, uh, than than doing that. Uh, and we frequent our our local B-Dubz after my my boys little league games.
▶ 1:07:03So, um I am also thrilled, as I said in, uh my my intro to have my constituent here, uh Mr. Cross, just weeks after I visited his business, and I appreciate his willingness to come to Washington to express concerns that so many franchiseors um have communicated to me. Uh while Mr. Cross and I might not align on every single issue, that's okay.
▶ 1:07:25That's what these hearings are about, to hash out some of the most important issues that are facing uh our our country when it comes to small businesses. I support having beneficial ownership reporting requirements within the corporate transparency act because we need to ensure that American businesses are protected from bad actors who have taken advantage of our nation's businessfriendly environment to the detriment of our entrepreneurs security and access to fair markets.
▶ 1:07:54But I understand that my constituent and other witnesses here today may have a different perspective. That's not something to be afraid of. That's something to discuss and figure out how we can do it better. I look forward to hearing uh what he and many others have to say. Fundamentally, I believe that we should work to make these reporting requirements easier to navigate so legitimate, hard-working businesses like the ones here today are rewarded for playing by the rules. With that said, Mr.
▶ 1:08:23Cross, thank you for being here today. My first question is for you. I had the pleasure of touring your business back in West Michigan just a month ago. Um, can you tell me about your experience with franchising, the franchising ownership model, and how it has benefited you, your family, and our I don't think I have enough time to uh answer that question, but I will tell you that I would not be here today without the franchise business model.
▶ 1:08:50Um, I can look myself in the mirror and tell you that I did not have what it takes to start a business from scratch off the ground, the tremendous things that go into that process, the uncertainties. So, when I met the Merrick family, the owners and founders of Fish Window Cleaning, and they showed me this simple model that I could follow to be a business owner, it's been absolutely life-changing for me. Uh, I have been able to support my family, my beautiful wife, Betsy, and my talented son, Alex.
▶ 1:09:15We've uh been blessed with hundreds of employees uh that have used our uh job to put themselves through school or uh as a stepping stone position to whatever is next in life. Uh I have it's I've been able to support the local community as you know, Congresswoman. Uh I'm very supportive of Hope and Kelvin uh in the area. And I also have to stop and pause and and say thank you so much uh for what you've done for franchising.
▶ 1:09:43Um, I appreciate uh what you've done with the joint employer issue. I thank you for your service as franchise uh co-chair and uh I do want to continue to put that plug in. I look forward to teaching your boys how to use those squeegees uh the moment they turn 18 years old there. There's an application waiting. Thank you. Thank you. Well, and and we are so grateful for everything you've done for our community.
▶ 1:10:08Um, in your written testimony, uh, you talk about the CTA reporting requirements and you refer to them as being confusing and burdensome. And I think that you and I both agree on the importance of transparency and security in our financial system. Um, according to the FBI, each year an estimated 300 billion in illicit proceeds make their way through the US financial system, including assets linked to terrorism financing and human trafficking. No one wants that.
▶ 1:10:35I am committed to achieving the goals of the CTA in a way that is not overly burdensome for small business. In your view, can you help us understand what tools or clarification should these reporting requirements have to make them easier for businesses to navigate? Well, unfortunately, because I have 31 employees, that particular uh piece of law would not have affected my own franchise location. So, I'm sorry, but I haven't studied up on that issue.
▶ 1:11:02I would say in general uh with my franchise or hat on, what I'm concerned about for my franchises is the fact that they are very small business and Jennifer alluded to it. They don't have in-house counsel to help them navigate these issues. And and they're really just busy trying to find new customers and hire employees and clean more windows. And so anything that gets in the way of that uh is very difficult. And so again um you know we're blessed to be part of the International Franchise Association.
▶ 1:11:31And while I can't answer your question directly, I'd be happy to put you in touch with them and we can work together on that issue. Thank you. Um, I had so many more questions, uh, but I I'm afraid we're out of time, so Mr. Chairman, I I will yield back. Thank you all. Gentle lady yields back. I now recognize Mr. Downing from the great state of Montana for five minutes. Thank you, Mr. Chairman, and thank you to the witnesses. you know, the uh franchise businesses are critically um and rapidly growing part of the American economy.
▶ 1:12:02In my home state of Montana, franchise businesses were responsible for almost 15% of job growth between 2023 and 2025. And this is despite the fact that our franchises currently employ, you know, less than 5% of the total job force in our state. and Republicans in Congress are fighting to ensure small businesses, including franchises, are unburdened by the crippling taxes and regulations.
▶ 1:12:27You so one of our main priorities is to extend the Tax Cuts and Jobs Act, the TCJA, and uh its small business provisions. So, I'm going to start with uh Mr. Wright. Um, in your testimony, you highlight the importance of uh TCGA section 199A uh deduction, which allows pass through business owners to deduct to deduct 20% of business income from their taxes. So, can you explain in further detail how the section 199A deduction has specifically benefited your business's operations? Yeah, absolutely.
▶ 1:12:56any anything within the PR and our franchise process or any franchise process the more capital that can be in introduced interjected into the business is going to fuel growth. It's going to fuel growth for building new locations. It's going to fuel growth for expansion. It's going to fuel growth for a higher rate uh wages and benefits. And so that tax deduction puts more capital into the hands of the franchise owners. Well, thank you.
▶ 1:13:22And if this were to expire, if this 199A deduction were to expire, how would that affect um employees at Aquat's uh swim school and or the franchises? How would they be impacted? Yeah, so this isn't theoretical. Um our franchise owners have been talking about that and uh they're actually putting on pause potentially some of new leases they're looking at opening because they're concerned about the impact that that's going to have on their ability to invest in new schools. Thank you. Uh you know, Miss Bodin had mentioned something about the estate taxes.
▶ 1:13:51Uh, can you tell me how the TCJ's the state tax provisions have impacted your franchises? Oh, it's it's the same thing. So, the um I think you said it perfectly there. We are a younger uh franchise organization that right now is looking at passing it on to the next generation. Those the those estate taxes would have a they would probably have to sell their locations rather than passing them on to their family. And that's a really really sad thing. Yeah, it is. Thank you.
▶ 1:14:19Uh, in my home district, many Montana business owners, particularly in rural communities, struggle to access capital to fund their business ventures. And and as I'm sure everybody on this panel understands, I mean, one of the biggest limiting factors in building or growing a business is access to capital. Uh, so recently I introduced the expanding access to capital for rural job creators act. And this is to help address these issues.
▶ 1:14:41Uh this uh legislation requires the Securities and Exchange Commission's Office of the Advocate for Small Business Capital Formation to report on capital access issues faced by rural and small businesses. You know, the franchise model offers a potential solution for some of these capital access challenges. I'm going to move on to Miss Bodin. Uh can you expand on how the franchise system provides unique opportunities for aspiring business owners to achieve their dream of business ownership? Yes.
▶ 1:15:10So being part of a bigger brand is why banks talk to us. Otherwise it really wouldn't be a conversation especially in the envir restaurant environment right now. Um restaurants margins are so tight that banks are very very hesitant to lend. But because we are part of a bigger brand and have an even bigger parent brand of inspire brands um behind us they will enter into the conversation. We do sometimes because we are such a small franchise um my father personally guarantees a lot of our loans.
▶ 1:15:38Um, so there is a weight on me that I have my parents personally guaranteeing loans as well as trying to support my children. Um, so it is it is a heavy burden, but again because we are a Buffalo Wild Wings franchisee, we have access to many banks that will lend to us. Yeah, thank you. I I have to admit I had a bonding moment with my daughter when she was in college and wanted to go to dinner to B-Dubz. I'm going what is B-Dubz? Is that by that Buffalo Wild Wings over there? So that is the Buffalo Wild Wings.
▶ 1:16:05So um what what advantages in in those last few seconds here uh do you think the franchise model can bring for aspiring business owners coming from rural backgrounds who are you know often isolated from you know these sources of uh from sources of capital. Yeah. I mean I think that it gives them an opportunity of a proven brand and a proven business model that they don't have to invent from scratch.
▶ 1:16:26they can work on focus on operating their businesses while the franchiseor is developing for for example in the restaurant business is developing the menu and the sauces and that type of thing and they can really just focus on building their culture and their business. Excellent. Well, thank you and on that Mr. Chair I yield my time. Gentleman yields back. I now recognize Miss McCyver from the great state of New Jersey for 5 minutes. Thank you uh Mr. Chairman and ranking member for convening this hearing and thank you to our witnesses for being here today.
▶ 1:16:54The franchise business model plays a critical role in providing an avenue for entrepreneurs to become their own bosses and create jobs in their communities. This model is sometimes overlooked, but it's essential that federal policies create an environment where these types of small businesses can thrive. But as we all know, the Trump administration is continuing on its path to make every part of the federal government less transparent, more corrupt, and totally ineffective.
▶ 1:17:23Continuing the work he started during his first administration, Trump is ignoring the laws Congress passed like the Corporate Transparency Act and the Anti-money Laundering Act that are meant to prevent corruption and criminal activity in our economy. We must ensure our small businesses are not used as pawns in global money laundering schemes or as as a cover for criminal enterprises.
▶ 1:17:50They deserve a level of playing field, not one rigged by Trump and corruption. With that being said, Mr. Calman, am I saying that right? I want to make sure I'm pronouncing it right. Mr. Calman, under the Corporate Transparency Act, reporting companies must provide the beneficial owner's full legal name, date of birth, current address, and unique identifying number from an identification card.
▶ 1:18:16What is excessively burdensome about these reporting requirements during we don't think they are um we in fact most business owners that we when we went to look at state registrations most business owners actually provide this information to their state it's most of the information is out there um so we don't actually think it's it it has not proven to be a burden I will also say this that Fininsen had estimated that it would cost $85 $5 for an initial
▶ 1:18:47registration and then after that if your information doesn't change never for the history for the rest of the eternity of your business would you have to think about this ETA ever again. Can you give us an example of when a legitimate business would be incapable of providing this information? You know, this was actually raised during the debate and the passage of the law as a potential possibility. And in 10 years of debate, no one ever put forward an example of a company that couldn't provide this information. Okay.
▶ 1:19:18Under the statute, companies are required to report updates to the information to the information on file within 30 days of changes. Some claim that this will subject reporting companies to harsh penalties if they forget to update their information. Is this true? No. Okay. Thank you. With that, I yield back. Gentle yields back. I now rec recognize Mr. Muer from the great state of Pennsylvania for 5 minutes. Thanks, chairman. Thank you all very much.
▶ 1:19:44It's a a nice conversation and appreciate your your information. So, the Ways and Means Committee yesterday marked up their portion of the one big beautiful bill. Uh we're delivering critical tax relief to franchise businesses, small businesses. The bill uh has many provisions in it uh such as 100% bonus depreciation, section 199A uh for small a small business deduction um uh R&D tax credits, etc.
▶ 1:20:13Are these provisions uh helpful, critical? On a scale of 1 to 10, how important are they to your growth and sustainability? Mr. Uh very important, Congressman. Thank you for the question. Yes, any any additional funds that we can have to reinvest back into our businesses. In my case, we look at vehicles and uh and additional labor to go out and do more work uh are always much appreciated. Do you others agree, Mr. Wright? Oh, 100%. Yes, exactly.
▶ 1:20:42It's uh being able to take that and invest back in the business is critical to the growth of a small business. On a scale of 1 to 10, I'd give it about a 25. Very good. Thank you. Uh that's what we thought. I wish everybody thought that way, but we uh we're working on it. Uh because the real world is where it matters, not in the theoret theoretical bubble that that tends to exist in certain certain uh places here in Washington.
▶ 1:21:08Uh the um small businesses, franchise, you know, I get it. I was in small business and grew lucky enough to grow it into a larger business over time. I I recall with the PPP for a temporary period franchises were not included in availability for PPP because you were considered a larger corporation. Um we fixed that pretty fast.
▶ 1:21:34What um is there anything else that franchises uh do not gain versus small businesses uh that that you would like to see corrected? Uh Mr. Right. I I can't think of anything and Yeah. All right. Because we differentiate uh quite deliberately, but as the chairman was saying, you are small businesses and we you know, many of us understand that.
▶ 1:21:59I just making sure that there's nothing that you're not receiving because you're a franchise and I'm and and I was curious to hear about the personal guarantees, Mr. Benoy. I I I would think that being a franchise that wouldn't be as as Yeah. Well, again, because we are our own business, we are not Buffalo Wild Wings Corporate. Um, they just want to make sure that we have the capital to back our loans. Sure. And I signed many in my day as well.
▶ 1:22:23So, I I I understand uh the tax provisions 199A uh obviously affect your long-term planning and your investment strategies for your businesses. Okay. So, so very important, you know, on to this beneficial ownership rule.
▶ 1:22:41Um listen when it was well you know when it was passed there were four questions that on a regulatory basis the Biden depart department of treasury uh turned it into 52 questions. All right. And by the time January 1st, 2025 came around when it was when it was supposed to go into effect, there was something like 25% of small businesses actually submitted.
▶ 1:23:08And yet and and what meanwhile domestic companies were now excluded, which was I certainly think the right thing to do because of the level of fines and other penalties that were being expressed, but foreign companies must still abide by it. uh what may why would you think that that would be something that should have been implemented uh or or or express to me why you are very happy it wasn't I'll start with you Mr. for us and we'll go down if you can answer it in a short period of time.
▶ 1:23:39Again, Congressman, thank you for the question. I I think it's just the uncertainty of how to comply and the fear of the fines. And again, we I mentioned it in my previous uh response. We don't maintain on-site legal counsel to help us navigate these issues and uh with my franchiseor hat on because of the limitations of the joint employer. I as a franchiseor limited with the support that I can provide our franchises to help coach and guide them through it. Thank you, Mr. Wright. I think that was said very well.
▶ 1:24:07No, there's not a single franchise owner that we have has any legal counsel at all and they they will absolutely have to have some help in getting that documented completed. Miss and we are thankful to have the franchise association that kept us ab breast of this issue. Um, that being said though, it's just another administrative burden that small business if I were not part of a franchise.
▶ 1:24:25I I pray for the small business owners daily of what they are missing and it's the fear of what am I going to miss and what am I going to be have an exorbitant penalty for and I'm not sure the penalties around this but there are just so many administrative things that franchises or small business owners can miss. Thank you for your honest realworld information so we can base policy and uh uh uh support for small business based upon it. Thank you very much. Gentleman yields back. I now recognize Mr.
▶ 1:24:53Cisneros from the great state of California for 5 minutes. Thank you, Mr. Chairman. And um as a former franchisee, I appreciate the witnesses being here today to share their views with us, but I I need need to take a few moments to take make a note that we have been asking for months to have the SBA administrator come speak before the committee about the policies and changes at the SBA that affect our small businesses. My colleagues and I have sent multiple letters to the SBA that have gone unanswered.
▶ 1:25:23Legislation about the SBA has been pushed through this committee with no input or insight from the SBA on how it will be implemented. Uh it is important that the SBA administrator come in person to answer questions like you know what was the extent of the Doge access to SBA headquarters and systems and what was done by the SBA to ensure the systems were not abused or accessed by individuals without clearance.
▶ 1:25:51What specific offices or departments within the SBA are affected by the reduction in the workforce? Uh and where are the gaps? Where is the SBA relocating the six regional offices and will any others be closed in the future? What is the SBA's plan to handle 1.7 trillion dollars uh in student loan portfolios uh while cutting 43% of their staff and also having staff not trained to work with such a complex student complex student loan system.
▶ 1:26:21So I I that being said, I want to thank the chairman and the committee staff for finally making it happen and getting the administrator on our calendar for the first week of June. If it took this long for the for members of Congress to get a hold of the SBA, I'm very concerned about how long it you know any help from the SBA is taking to get to our small businesses. So, I sincerely hope the administrator comes with actual answers as I look forward to working with the SBA to help small businesses in my district and throughout our great nation.
▶ 1:26:52So, that being said, um Mr. Mr. Coleman, many opponents of the beneficial ownership information reporting requirements claim the penalties for small businesses owners u who do not comply with the BOI reporting requirements are overly punitive with prison sentences up to two years and fines up to $10,000. Yet, the statute only provides penalties for willful failure of deception and reporting.
▶ 1:27:19Why is this inclusion of the of the word willful so important and how does it impact small business owners? Uh thank you for the question. Um I think in the leadup to the passage of the bill, there was a lot of discussion. Nobody wanted a negligent standard. No one wanted a reckless standard. Uh for those that are not familiar with these terms, all the sort of I forgot, I didn't know the law existed. I didn't realize that that was what I was supposed to report. Those are not punishable under the system.
▶ 1:27:49uh it is a willful standard. The original standard was knowing and they change it to a willful which is even a higher bar. So we felt confident that we are only going after people who know about the law and knowingly willfully you know whatever the term uh choose to violate the law. Um and we think that that's a safer standard and therefore the punishments are appropriate.
▶ 1:28:13So, if a small business owner accidentally makes a mistake uh on their submission, what are the consequences? Nothing. All right. Thank you for that. Um um as I stated, the SBA administrator is going to be here the first work of of June. I would love to hear from our franchises if uh if there's anything specific that you would like us to address with the SBA administrator that could go and help your your businesses.
▶ 1:28:41I would like to thank the SBA for um once again opening up the uh SBA directory for both banks and lenders and potential franchise ease to be able to see that information. Any else? Anything that could be done to streamline the process for our prospective franchises uh franchises that are using SBA funds? It typically takes it's an ownorous process to get them through it.
▶ 1:29:08I tried to apply for an SBA loan with my steakhouse and it was such an ownorous process that I backed off and I found other investors to come in and help me get it started. All right. Well, thank you for your testimony. I'll make sure that we address those issues when she is here and uh I yield back. Gentleman yields back. I now recognize Mr. Jack from great state of Georgia for 5 minutes. Thank you, Mr. Chairman, and thank you for convening this hearing. And uh I'll start with Miss uh Bedo. Is is that the right pronunciation?
▶ 1:29:39It's Bodwin, but anything works. Bodwin. I um I say that because um I know a lot of our colleagues on both sides of the aisle have already tried to affirm their loyalty to uh the the franchise um that is Buffalo Wild Wings, but I suspect I'm the only member of this committee that's eaten at perhaps one of your restaurants within the last week. So, very excited uh that you're here.
▶ 1:29:59And I I I you know I think what's important about this hearing in all seriousness is that you know for so many of our colleagues it's instructive to know that uh you know franchises are small businesses. You think of these massive corporations with these huge brands trillions of dollars in brand value but uh ultimately are they are small businesses and and I'm just curious you know states such as Oregon and Illinois have instituted minimum wage laws that treat franchises as if they were part of their franchiseor.
▶ 1:30:26This includes attributing the franchiseor's total employee count to the local franchisee. Uh what say you to that? And is this treatment of franchises fair? I it's it's been tough on my colleagues in those states for sure. Um to where they're looking at different ways to handle their service models. Um it they are working on ways to cut team members. Uh they're looking at automation. um they're looking at using computers to or to for servers to have tablets to um cut servers on the floor.
▶ 1:30:57So yes, I know it has been extremely burdensome on those franchises in those states. Mr. R give you a chance to comment. Yeah, I agree. Any anything that we are doing to hinder the growth of the franchise um owners is is uh it's it's just not common sense. The process in my opinion and the regulation is just not common sense. Sure.
▶ 1:31:17and to help me uh understand scale as it relates to just how many I think you noted ma'am that you've got five uh restaurants and and given your leadership across uh Buffalo Wild Wings were at large what's the average size uh of a a small business that that operates a few restaurants is it three four five what do you see the average being for the franchisee across Buffalo Wild Wings I I believe the average is around 14 um I I don't know for sure um that's great and Mr. uh Mr. Right.
▶ 1:31:47Curious about aquats. Yeah. Average franchise owner is three schools. Three schools. And Mr. Cross, mostly single unit operators with six to eight employees. Got it. Okay. Very helpful. Um, one of the things we're talking about today, uh, many members of our leadership are meeting with folks uh, right now to talk about the extension of the Tax Cuts and Jobs Act.
▶ 1:32:06We've seen it over and over and over um across this this hearing, but also across um the the communications that come out of our conference as to how important that is to revitalize our communities to generate and incentivize investment. And I would just love to start with you uh Mr. Cross and work our way down. What is the impact of us passing uh the extension of these tax cuts going to do to small business?
▶ 1:32:31Uh for me personally, I'm going to get to reinvest more in my uh operation with additional management staff, with additional sales staff, with vehicles uh to go out and perform the service. Wonderful. Thank you, Mr. Cron. Uh yes, we'll be able to reinvest back in our in our uh team members as well to provide greater support for our uh swim schools. Wonderful. And we're looking at opening two additional locations. So, this will help us invest in that. Perfect. Um the only other question I have is when it talk we talk about regulations.
▶ 1:32:59One of the things that I'm really proud of uh having accomplished this Congress is um ensuring the passage of a a bill that repealed a regulation that drastically impacted a a factory in my district. Um, and we see the regulatory burden being incredibly complex, especially because as an administration is leaving, in this case, as the Biden administration was leaving, a lot of regulations are forced upon uh businesses across the country right before that administration ends.
▶ 1:33:25I'm just curious if you could uh all three of you uh speak just very briefly to how we can best serve you as it relates to in ensuring there's a regulatory environment that enables you to thrive. We'll start with you, Mr. Cross. Uh 54 seconds isn't enough. Uh, it's the Save Local Business Act and and uh making sure this joint employer legislation goes away. It's detrimental to franchising and it threatens to take away the retirements of thousands of small business owners across the country. Thank you, sir.
▶ 1:33:54I would say the joint employer act as well holding a franchiser responsible for franchisee uh employment practices um is just not good process at all. Absolutely. Thank you, ma'am. And I would agree it's the joint employer standard that needs to be loosened up. Wonderful. Well, I Mr.
▶ 1:34:12Chairman, I applaud you for convening this hearing and and uh as so many of our colleagues on both sides of the aisle have noted, um there's a point of pride in a lot of communities when uh some of these brands move in and have an opportunity to serve the uh the constituents we represent. So grateful for everyone's testimony today and likewise your service to your communities. And with that, Mr. Chairman, I yield back. Gentleman yields back and now recognize Mr. Cran from the great state of California for 5 minutes. Thank you, Mr. Chairman, ranking member for the panel today and the hearing today.
▶ 1:34:42Uh panelists, welcome. Appreciate you being here. Uh my first question is for Mr. Kelman. Recent SBA reporting determined there are more than 34.8 million small businesses in the US, making up 99.9% of all US businesses.
▶ 1:34:57Despite this number, it seems to be a common misconception that cyber threat actors who commit ransomware attacks only target large companies or that small businesses on America's main streets don't have to worry about Russia, the Chinese Communist Party or North Korea targeting their small firms, uh, their hardware stores or their investment advisory companies. Uh, first, can you explain why smaller businesses or firms might attract or are more likely to be victims of ransomware attacks?
▶ 1:35:28Yeah, in in our discussions with a number of small business organizations, and I think it's something that my colleagues on the panel here have alluded to, is they don't actually have in-house counsel. They're not large institutions. Large institutions are much more likely to try and fight back. Uh they're likely to protect their brands. They're likely to have the resources to do that.
▶ 1:35:46So, while any individual uh attack might be a smaller amount of money, it is much more likely that a small business owner might go, I'm going to pay this amount rather than higher legal cost to try and fight it. Thank you. And then a followup to that, can you explain how the Trump administration's decision not to enforce the Corporate Transparency Act uh beneficial ownership information reporting requirements makes legitimate small businesses more vulnerable to these types of attacks?
▶ 1:36:16Well, if some one were to try and go to law enforcement to try and get help uh or actually try and pursue some remedy, they're they would hit a brick wall without beneficial ownership information. These companies open up and shut down overnight. Um they can move across the street. They can move across the globe. Uh and there's no way of tracking them. And and and what could Congress do to help small business owners who are likely targets of ransomware attacks?
▶ 1:36:44uh carried out by North Korea or China. I mean, I think there's two things. One is to reinstate the law as we have it here in the United States, but also the United States has been a leader globally in moving anti-corruption legislation. There's now a hundred uh countries around the world that have pledged to start beneficial ownership directories so that we can begin to track this stuff across countries and across continents. Um, I would urge us to get back into that and and follow up with all those countries.
▶ 1:37:15And Mr. Kelman, uh, your organization published a fact sheet with, uh, numerous examples of shell companies from the fentanyl drug trade, which is, uh, currently killing about 80,000 Americans per year. Can you explain how small how shell companies are being utilized in the fentanyl drug trade and how, uh, with the corporate transparency act help reduce their prevalence in this illegal market?
▶ 1:37:38So, uh, anonymous companies are not just a mistake or an occasional use by drug cartels. It is a feature of how they operate. Um, and uh, the president, for example, in his latest budget has proposed to increase uh, funding for border and customs uh, protection. That's only part of the problem. Uh, it's just trying to stop drugs that come into the country.
▶ 1:38:03Uh there are numerous ways in which they're going to get here, but bankrupting the drug cartels is actually seen by D agents, if you ask them, as a more effective way of shutting down these operations. The Corporate Transparency Act is going to be critical to do that. Thank you for that, Mr. Wright.
▶ 1:38:22The government guarantee provided by the SBA in the 7A, the 504, and other capital access program enables lenders to offer more affordable loans with more advantageous repayment terms than they would otherwise uh have. Uh this helps small businesses b small business borrowers overcome many of the economic pressures we are discussing here today. And I'm always looking for ways to improve awareness of the SBA's capital uh access programs and the benefits they provide.
▶ 1:38:49How do you think we can help the SBA improve awareness of these programs for franchi franchisee owners and small business borrowers? Oh, I would say working with the IFA, making sure that you're providing that information to the international franchise association who does a fantastic job of communicating to all of the small businesses and the franchiseors about this opportunity. We do that.
▶ 1:39:09We we as part of our process of onboarding a new franchise owner, we provide them with a a pretty large list of opportunities usually through lenders who are working that process um across the country. So, it has been SBA has been vital to the growth of our business. Thank you so much for that, Mr. Chairman. I yield back the rest of my time. Uh gentleman yields back. I now recognize Mr. Alford from the great state of Missouri for 5 minutes. Well, thank you much uh Mr. Mr.
▶ 1:39:39Chairman, and thank you, Ranking Member Velasquez. As a previous small business owner, I know firsthand one of the most difficult parts of starting any business is staying in business. Uh, is your branding and your marketing and and of course capital. Uh, franchising offers a ready-made pathway towards creating their small businesses. The franchise model provides a pathway for Americans who want to be their own boss to achieve that dream. Here in the Small Business Committee, we are focusing on helping all small businesses franchise and otherwise succeed on Main Street.
▶ 1:40:09I'm proud to be on this committee. Um, Mr. Wright, in your testimony, you mentioned that franchises typically represent about 20% of SBA loans by dollar volume. I'm currently working on legislation that would seek to raise the current maximum loan of SBA back loans. How could raising the limit on 7A and 504 loans benefit entrepreneurs looking to start small businesses? Oh, that's that's a great question. And that's my ass.
▶ 1:40:35Literally, this uh this past week, I was talking to a franchise owner who's up against that $5 million uh uh cap because of multiple schools that they've owned, and they're looking to grow, and they're looking at options other than the SBA to do that. So, it would absolutely uh be beneficial to our owners who are opening multiple locations. We got to get that done.
▶ 1:40:55Missouri represents about 16,000 franchise establishments contributing to about 170,000 jobs in the show state and we are proud in our district to have fish window cleaning headquartered there. Uh Mr. Cross, are there any policy changes at the federal level that you believe would significantly benefit small franchise owners like yourself? Yes, Congressman, thank you for the question. I appreciate the red tie. That's our branding. Uh that's why I wore it. I appreciate it.
▶ 1:41:26It goes back to the joint employer. Again, it's the single biggest issue that is affecting us as franchiseors to being able to support our franchises and their uh pursuits of small business ownership. Uh Miss Bedwan, is that how you pronounce it? Did I get it right? Oh my goodness. That's perfect. That's the French version. Ryan Jack told me how to pronounce it. He looked it up. So, thank you. Thank you for being here. You How many wild wings do you own? Buffalo Wild. I have four. Four. Yes. How did you get into that business? So, I uh started in college.
▶ 1:41:52My father I went to um West Virginia University and my father was looking at getting into a different type of um restaurant. He had started a restaurant when I was three and we grew up in it and um I told him there was a place he should check out and he called the number on the back of the menu. All right. Uh I looked it this up on guac or grock, you know, an x gro. The hottest sauce at Buffalo Wild Wings is the Blazing Knockout. Yeah.
▶ 1:42:15It's made with nine of the spiciest peppers, including devil's breath, Carolina reaper, scorpion ghost, habanero, red and green jalapenos, chile de arbol, and cayenne. This sauce is so intense it comes with a warning for potential skin and eye irritation and is served with ice cream to cool the heat. It is designed for extreme spice lovers and significantly hotter than other sauces like wild or hot. My question to you, Miss Bedwan, have you had this hot sauce? I have. I have actually.
▶ 1:42:43I tested four blazing sauces, four versions of a blazing sauce at one FAC meeting. I would like you to tell you I was the only member that tried all four and um Yes. And I frequently have participated in the blazing challenge with my team members. How long does it take to get your taste buds back after they burn off your tongue? Yeah, it's it's a it's a it's Yeah. Uh I've got about a minute and a half left.
▶ 1:43:06um just for the folks who may be tuning in uh or may be watching this on one of our social media channels later. Um kind of describe how the franchise model works. A lot of people don't realize I think that it's it's not a corporateowned store. Correct. No, we are our we are our own businesses. I wear many hats in my business. I um I coordinate the contractors and the architects when we build. I um I am the last uh one that checks payroll.
▶ 1:43:36Um I oversee our bookkeeper. I um I am head of HR. I am the operations manager. Um they report up to me. So I wear uh marketing, our local store marketing. Um I do have somebody that handles our local store marketing, but again, she reports up to me. Um and I handled that myself for um many years. But that being said, we also have resources that we can draw on from the corporate office so that I don't have to reinvent the wheel. Thankfully, I don't have to do the menu development piece. Um I I do set my own pricing.
▶ 1:44:05Uh we've been very conservative in our pricing. Um which has uh led to increased sales the last few years, but we definitely run our own businesses. Well, to all the witnesses here today, thank you for coming here, as I like to say, on your own time and on your own dime. Your time is an investment in the future of what we do here, making Main Street great again under the leadership of Chairman Williams. So, thank you so much. And with that, Chairman, I yield gentleman yields back. I now recognize Dr.
▶ 1:44:34Conaway from New from the great state of New Jersey for five minutes. Uh thank you, Mr. Chairman, and thank you uh witnesses for presenting yourself today to offer information on uh this important uh issue enacted in uh 2020.
▶ 1:44:48The corporate uh transparency act uh increases transparency in business ownership in order to combat certain financial crimes like tax evasion, money laundering, terrorist financing, the track uh the trafficking and labor uh and and then the sex trade. Uh these are important uh goals um that uh protects our country, protects the interests of small business and individuals.
▶ 1:45:16Uh the administration however um last month uh decided they would no longer enforce penalties and fines against domestic companies and individuals that intentionally that's important part of it intentionally and willfully uh failed to complete the financial ownership information. Information that involves a name, address, perhaps the um driver's license takes 20 minutes to do, $85 uh to file and you never have to do it again once done.
▶ 1:45:42Um, I view this action as reckless and I think I'm joined by many in this and u because I understand uh that the American people have an interest in preventing drug lords from flourishing and terrorists uh from uh gaining a foothold and and um basically attacking freedom, attacking our country. Um can you um uh Mr.
▶ 1:46:06Coleman uh speak to how these actions taken by the administration will weaken national Thank you for the question. Um, there are numerous examples uh of bad actors and US adversaries setting up companies in the United States to exploit our financial system.
▶ 1:46:24Um, whether that be uh Chinese companies setting up in California uh to access and uh purchase or get their hands on sensitive information from our defense department. There was actually a defense department contract at one point in Afghanistan that uh in which a US company was getting funding through the defense department to provide services to the troops. That company was secretly had ties to the Taliban.
▶ 1:46:53We were literally giving money to the people who were shooting at our troops. These are the kinds of horrific stories that we want to make sure we're doing everything in our power to counter. Uh thank you for that. Um we have um the um there have been a lot of uh concerns raised about um the burden of uh of complying with this law and um
▶ 1:47:24there have been it took 10 years for this law to be passed. There were very uh there were a lot of interest groups uh and uh law enforcement agencies who were involved in its passage, good government people, people concerned about national security. Can you uh put more clothes on the coalition that came together uh to get this law passed? Yeah, I actually uh put this together um because I often get asked this question.
▶ 1:47:50So, if you don't mind, I'm just going to quickly read that the coalition included police, chiefs of police, sheriffs, prosecutors, national security experts, anti-human trafficking organization, faith-based networks, business trade associations, banks, real estate associations, consumer and housing advocates, accountable governance organizations, and scholars at both conservative and liberal leaning think tanks.
▶ 1:48:10It was a wide coalition, broad coalition and and that um I think uh is um as a testimony uh to uh how um to the to the strength of the of the desire to get this pass, this bill passed and to bring security uh to the American people and to protect small businesses from attack by these foreign corporations.
▶ 1:48:33And indeed uh in the in this climate of um of increased tariffs, broad-based tariffs, people uh who can go unidentified will make domestic shell companies here in order to get around the tariffs and confound the administration's desire to uh collect these tariffs and then pass it along uh to the wealthiest in our country. Um I met with um small businesses in my district um a couple of weeks ago to talk about tariffs and the impact on small businesses.
▶ 1:49:02a sort of uh whly bird back and forth and uncertainty. Uh I heard repeatedly from car dealers and uh people involved in uh selling um all sorts of items. Um insurance uh brokers and the like about how these are raising costs. Many small businesses buy uh make their products from uh items purchased overseas and also sell overseas. So they get hit coming and going and uh of course the consumer pays for all of this.
▶ 1:49:32Uh can you comment on how uh this um uh this uh the CTA uh helps with the tariff problem that um that so many of us are facing up? I don't know if you can answer that now. Thank you. Time is up. I now recognize Mr. Patronis from Florida for great state of Florida for five minutes. Thank you, Mr. Chairman.
▶ 1:49:59Um, I got I was really excited when you had a restaurant tour come up. Uh, my family's been my great granddaddy was in the rest of the business. My grandad, my dad, now my family. And, uh, you know, just to be able to to pick your brain and maybe empathize a little bit. Is it I'm sorry. First timers, rookie problems. Horrible. No excuse. Doesn't my clock start over? Nobody heard what I was saying. Thank you, sir.
▶ 1:50:28Um, but as as I I I like to tell people, the restaurant business, it's intoxicating. Um, but it's also the most competitive business that exists. People could go anywhere for their birthday, their anniversary, maybe in your case to watch a playoff game. and what you have to do to ensure your product is always on the mark in order to get that consistent return customer.
▶ 1:50:53Um, and I I struggle sometimes and I think about the days of precoid and how it seems like life was so much better back then and then how the workforce has changed so dramatically since then. Um, but then I I you know I want to get you to elaborate on specifically because the competitive nature of your industry and what you've dealt with in your family's evolution. Um, how much help did you get from the government when you decided to open up your first restaurant? Oh, our first restaurant? None. Yeah.
▶ 1:51:22You know, and I mean you took that risk. My my father did. My father um he he financed. I mean, after 30 years of working in the restaurant business, he saved every penny he had. Um we rarely went on vac well we went on one vacation a year to the beach um and the restaurant closed that week but yeah so he funded our first restaurant. Yeah I I relate. Our restaurant would close in the month of December and that's when dad would take us on our trip.
▶ 1:51:48Y and all of the the hundreds of jobs that you've created the the families that you've put to work any assistance from the government any way shape or form? Uh, I mean through COVID with PPP and RRF. Yes. Otherwise, no. Yeah.
▶ 1:52:06What are some of the the if if if you had a magic wand and say, you know what, if I could change this one element and I and I don't care if it's state, local, or government, what would make your life easier when it comes to growing your business? I think it's two things actually. Um, I think it is access to capital without having to personally guarantee it. um that that's a burden that my father takes on and I'm grateful for.
▶ 1:52:30Um but also I think it's the uh amount of administrative duties and the constant I feel like I constantly wear a cloud over my head of what am I missing or what am I forgetting and what are the penalties going to be if I check the wrong box on a form honestly when it comes to government regulation. And do you ever look around at other businesses and get envious of assistance they may receive in comparison to what you're eligible for? I think I focus on my restaurants and just on my on my road. Yeah.
▶ 1:52:59I the restaurant business, I tell people um and I would tell mom all the time, look, if you don't take care of the customer, somebody else will. Correct. And but when you get into government, it's hard to have that type of attitude. So, I've always been in front of my my co-workers and my employees and anywhere I've been in government, my attitude's always been if you don't take care of the customer, I'm going to find somebody else that will. And that's it's a culture that doesn't happen overnight.
▶ 1:53:26And but, you know, you build out a team and as all these members up here, they they have, you know, the teams they lead are trying to be responsive to our constituents, but I tell them, you still have to be hold us accountable, you know, and what else can we do? And I mean just hearing your concerns about access to capital to be able to grow the business to be able to make that risk. You've got a proven track record. It's obviously you know what you're doing otherwise you wouldn't can continue to expand the way you have. What about in supply chains?
▶ 1:53:55Supply chains have got again if I did not have a franchiseor I don't know what we would have done through COVID. Um there was there was a point where we had no wings. Um that has gotten dra drastically better. Um, but as a small business owner, if it weren't for the franchiseer, we would not have been able to survive. Well, um, congratulations on getting your daughter into the business. Thank you. So, um, my dad had four boys. Uh, my three brothers are still there.
▶ 1:54:22Um, I'm the baby of the four and up until 2017, my brothers still do. They clock in and clock out every day. If you want a paycheck, you're taking care of the customers. So, uh, anyway, it's just a real treat to have you come up and give some reality to this group. I appreciate you guys having us. Thank you. Back. Gentleman yields back. I now recognize Miss Simon from the great state of California for 5 minutes. Thank you all so much. And um this has been a great panel. Um to the gentle woman who came in. I'm thinking about you.
▶ 1:54:50My daughter got married a year and a half ago and you will be employing a lot of small businesses to make that wedding go. I am telling you from the flowers to the bar to the tablecloths. Um you all are providing such an incredible service in community. Um, I ran a youth program some years ago for a long time for young women who really young women who were struggling. So many of their first jobs, you know, out of the foster care, out of the juvenile justice system were in local small business franchises. So, thank you so much for lifting up really what what's so important.
▶ 1:55:20You know, I have a few short comments. Uh, and I to make sure that, you know, I associate my comments uh to the comments of ranking member Velasquez. You know, although I was not in Congress when the Corporate Transparency Act was passed, uh I understand and agree with uh Mr. Coleman and your remarks earlier uh this hearing. Mr. comment.
▶ 1:55:45I was extremely concerned listening to your testimony about the potential consequences of rolling back the law and I'm committed to working with this committee and again our partners on the ground and communities to making sure that we we get it right.
▶ 1:55:59Now, while my Republican uh are are using this hearing to justify really what's happening here in the House this week and the the tax cuts and uh gutting the corporate transparency act, you know, I want to highlight how this administration's actions are actually impacting small businesses and franchises on the ground. Unlike big companies, small businesses and franchises can't absorb these costs.
▶ 1:56:28uh restructuring supply chains and a lobby for exclusions. You know, when shipments are delayed or prices soar like they are right now in many communities, small businesses are the first to feel the brunt and the pain because their margins are much smaller. In my district at the Port of Oakland, we saw shippers rush cargo through in April before the tariffs took effect.
▶ 1:56:55And these port sellers, they're now experts. They're expecting, these experts are expecting 20% fewer ships to call in to the port in June. This is a catastrophe. That translates to fewer outbound vessels for exports and higher cost for imports. This will certainly hit small businesses the hardest as they won't be able to win the bidding war for container space against multinationals.
▶ 1:57:24Now, I have a question for one of our witnesses, but I do want to say in meeting with so many franchise owners and so many small business owners in my district, we know that approximately in this country, 30% of the employees that are employed by franchises, food service workers, and etc., they're able to access Medicaid. Many of them are half-time workers.
▶ 1:57:50Many of them again are paid a low wage and their health and their famil family's health are contingent upon them having this resource. And I am so afraid for our small business community across the country that in just weeks to come the viability of their workforce will be harmed. So I'm hoping that this committee and others that we band together to support small business owners, franchise owners, and the good people that are working for them.
▶ 1:58:19I do have a quick question. Uh and actually our ranking member, she lifted up and uh talked about an article before I go further, the Chinese exporters, the Financial Times article. I would encourage us all to read that article so that we know uh what's at stake. And in my short question, Mr. Calman, would you quickly explain how US law enforcement would identify shell companies? We talked about these before.
▶ 1:58:47In the wake of the Trump administration's decision not to enforce the Corporate Transparency Act's beneficial ownership registration uh it will make it very difficult. I mean, we have the experience prior to the Corporate Transparency Act being passed uh of law enforcement running into a brick wall. It is the reason that they all rallied around this bill for 10 years and worked with us to get it passed. So, I think we will return to a time where it's very difficult. Thank you very much. and I will yield back.
▶ 1:59:16Before I go, would anyone like my time? I have 32 seconds. All right. There you Thank you, Mr. Chairman. Did you give 14 seconds? Go ahead. Okay. Gentle lady yields back. Gentle lady yields back. I now recognize Mr. Weed from Wisconsin, great state of Wisconsin, for five minutes. Thank you, Mr.
▶ 1:59:45Chairman, and of course, the witnesses who came here today to share their experiences with us. As a former franchise owner myself, I know the firsthand the benefits of this model for both the franchisee and the community that they live in and work in. Whether it's fast food like McDonald's, gyms like Planet Fitness, or even hotels like Motel 6, the opportunity to become a franchise owner exists across many industries.
▶ 2:00:10For first-time entrepreneurs, becoming a franchisee allows access to a recognizable brand, the framework to begin their business, and potentially other resources from the franchiseor. This allows firsttime business owners to develop the skills to run their business while receiving support from their franchiseor. This type of increased support makes the American dream more possible for thousands of Americans across this great country.
▶ 2:00:36The most important point I make is that franchises are small businesses and they should be treated as such. However, Biden era policies such as beneficial ownership information requirements and the joint employer rule as well as other state laws that misinterpret the relationship between franchises and their franchiseors actively hurt these small businesses.
▶ 2:01:01My Republican colleagues and I are committed to advocating for franchise owners and their businesses just like any other business. Mr. Cross, Mr. Cross, uh fish window cleaning. I love good clean windows. Definitely love that on my businesses and at home. But as you know, maintaining and replacing equipment can be very costly for a small business. How would how would the reinstatement of 100% bonus depreciation under the section 168 the K allow you to reinvest in your small business?
▶ 2:01:30Yeah, great question and thank you. And yes, everybody loves clean windows. It keeps us in business, Congressman. Uh for me particularly, again, it goes back to vans, additional equipment are the primary ways that that additional uh the the depreciation uh expense would help me there. Great. Purchasing more vans. Yeah, absolutely. Uh so, Mr. Bod uh Ms. Mrs. Bodwin of well Buffalo Wild Wings which is obviously amazing. My kids love it as well. We have it often. There are many examples of laws across our country that treat franchises as part of their franchiseor.
▶ 2:02:01How do these laws negatively impact the owner of a franchise like you? Yeah, as I spoke earlier um it's really under our human um resources policies. So we have to employ outside counsel for our handbooks and to um for our workplace safety training, for sexual harassment training. the franchiseor can't give us any feedback on that.
▶ 2:02:20If we have um even a brand damaging issue that is caused by one of our team members, we really have to handle that and kind of navigate it um with a really light touch from their U also what impact do higher minimum wage laws for franchises have on the you know like businesses and especially in the rural areas? Yeah, it's interesting. So I'm in the panhandle of West Virginia. I'm on the 81 corridor. So you can get to three states in about um 45 minutes there. And so I'm in Virginia, West Virginia, and Maryland.
▶ 2:02:49We have a really hard time hiring in the panhandle with the lower minimum wage, even though our starting wage is higher than the other two states. Um, just because it's uh the other two states have a higher minimum wage, but at my um back of house kitchen wage is actually lower in those states. Um, because there's a perceived uh there's a perception that they're going to get paid more, but I'm trying to attract workers in the lower minimum wage state.
▶ 2:03:14Um, so really I'm paying more in the state with a lower minimum Well, thank you all for all that you do. You're the heart the heart of America, the small businesses and and you are Main Street. So I appreciate that and uh thank you all for being here today. I yield back. Gentleman yields back. I now recognize Miss Goodlander from the great state of New Hampshire for five minutes. Thank you, Mr. Chairman, and thank you to our witnesses for being here today.
▶ 2:03:39You know, I I really appreciate your tr your testimony, especially tracing the roots and the history of the franchise model. Um, it's a deeply American idea. Uh, the word I I I I learned recently franchise comes from a French word. Um, but it's an American idea at bottom, but the French word it comes from basically means to make free. And I come from the live free or die state. And our state really does have a long history uh with franchising and the franchise model.
▶ 2:04:08Um, we call Bill Rosenberg one of our own. And, uh, Bill Rosenberg, of course, the founder of Dunkin Donuts. Um, I'm very upset to learn that Dunkin Donuts is going to be leaving the Longor House office building. I learned that this morning. Um, we'll try to fight that, but the he he helped to actually bring about the International Franchise Association. Um, and he left a long legacy in New Hampshire. We're also home to the McDonald's brothers.
▶ 2:04:34And before I came to Congress, I worked at the Department of Justice in our antitrust division. And one of the cases I worked on that had a real impact on me that I felt deeply about was a case involving um a woman, Lenani Dandis, Dlandis, who worked um she was started out her career as a crew worker in a franchiseeowned McDonald's. She was making $7 an hour. She worked really hard.
▶ 2:04:58And you know, I think one of the powerful things about the franchise model is the people who work in franchises have dreams of actually becoming small business owners, too. And you know, she she said, uh, someone who's who's making your fries today in 10 years could be running six or seven McDonald's. That's what she believed. That's at the bottom of what makes this such a powerful model. Uh, she worked hard throughout her career. She got a pay raise. She was making $12 an hour.
▶ 2:05:27And you know, eventually a a management job opened up in another McDonald's not too far away. Um, she was prevented from actually even pursuing that job uh because of a clause in a franchise agreement um that that that uh is known as a no poach agreement. It basically restricts employ franchise franchises from hiring workers from other franchises.
▶ 2:05:53And um this this is at odds with the antitrust laws in our country which promote competition and protect workers as equally as they protect small businesses. Uh I wanted to ask about this because you know this is a a problem that we've seen across the American economy and and and um in in a number of different types of franchises. But I wanted to ask you about this miss Bodwin.
▶ 2:06:17Um do to your knowledge do you uh have any employment contracts or franchise agreements uh that include no poach provisions? Not to my knowledge. And uh but at at one point there were such clauses in agreements that uh buffalo wild wings uh I I can't I am not sure. I don't know the exact provisions if there are. C any of our other witnesses are you aware of any any of those types of clauses?
▶ 2:06:48No, we do not have an anti- poach in our agreement and I'm not I'm not aware. Good. Well, c can you help us understand why why those types of clauses might have been put into contracts? Um I didn't develop it so I really couldn't speak to it. Um and again if it is in my contract I'm not aware of it.
▶ 2:07:09So you your testimony today is you see no need for these types of from your perspective from the perspective of small businesses who are trying to make it work and work for your workers you don't see a need for these types of agreements. I think we're in the most competitive employment environment that we have ever been in. Um, and so can understand team members going back and forth and as a franchisee having some security would be amazing.
▶ 2:07:34But again, I understand though that we want to get the best help possible and if there's a better opportunity for my team members elsewhere, I understand why they would go searching for it. Well, I I appreciate that and I know, you know, I've talking to small businesses in my state, I know there's it's it's a challenging moment right now. you're facing a whole lot of uncertainty.
▶ 2:07:53I wanted to ask you about the impact that tariffs have had on your bottom line in recent weeks and uh what you would urge this committee to consider as we're looking as many of us are looking to restore the important role that Congress should be playing in the imposition of tariffs. For me, it's just really providing more certainty. As I shared in my opening testimony, restaurant ownership's not for the week. Um we work hard for every dollar that comes through our doors and so margins are thin. Uh, anything that increases cost raises concern.
▶ 2:08:22Um, uncertainty brings a a lot of discomfort. Um, so really for me, um, as far as the tariffs go, I mean, in any of these tax provisions, just anything that can be done to eliminate that uncertainty for the franchisee would be phenomenal. Well, I appreciate your testimony. I see my time is up, so I yield back. Mr. Chairman, gentle lady yields back. I now recognize Mr. Schelki from the great state of Maryland for 5 minutes. Thank you very much uh Mr.
▶ 2:08:51Chairman, to our ranking member, to all of our witnesses. I really appreciate uh your time here today and your feedback. Uh also appreciate the contributions you are making both within your communities and across this great country uh through your franchises. In my home state of Maryland, we have over 15,000 uh franchise locations um which employs over 155,000 people. the type of ecosystem that we know helps Marylanders and helps all Americans.
▶ 2:09:18Uh I know we talked a lot about the CTA today, so I will try not to talk too much about it. Uh but do want to reinforce that I think this is just critical legislation that provides law enforcement with those fundamental tools to help keep us safe from criminals laundering funds and setting up shell companies to wire money to criminal organizations. uh here with Police Week. I want to especially thank my younger brother Jordan who is in law enforcement back home for his service uh along with the men and women uh across this country who who serve us all.
▶ 2:09:48Um I do think it's a timely uh conversation that we're having around the idea of countering corruption though. Uh just this week our president publicly announced the possibility floated the possibility of taking a $400 million gift from the government of cutter, a luxury plane uh that would be used first as Air Force One and then donated to his presidential library. Um but just worry that you know in this governing world that the public is rightly asking the questions about do these types of things affect our decision-m.
▶ 2:10:18So unfortunately it seems in Congress we're getting to a place where we are picking and choosing which reporting requirements we require, which ones we don't. Uh we discourage global interaction that can foster new ideas in the classroom. On the business side, however, we are sitting and watching as this administration fails to enforce legally mandated penalties or fines.
▶ 2:10:38Um, so I guess I want to sort of ask just sort of generally to all of you, you guys all follow whatever applicable rules and regulations that are out there, whatever they are as best you can, right? Yeah. And then generally for business, right, knowing the goalposts, whatever they might be, even if we disagree, is helpful so that we can plan for and work around those. Okay.
▶ 2:11:00Um, and so I I guess my point to my colleagues here is, you know, we can disagree with whether or not it was the right idea, but I think we have a wellestablished process. I know it was a 10-year, we talked earlier in testimony, this was a 10-year bipartisan multi- um stakeholder effort to get this passed. And if we think that there are flaws, we should come back through this Congress, make those changes, and we can do things like simplifying the reporting form if there are improvements to be had. We can do instant verification.
▶ 2:11:29we can do sufficient resources if there are questions. Would that be something that would be helpful if we were to take up conversation? You guys are being so succinct in your answers and I really appreciate it. Um, so since you've been so great with me and gracious with me, I'll just turn the floor open to all of you.
▶ 2:11:47In addition to following the process so that we can address this issue, both fighting crime, but also being good partners to our small business leaders, is there anything new that we should be thinking about um that would best help you create more franchises across this country? Anything new that we should be thinking about? I think it's all been covered.
▶ 2:12:11access to capital to uh give fr potential franchise owners streamlining that process clarifying the the joint employer standard making it easier for small businesses. I think I I can speak for my myself you know when I started this business early on it was me one other person and a window cleaner and we were out there just hustling to make it happen to drum up new business to hire employees and to build that business and I had very little if any time to go out and worry about some of these other things that we've discussed today.
▶ 2:12:40So clarifying those things and making it easier for those businesses that are simply just trying to get this off the ground to put food on the table for their families would be appreciated. Yeah, rem removing burdenome burdensome regulations is critical to the process. So we've talked a lot this morning about the joint employer, but I'd also add that the uh tax policies that are going uh that are being reviewed right now are also critical to the growth of the franchise uh committee. Yeah, I would agree.
▶ 2:13:07creates the tax policies and also um one that we've talked about but haven't really um talked about thoroughly is the increased estate tax as well as addition in addition to the 199A and the IBIDA standard. Um and then just really it was I appreciate Mr. Coleman explaining the difference between willful negligence. Um that being said that's not true of all the provisions that um franchise owners and small businesses face.
▶ 2:13:31Um, so it's just it's really what we don't know what we don't know as far as some of these things that come along administratively. Very quickly, I just want to reiterate that if there are improvements to streamline the system for small business, we would be first in line to join that process here. Here, me too. Thank you all again so much for your time. I yield back. Gentlemen yields back. And I want to thank the witnesses today for your testimony and for your appearing before us.
▶ 2:13:56Without objection, members have five legislative days to submit additional materials and written questions for the witnesses to the chair which will be forwarded to the witnesses. So, I want to ask the witnesses to please respond promptly. Uh, if there's no further business, again, I want to thank all of you. Did a great job today. It's a great hearing. I think you see we got a really good committee here representing you here in Washington. So, that done. Thank you.