[House Hearing, 119 Congress]
[From the U.S. Government Publishing Office]
A SMALL PART IN A BIG COMPANY: EXAMINING
THE POWER OF FRANCHISING IN THE
AMERICAN ECONOMY
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
MAY 15, 2025
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 119-011
Available via the GPO Website: www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
60-425 WASHINGTON : 2025
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HOUSE COMMITTEE ON SMALL BUSINESS
ROGER WILLIAMS, Texas, Chairman
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
BETH VAN DUYNE, Texas
JAKE ELLZEY, Texas
MARK ALFORD, Missouri
NICK LALOTA, New York
BRAD FINSTAD, Minnesota
TONY WIED, Wisconsin
ROB BRESNAHAN, Pennsylvania
BRIAN JACK, Georgia
TROY DOWNING, Montana
KIMBERLYN KING-HINDS, Northern Marina Islands
DEREK SCHMIDT, Kansas
JIMMY PATRONIS, Florida
NYDIA VELAZQUEZ, New York, Ranking Member
MORGAN MCGARVEY, Kentucky
HILLARY SCHOLTEN, Michigan
LAMONICA MCIVER, New Jersey
GIL CISNEROS, California
KELLY MORRISON, Minnesota
GEORGE LATIMER, New York
DEREK TRAN, California
LATEEFAH SIMON, California
JOHNNY OLSZEWSKI, Maryland
HERB CONAWAY, New Jersey
MAGGIE GOODLANDER, New Hampshire
Lauren Holmes, Majority Staff Director
Melissa Jung, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Roger Williams.............................................. 1
Hon. Nydia Velazquez............................................. 2
WITNESSES
Mr. Randy Cross, Franchise Owner, Fish Window Cleaning,
Grandville, MI................................................. 5
Mr. Craig Wright, Chief Executive Officer, Aqua-tots Swim School,
Mesa, AZ....................................................... 6
Ms. Jennifer Beaudoin, Franchisee, Buffalo Wild Wings, Stephens
City, VA....................................................... 8
Mr. Gary Kalman, Executive Director, Transparency International
US, Washington, DC............................................. 9
APPENDIX
Prepared Statements:
Mr. Randy Cross, Franchise Owner, Fish Window Cleaning,
Grandville, MI............................................. 39
Mr. Craig Wright, Chief Executive Officer, Aqua-tots Swim
School, Mesa, AZ........................................... 44
Ms. Jennifer Beaudoin, Franchisee, Buffalo Wild Wings,
Stephens City, VA.......................................... 52
Mr. Gary Kalman, Executive Director, Transparency
International US, Washington, DC........................... 58
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Executive Office of the President Office of Management and
Budget..................................................... 70
Fact Coalition Briefing Memo................................. 71
Fact Coalition............................................... 79
National District Attorneys Association (NDAA)............... 83
National Fraternal Order of Police (FOP)..................... 84
National Narcotic Officer's Associations' Coalition (NNOAC).. 86
Trump Tariffs................................................ 87
A SMALL PART IN A BIG COMPANY:
EXAMINING THE POWER OF FRANCHISING IN THE AMERICAN ECONOMY
----------
THURSDAY, MAY 15, 2025
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 10:00 a.m., in Room
2360, Rayburn House Office Building, Hon. Roger Williams
[chairman of the Committee] presiding.
Present: Representatives Williams, Meuser, Ellzey, Alford,
Finstad, Wied, Jack, Downing, Schmidt, Patronis, Velazquez,
McGarvey, Scholten, McIver, Cisneros, Tran, Simon, Olszewski,
Conaway, and Goodlander.
Chairman WILLIAMS. Okay, good morning. And before we get
started, I want to recognize Congressman Patronis from the
great state of Florida to lead us in the pledge and prayer.
Good morning, everyone. And I will now call the Committee
on Small Business to order. Without objection, the Chair is
authorized to declare a recess of the Committee at any time.
I now recognize myself for my opening statement.
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 franchisors
and franchisees on all aspects of the franchise business model.
We 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. My family
has been a part of the franchise model for over 80 years in the
car business. I have seen firsthand the benefits to consumers,
manufacturers in local communities, and, most importantly,
individual citizens and people in the community. Whether you
are in a small town or a big city, you are likely to encounter
locally owned franchises that 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 percent of the U.S. GDP.
When the franchises thrive, the American economy thrives.
Unfortunately, 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, franchises
would have incurred an estimated $33 billion in additional
costs each year.
Franchises 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
TCJA will result in the greatest tax hike on the American
people in its history. Rather than being undermined through
excessive regulation and being subject to Democrat tax hikes,
the franchise business model should be supported. This 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 is an honor to work alongside my colleagues and
President Trump to create commonsense policies that uplift our
nation's small businesses through deregulation, lower taxes,
and greater access to capital. I would like to thank the
witnesses to participate in this important hearing. We look
forward to your testimony.
Now with that, I want to yield to my friend and
distinguished Member, Ranking Member from New York, Ms.
Velazquez, for her opening remarks.
Ms. VELAZQUEZ. Thank you, Mr. Chairman. Today's hearing on
the franchise business model gave 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 bells. Americans are becoming
increasingly worried about the health and future of our
economy. Recent economic data showed that our economy shrank by
0.3 percent 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 percent growth
the economy experienced in the fourth quarter of 2024.
Despite 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 percent in the first
quarter and core inflation rose 3.5 percent. When combined with
a generally weakening economy, the uncertainty and higher costs
caused by the President's tariff policies are beginning to
force franchises and other small business owners to make
difficult choices. Thirty percent of small business owners
indicated in March that they plan to increase prices, the
highest amount reported over the last year. Employment of small
employers declined by 3 percent since President Trump took
office, and 5 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. J.P. Morgan now places the odds of a U.S.
and global recession at 60 percent and directly attributes that
forecast to President Trump's tariff policy. Again, these are
the facts.
Combined with the Trump administration's decision not to
enforce the beneficial ownership reporting requirements under
the Corporate Transparency Act, the American economy is left in
a particularly vulnerable state. Passed 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 U.S.
Mr. Chairman, I would like to include for the record a
statement of administration policy from the Trump
administration supporting passage of the CTA in 2019; a letter
signed by the 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 passage of the CTA.
Chairman WILLIAMS. So moved.
Ms. VELAZQUEZ. While there is no doubt that there were
problems with FinCEN's rollout, establishment of the registry,
and education to small businesses of their reporting
obligation, that is not justification for not enforcing the
statute. I 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, and the Trump
administration's decision not to enforce the CTA expanding 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.
Chairman WILLIAMS. The gentlelady yields back. And we will
now move to witness introductions.
I recognize my colleague, Representative Scholten from the
great state of Michigan, to briefly introduce her constituent
who is testifying before the committee today.
Ms. SCHOLTEN. Thank you so much, Mr. Chairman. I really
appreciate the spirit of bipartisanship that dominates this
committee and the opportunity to introduce my constituent here
today.
I am so pleased to introduce Mr. Randy Cross, the president
of Fish Window Cleaning. Mr. Cross is a constituent of mine. We
enjoyed a great conversation over at Fish Window Cleaning just
a few weeks ago, and my boys are very interested in getting
into the squeegee business at some point in the future. I have
to say, they re very fascinated. Thank you for your
hospitality.
After opening his first Fish Window Cleaning franchise
location in 2003, Mr. Cross has gained years of experience in
the franchising world. He is now both a franchisor 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.
Chairman WILLIAMS. The lady yields back.
Our next witness here with us today is Mr. Craig Wright.
Mr. Wright is the chief executive officer of AquaTots Swim
School in Phoenix, Arizona. Mr. Wright has over 30 years of
executive leadership experience and joined AquaTots Swim School
in 2017. Prior to that, he served in multiple positions for
Leslie's Pool Supplies and as senior vice president for Millard
Refrigerated Services. He worked his way up in his career,
starting as a box boy at Buttrey Food and Drug, all the way up
to vice president of distribution, merchandising, and support.
Mr. Wright graduated from Montana State University in Billings.
I want to thank you for being here today and thank you for
taking the time to bring your family with you, too.
Our next witness here with us today is Ms. Jennifer
Beaudoin. Did I say that right, Jennifer? Ms. Beaudoin is a
franchise owner of multiple Buffalo Wild Wings locations in
West Virginia and Virginia. Ms. Beaudoin has been a Buffalo
Wild Wings franchisee for more than 25 years, founding her
first restaurant with her family in 1999. Ms. Beaudoin serves
as Vice Chair of the Franchise Business Services Board of
Directors and is a co-owner of Black Rock Bar and Grill. She is
a graduate of West Virginia University.
And thank you for joining us today. I am looking forward to
hearing your conversation.
I now recognize the Ranking Member from New York, Ms.
Velazquez, to briefly introduce our last witness appearing
before us today.
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
I would like to introduce Mr. Gary Kalman, Executive
Director of Transparency International, U.S. In this role, he
oversees the organization's U.S. operations, focusing on
illicit finance and the U.S. 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 corrupt financial practices and served as Executive
Director from 2016 to 2019. He is currently an Advisory Council
Member for the International Coalition Against Illicit
Economists.
Mr. Kalman, it is nice to see you again. Welcome back to
the Committee. Thank you.
Chairman WILLIAMS. The lady yields back. And so thank again
all of you for being here.
Now, before recognizing the witnesses, I would like to
remind them that their oral 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 is over with. Okay. It means
your 5 minutes have concluded and you should wrap up your
testimony. If you continue to go, you will hear this, reminding
you that you need to stop.
I now recognize Mr. Cross for his 5-minute opening remarks.
STATEMENTS OF RANDY CROSS, FRANCHISE OWNER, FISH WINDOW
CLEANING; CRAIG WRIGHT, CHIEF EXECUTIVE OFFICER, AQUA-TOTS SWIM
SCHOOL; JENNIFER BEAUDOIN, FRANCHISEE, BUFFALO WILD WINGS; AND
GARY KALMAN, EXECUTIVE DIRECTOR, TRANSPARENCY INTERNATIONAL US
STATEMENT OF RANDY CROSS, FRANCHISE OWNER, FISH WINDOW CLEANING
Mr. CROSS. First of all, thank you to my congresswoman,
Hillary Scholten, for the introduction. And thank you, Chairman
Williams, Ranking Member Velazquez, and distinguished Members
of the committee for inviting me here today. My 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 franchisor, 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, and 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.
Franchising 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 AquaTots Swim
School, or a Buffalo Wild Wings restaurant, what you are
looking at is small business. The vast majority of our
franchisees in the country are like me, and they operate a tiny
enterprise. Over 80 percent of franchise owners own and operate
just a single location. And for all the benefits of operating
under that established brand, franchisees pay an average of 6
percent royalty to a brand to sell that brand's products or
services. This means franchisees retain an average of 94
percent of their business revenue.
So now that you understand most franchisees are very small,
you also need to understand that the vast majority of
franchisors are also very small enterprises. The 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. Specifically, we are excited that the House Ways
and Means Committee is advancing a bill to extend, increase,
and make permanent the Section 199A deduction for passthrough
businesses. This benefit will provide monumental certainty to
small business franchisees and franchisors.
Franchise business people are also very pleased about the
extension of the bonus depreciation and estate tax provisions
from the 2017 tax laws. These two policies, respectively, will
allow businesses to immediately write off 100 percent of the
cost of capital investments and prevent an unimaginable burden
to a family in the event of a death of a franchise owner.
Another policy I would like to discuss is the unnecessary
impact of the Corporate Transparency Act enacted by Congress in
2021. The CTA would require the smallest franchisees in America
to report sensitive and personal information to the federal
government. And 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.
Last but not least, the most important action Congress can
ever take to pave a clear future for franchise small businesses
is to finally write a commonsense law for what constitutes a
joint employer. While franchise businesses are predominantly
small, they are also independent businesses. And franchisees
like me want to stay independent forever. That is why we
entered into this line of work.
Last year's expansive joint employer standard made no sense
for the franchisor-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 Review Act
resolution that passed both the House and the Senate last year.
This 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.
Chairman WILLIAMS. Thank you very much.
I now recognize Mr. Craig Wright. You can swim, can't you?
Mr. WRIGHT. I can swim. I can swim, yes.
Chairman WILLIAMS. I now recognize Mr. Craig Wright for his
5-minute opening remarks.
STATEMENT OF CRAIG WRIGHT, CEO, AQUATOTS SWIM SCHOOL
Mr. WRIGHT. Thank you. Good morning, Chairman Williams,
Ranking Member Velazquez, and distinguished Members of the
committee. My name is Craig Wright and I am the CEO for
AquaTots Swim Schools, a franchise based in Mesa, Arizona.
AquaTots 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. Initially operating in backyard and hotel pools,
AquaTots 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, AquaTots launched its first franchise. Today,
AquaTots is in over 170 locations, 14 countries. We have taught
over 47 million swim lessons to 2-1/2 million children
worldwide. The majority of our 75 franchise owner groups are
made up of first-time business owners and families who are
passionate about water safety and childhood development. Since
2017, I have had the privilege of leading AquaTots as the CEO.
It is an honor to be here today and give my perspective on the
impact of franchising in its hundreds and thousands of small
businesses.
At its core, franchising is about the relationship between
the franchisor and the franchisees, specifically how the
franchisor supports its franchisees and how the franchisees
meet their obligations to deliver products and services in
accordance with the system's 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.
While the franchisor 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 franchisees 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.
The collective network of a franchise brand can be
substantial, comprised of hundreds if not thousands, thousands
of individual small business owners. These entrepreneurs are
the backbone of the franchise model and significantly
contribute to their local economies. As franchisors, we are
proud to empower these individuals to achieve their dreams of
business ownership and witness the positive impact they have
every single day.
When franchising is mistakenly painted with a broad big
business brush, it can lead to misguided policies and
regulations. Legislation aimed at large corporations can
inadvertently harm the small business owner, hindering their
ability to grow, create jobs, and serve their communities. To
that end, I would like to highlight an issue that has clouded
the franchise community for decades, notably the ever changing
joint employer standard.
Franchise businesses have faced four different definitions
of the joint employer standard over the past decade and while
there is reprieve from previous NLRB's Joint Employer Rule, I
want to stress the importance that the current commonsense
standard in federal labor law has on franchise businesses like
AquaTots, and state that any action to 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 franchisors and franchisees to
thrive, grow, create jobs, and serve in the opportunities in
their local communities.
Lastly, 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 percent of the billions of dollars in SBA loans. On April
25, we welcomed the SBA's news that it would be reinstating the
Franchise Directory. This directory which was, unfortunately,
eliminated in 2023, is an essential and centralized tool for
lenders to access SBA loan eligibility and financing for
franchisees. It also serves as a beneficial tool for
prospective franchises and 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
franchisees. I also appreciate your efforts to once again make
the Franchise Directory 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 you might have.
Chairman WILLIAMS. Thank you. The gentleman yields back.
I now recognize Jennifer Beaudoin for her 5-minute opening
remarks.
STATEMENT OF JENNIFER BEAUDOIN, FRANCHISEE, BUFFALO WILD WINGS
Ms. BEAUDOIN. Good morning, Chair Williams, Ranking Member
Velazquez, and distinguished Members of the committee. My name
is Jenny Beaudoin and I am a proud small business owner. I
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
victory. That 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 is 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 is when I suggested
franchising. I 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.
Over the years, I have expanded my operations, always
reinvesting in my business and my people. And now I am
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. Franchisees are small business owners. We
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 is a model that has proven
to be a powerful engine for economic growth and job creation.
However, it is crucial that policymakers understand the
realities of franchising and recognize that franchisees are in
fact small business owners. Policies that treat franchisees as
large corporations or employees of the franchisor can have
unintended consequences, harming the very small businesses that
this committee is intended to support.
To 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 franchisor'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. One hundred percent 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. Interest deductibility based on EBITDA, not
just EBIT 163(j), that allows me and my fellow franchisees 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 S&J Enterprises LLC. I also appear
as Vice Chair of the Association of Buffalo Wild Wings
Franchisees, the Buffalo Wild Wings Franchise Business
Services. I am 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 U.S. 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.
Chairman WILLIAMS. The gentlelady yields back.
I now recognize Mr. Gary Kalman for his 5-minute opening
remarks.
STATEMENT OF GARY KALMAN, EXECUTIVE DIRECTOR, TRANSPARENCY
INTERNATIONAL U.S.
Mr. KALMAN. Thank you. Chairman Williams, Ranking Member
Velazquez, and distinguished Members of the Committee, thank
you for inviting me to testify today, on behalf of Transparency
International U.S., I appreciate the opportunity 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.
When 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 small
businesses, including stolen contracts and disruptions to
supply chains. The current administration has made clear its
prioritization of disrupting, even dismantling, drug cartels
and transnational criminal organizations. Any suspension of
enforcement or weakening of our anti-money laundering 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 a
significant and persistent problem in federal procurement
practices and that some of this fraud is perpetuated by
companies obscuring beneficial ownership information when they
compete for contracts and apply for federal benefits. The 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 those contracts.
The effective implementation of the CTA is also integral to
the President's tariffs plans. Whether 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.
The 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
serious questions for small businesses about their role in
undermining federal tax policy.
Since this week is Police Week and tens of thousands of
officers and their families are in D.C., 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, as the Ranking Member suggested, a
Statement of Administrative Policy that said the CTA would
assist law enforcement in detecting and preventing illicit
activities, such as terrorist financing and money laundering.
On 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 risk-based approach to countering
financial crime. We strongly urge the Treasury Department to
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. The current rule does
neither.
Small business trade associations we spoke with 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. I would suggest that there seems to
be a disconnect between 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 FinCEN
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.
Thank you for the opportunity to present this testimony and
I look forward to answering your questions.
Chairman WILLIAMS. The gentleman yields back.
And before we get started, just as a reminder, you may see
some Members coming and going and back and forth. It is not
because they are mad at anybody or whatever. Lots of times
there are other hearings going on. So you will see possibly me
and the Ranking Member will have to get up and come back. So be
aware of that.
I now recognize myself for 5 minutes.
Mr. Cross, you began your career as a franchisee in 2003
and transitioned to the 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
franchisor side, because there is a big difference. So how has
your experience as a franchisee impacted your thoughts and
decision making as a franchisor?
Mr. CROSS. Thank you, Congressman. I would say that I live
and breathe the business each and every day. And as a
franchisee myself, I am blessed to help lead the corporation.
So my overall answer is I know what it takes to be a successful
small business in this country and a franchise owner out of
West Michigan. So just what we want to do is support our
franchisees in any way possible.
And I know we keep coming back to this joint employer. That
is why I am here today. That is what is on my heart is this
joint employer issue. These regulations are getting in the way
of my ability as a franchisor to be able to support our
franchisees. We would like to do more. I should have brought
two hats. One as a franchisee and one as a franchisor.
Sometimes it is difficult, but as a franchisee, I want as much
support as possible from the franchise headquarters' offices.
And as a franchisor, I want to provide as much support to our
franchisees. They send royalty dollars our way and they expect
and demand support for them.
So I am here to hopefully clear up this issue so we can get
back to just providing window cleaning services to our great
customers all across the country.
Chairman WILLIAMS. Thank you. Mr. Wright, 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. At the same time, laws and
regulations, such as the Franchise Act and the Joint Employer
Rule, place limitations on the relationship between franchisees
and franchisors. So how do you currently work with your
franchisees to help them develop and be successful?
Mr. WRIGHT. Oh, that is a great question. That is really
what we do every day. It is the core of what I do and my team
does. And, you know, a lot of times we are using the word
``communication,'' like back and forth, and that is not what we
want to do. We want to build community, we want to build
relationships with our franchise owners.
And it is a formal process where we have monthly calls, we
have roundtables, we have owners forums. And it is a process
where my team, on a weekly, on a monthly basis, has specific
schools that they are calling and working with and
communicating to. We also have a Franchise Advisory Council
made up of nine franchise owners where we talk about
operations, training, and marketing. Because it is really
important to us that the processes that we are putting in
place, the new technology that we have, all aligns with what is
in the best interest of our franchise owners.
Chairman WILLIAMS. As a car dealer and franchise owner
myself, I have noticed there is a misconception that
franchisees are just extensions of the franchisor, and
certainly not in my business. And when people see a Chrysler,
Dodge, Jeep, or Ram dealership, they often think it is owned
and operated by Chrysler. 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
communities. We support local charities, first responders and
more. And simply put, our business operates just as any other
nonfranchise business.
So, Ms. Beaudoin, could you please tell us how your
business positively impacts the community that you serve in
West Virginia and Virginia?
Ms. BEAUDOIN. Yes, sir. We are honored that we are the
place that people come to when they need something, whether it
is a meal for a football team before a game or if it is--we
took wings this week to the police, local police force just as
a thank you. We make ourselves visible in the community as much
as possible. We recently had sponsored a community day within
our locations where each location got to pick a charity that
was on their heart, 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. So we really do pride ourselves
and we are the place that people come to after their Little
League games or just to celebrate whatever it is that is going
on in their lives. And we value the opportunity to do that.
Chairman WILLIAMS. And you are also the first one to get to
work and the last one to leave, right?
Ms. BEAUDOIN. Absolutely. My team works harder than anybody
I know, especially during COVID. That was a time where we
really shined within our communities and gave people a respite
and a place to come and relax.
Chairman WILLIAMS. And sometimes the last to get paid.
Ms. BEAUDOIN. Yeah, yeah, for sure.
Chairman WILLIAMS. Right? That is the way it works.
Ms. BEAUDOIN. Yeah. The franchisee definitely is last to
get paid.
Chairman WILLIAMS. So quickly, in the time remaining, what
are your future plans for the future of your business?
Ms. BEAUDOIN. We are hoping to expand two more locations.
We are looking at two locations in Virginia that we are hoping
to expand.
Chairman WILLIAMS. Okay. I yield back.
I now recognize the Ranking Member for 5 minutes of
questions.
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
Mr. Kalman, shortly after the Trump administration
announced the Treasury Department will not enforce the legally
mandated penalties or fines against domestic reporting
companies and individuals that intentionally failed to complete
their beneficial ownership information reports, the Treasury
Department quickly turned to exempting all U.S. companies and
individuals while maintaining the requirements solely for
foreign firms. This announcement is contrary to Congress'
intent, correct?
Mr. KALMAN. Yes, we believe it is.
Ms. VELAZQUEZ. What was Congress' intent?
Mr. KALMAN. Congress, when it passed the law, created what
we call a risk-based approach. That is, what are the greatest
risks for money laundering that could harm the American people?
There are numerous examples of--and case studies and other
reports where companies were created in the United States, both
from U.S. citizens, but also from foreign actors that simply
create a company in the United States. Iran created companies
in New York, in California; you have Venezuela creating
companies in Miami. So there are numerous examples of where
that risk exists.
Ms. VELAZQUEZ. The Corporate Transparency Act passed by a
wide bipartisan vote, didn't it?
Mr. KALMAN. Yes.
Ms. VELAZQUEZ. What was the vote?
Mr. KALMAN. I believe it was 260--270--249 to 173.
Ms. VELAZQUEZ. By a big margin.
Mr. KALMAN. Over 70 votes.
Ms. VELAZQUEZ. 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?
Mr. KALMAN. Yes.
Ms. VELAZQUEZ. So, Mr. Chairman, I would like to enter into
the record an article from the Financial Times that at the end
says, ``Chinese logistics managers told Nikkei 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.
Chairman WILLIAMS. So moved.
Ms. VELAZQUEZ. Mr. Kalman, in my opening statement you
heard me mention that the President's on-again, off-again
tariff policies are 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 uncertaint
economic environment?
Mr. KALMAN. Yes. So, as you mentioned, the Chinese
companies are already telling Asian media that they are setting
up companies to avoid tariffs. They could set them up overseas
and create a web of companies. They could also set them up in
the United States. We have also seen other reporting in the
Washington Post and other media showing that other countries
are trying to figure out how they could game the system using
anonymous companies.
Ms. VELAZQUEZ. Mr. Kalman, this committee recently passed
H.R. 2966, the American Enterprise Act, which requires the SBA
7(a) and 504 program loans only be made to small businesses
that are 100 percent owned by a U.S. citizen, national, or
lawful permanent resident. Can you explain how the SBA is
supposed to certify that a business is 100 percent owned by a
U.S. citizen, national, or permanent resident without knowing
who the beneficial owner is?
Mr. KALMAN. 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, you know, enter their data to the Treasury
Department and the Small Business Administration redundantly.
Ms. VELAZQUEZ. So then you agree that it is inconsistent to
be supportive of H.R. 2966 while opposing the Corporate
Transparency Act's beneficial ownership information reporting
requirements?
Mr. KALMAN. It does seem to be an inconsistency, yes.
Ms. VELAZQUEZ. If you take the position that 7(a) and 504
program loans should only be extended to small businesses that
are 100 percent owned by a U.S. citizen, national, or permanent
resident--can you explain how the beneficial ownership
information registration process can help ensure the
requirement is carried out?
Mr. KALMAN. 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 and that the SBA
may find it valuable and other agencies may find it valuable to
ensure that they are dealing with U.S. citizens. So having a
central register that agencies can check, I think simplifies
the bureaucracy.
Ms. VELAZQUEZ. Thank you. I yield back.
Chairman WILLIAMS. The gentlelady yields back.
I now recognize Mr. Finstad from the great state of
Minnesota for 5 minutes.
Mr. FINSTAD. Thank you, Chairman Williams. Thank you for
holding this important hearing today, and thank you to our
witnesses for being here.
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. I represent a pretty rural
district, and it is on the front page of the news 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 are
very appreciative of this model.
On main streets across our country, franchise owners
collectively employ thousands of Americans. You all sit on
local chamber of commerce boards, other community
organizations, and, Mr. Chair, most importantly, they sponsor
things like local town ball baseball teams. Unfortunately, for
years franchise owners have been subject to misguided
regulations, as was pointed out in your opening testimonies,
these regulations coming from bureaucrats at the federal and
state levels, which limit your ability to grow and operate.
So with that being said, Mr. Wright, someone who has
fostered significant growth in your businesses throughout the
franchise model, can you maybe talk to us about how challenging
the changing regulatory environment on the federal and state
level have been to you and what impacts that has had on your
ability to expand and to grow?
Mr. WRIGHT. Yeah, sure. Especially the Joint Employer Act
is probably the greatest impact on us. As I stated in my
opening remarks, a franchisee purchases a franchise because
they need the help. They want the help. And that is what we
want to do. That is what we were created for, that is what we
are wired for. That is what they pay us to do in their
royalties. So anything that puts in jeopardy our ability to
give them 100 percent 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.
We conduct trainings in our headquarters where owners fly
in general managers and aquatics managers, and we don't want to
stop doing that. We think it is 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 are serving.
Mr. FINSTAD. Thank you for that. In your opening comments,
you also talked, Mr. Wright, about having locations, many
locations across several states. I believe you have two
locations in the state of Minnesota. So my question is, in your
experience in multistate franchise model, what has been some
challenges and do some states work better than others in
regards to this model, your model?
Mr. WRIGHT. Certainly the biggest challenge we have within
the states is the local health rules and regulations 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 lots of conversations and issues in making adjustments to
both the physical pool itself and the entry and exit into the
pool.
Mr. FINSTAD. Thank you for that. All right.
Now going to Mrs. Beaudoin. I would 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 I appreciate all of
the risks that you have taken and, you know, the story that you
talked about in regards to your family and I think that is
great.
So you mentioned that your hope is that your newly engaged
daughter, newly graduated daughter, was going to come into the
family business. I am a small business owner myself. I have
seven children, so it is something that is 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
business?
Ms. BEAUDOIN. So in regards to bringing her in, one of the
concerns we have is really, and we haven't addressed it yet, is
with the estate tax and what that is going to mean for her
taking over our business and even for me taking over when my
parents--my parents are 50 percent owners in my business and
what--the business that I already own, what I am going to have
to pay on the estate tax to just acquire the rest of my
business. So I would say that is a big concern.
Another one is just around the administrative burden that I
have had to acquire lately. And then with Joint Employer, our
franchisor cannot provide any human resources related--anything
human resources related. So I have to take an additional
expense to get outside counsel for handbooks and anything else
with our team members where we run into issues.
Mr. FINSTAD. I appreciate that. 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 and just the great, really part of the
fabric of our local communities that you really bring each and
every day.
So with that, Mr. Chair, I yield back.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Ms. Scholten from the great state of
Michigan for 5 minutes.
Ms. SCHOLTEN. Thank you so much, Mr. Chairman. And thank
you to all of our great witnesses. I am a huge fan of BDubs. My
constituent services director is a former BDubs server. He says
nothing prepared him more for this job than doing that. And we
frequent our local BDubs after my boys Little League games.
So I am also thrilled, as I said in my intro, to have my
constituent here, Mr. Cross, just weeks after I visited his
business. And I appreciate his willingness to come to
Washington to express concerns that so many franchisors have
communicated to me. While Mr. Cross and I might not align on
every single issue, that is okay. That is what these hearings
are about to hash out some of the most important issues that
are facing 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 business-
friendly environment to the detriment of our entrepreneurs'
security and access to fair markets. But I understand that my
constituent and other witnesses here today may have a different
perspective. That is not something to be afraid of. That is
something to discuss and figure out how we can do it better. I
look forward to hearing 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. Cross, 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. Can you
tell me about your experience with the franchising ownership
model and how it has benefited you, your family, and our
community?
Mr. CROSS. I don't think I have enough time to answer that
question, but I will tell you that I would not be here today
without the franchise business model. 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 has been absolutely life-
changing for me. I have been able to support my family, my
beautiful wife Betsy and my talented son Alex. We have been
blessed with hundreds of employees that have used our job to
put themselves through school or as a steppingstone position to
whatever is next in life. I have been able to support the local
community.
As you know, Congresswoman, I am very supportive of Hope
and Calvin in the area. And I also have to stop and pause and
say thank you so much for what you have done for franchising. I
appreciate what you have done with the joint employer issue. I
thank you for your service as franchise Co-Chair. And I do want
to continue to put that plug in. I look forward to teaching
your boys how to use those squeegees the moment they turn 18
years old. There is an application waiting.
Ms. SCHOLTEN. Thank you. Thank you. Well, and we are so
grateful for everything you have done for our community.
In your written testimony, 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. According to the FBI, each year an estimated 300
billion in illicit proceeds make their way through the U.S.
financial system, including assets linked to terrorism
financing and human trafficking. No one wants that. I 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?
Mr. CROSS. Well, unfortunately, because I have 31
employees, that particular piece of law would not have affected
my own franchise location. So I am sorry, but I haven't studied
up on that issue. I would say, in general, with my franchisor
hat on, what I am concerned about for my franchisees 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 they are 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 is very difficult.
And so, again, you know, we are blessed to be part of the
International Franchise Association. And while I can't answer
your question directly, I would be happy to put you in touch
with them and we can work together on that issue.
Ms. SCHOLTEN. Thank you. I had so many more questions, but
I am afraid we are out of time. So, Mr. Chairman, I will yield
back. Thank you all.
Chairman WILLIAMS. The gentlelady yields back.
I now recognize Mr. Downing from the great state of Montana
for 5 minutes.
Mr. DOWNING. Thank you, Mr. Chairman, and thank you to the
witnesses.
You know, the franchise businesses are critically and
rapidly growing part of the American economy. In my home state
of Montana, franchise businesses were responsible for almost 15
percent of job growth between 2023 and 2025. And this is
despite the fact that our franchises currently employ, you
know, less than 5 percent of the total job force in our state.
And Republicans in Congress are fighting to ensure small
businesses, including franchisees, are unburdened by the
crippling taxes and regulations. So one of our main priorities
is to extend the Tax Cuts and Jobs Act, the TCJA, and its small
business provisions.
So I am going to start with Mr. Wright. In your testimony,
you highlight the importance of TCJA Section 199A deduction,
which allows passthrough business owners to deduct 20 percent
of business income from their taxes. So can you explain in
further detail how the Section 199A deduction has specifically
benefited your business' operations?
Mr. WRIGHT. Absolutely. Anything within the--in our
franchise process or any franchise process, the more capital
that can be introduced, interjected into the business is going
to fuel growth. It is going to fuel growth for building new
locations, it is going to fuel growth for expansion, it is
going to fuel growth for higher wages and benefits. And so that
tax deduction puts more capital into the hands of the franchise
owners.
Mr. DOWNING. Well, thank you. And if this were to expire,
if this 199A deduction were to expire, how would that affect
employees at AquaTots Swim School and--or the franchisees? How
would they be impacted?
Mr. WRIGHT. Yeah. So this isn't theoretical. Our franchise
owners have been talking about that and they are actually
putting on pause, potentially, some of new leases they are
looking at opening because they are concerned about the impact
that that is going to have on their ability to invest in new
schools.
Mr. DOWNING. Thank you. You know, Ms. Beaudoin had
mentioned something about the estate taxes. Can you tell me how
the TCJA's estate tax provisions have impacted your
franchising?
Mr. WRIGHT. Oh, it is the same thing. So the--I think you
said it perfectly there. We are a younger franchise
organization that right now is looking at passing it on to the
next generation. Those estate taxes would have a--they would
probably have to sell their locations rather than passing them
on to their family, and that is a really, really sad thing.
Mr. DOWNING. Yeah, it is. Thank you. In my home district,
many Montana business owners, particularly in rural
communities, struggle to access capital to fund their business
ventures. And as I am sure everybody on this panel understands,
I mean, one of the biggest limiting factors in building or
growing a business is access to capital.
So recently, I introduced the Expanding Access to Capital
for Rural Job Creators Act, and this is to help address these
issues. This 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 am going to move on to Ms. Beaudoin. Can you expand on
how the franchise system provides unique opportunities for
aspiring business owners to achieve their dream of business
ownership?
Ms. BEAUDOIN. Yeah. So being part of a bigger brand is why
banks talk to us. Otherwise, it really wouldn't be a
conversation, especially in the restaurant environment right
now. 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
behind us, they will enter into the conversation.
We do sometimes, because we are such a small franchise, my
father personally guarantees a lot of our loans, so there is a
weight on me that I have my parents personally guaranteeing
loans as well as trying to support my children. So 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.
Mr. DOWNING. Yeah. Thank you. I have to admit, I had a
bonding moment with my daughter when she was in college and
wanted to go to dinner to BDubs. I am going what is BDubs? Is
that by that Buffalo Wild Wings over there?
Ms. BEAUDOIN. That is the Buffalo Wild Wings.
Mr. DOWNING. So what advantages in those last few seconds
here 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 capital?
Ms. BEAUDOIN. 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. They can work on--focus
on operating their businesses while the franchisor is
developing, for example, in the restaurant business, developing
the menu and the sauces and that type of thing, and they can
really just focus on building their culture and their business.
Mr. DOWNING. Excellent. Well, thank you. And on that, Mr.
Chair, I yield my time.
Chairman WILLIAMS. The gentleman yields back.
I now recognize Mrs. McIver from the great state of New
Jersey for 5 minutes.
Mrs. MCIVER. Thank you, Mr. Chairman and Ranking Member,
for convening this hearing. And thank you to our witnesses for
being here today.
The 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 is 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. Continuing 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 a cover for criminal enterprises. They deserve a
level of playing field, not one rigged by Trump and corruption.
With that being said, Mr. Kalman--am I saying that right? I
want to make sure I am pronouncing it right. Mr. Kalman, 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. What is excessively burdensome about these
reporting requirements?
Mr. KALMAN. We don't think they are. 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 is--most of the information is out there, so we don't
actually think it is--it has not proven to be a burden. I will
also say this, that FinCEN had estimated that it would cost $85
for an initial registration. 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
the CTA ever again.
Mrs. MCIVER. Can you give us an example of when a
legitimate business would be incapable of providing this
information?
Mr. KALMAN. 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.
Mrs. MCIVER. Okay. Under 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?
Mr. KALMAN. No.
Mrs. MCIVER. Okay, thank you. With that, I yield back.
Chairman WILLIAMS. Gentlelady yields back. I now recognize
Mr. Meuser from the great state of Pennsylvania for 5 minutes.
Mr. MEUSER. Thanks, Chairman. Thank you all very much. It
is 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. We are delivering
critical tax relief to franchise businesses, small businesses.
The bill has many provisions in it, such as 100 percent bonus
depreciation, Section 199A for a small business deduction, R&D
tax credits, et cetera. Are these provisions helpful? Critical?
On a scale of 1 to 10, how important are they to your growth
and sustainability, Mr. Cross?
Mr. CROSS. 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 additional labor to go out and do more work, are
always much appreciated.
Mr. MEUSER. Do others agree, Mr. Wright?
Mr. WRIGHT. Oh, 100 percent. Yes, exactly. Being able to
take that and invest back in the business is critical to the
growth of small business.
Ms. BEAUDOIN. A scale of 1 to 10, I would give it about a
25.
Mr. MEUSER. Very good. Thank you. That is what we thought.
I wish everybody thought that way, but we were working on it
because the real world is where it matters, not in the, the
theoretical bubble that tends to exist in certain--certain
places here in Washington. Small businesses franchise, you
know, I get it. I was in small business and lucky enough to
grow it into a larger business over time. I recall with the
PPP, for a temporary period, franchises were not included in
availability for PPP because you were considered a larger
corporation. We fixed that pretty fast. Is there anything else
that franchises do not gain versus small businesses that you
would like to see corrected, Mr. Wright?
Mr. WRIGHT. I can't think of anything off hand.
Mr. MEUSER. Okay, all right. Because we differentiate quite
deliberately. But as the Chairman was saying, you are small
businesses, and we, you know, many of us understand that. I am
just making sure that there is nothing that you are not
receiving because you are a franchise. And I was curious to
hear about the personal guarantees, Ms. Beaudoin. I would think
that being a franchise, that wouldn't be as--as----
Ms. BEAUDOIN. Yeah. Well, again, because we are our own
business, we are not Buffalo Wild Wings corporate. They just
want to make sure that we have the capital to back our loans.
Mr. MEUSER. Sure. And I signed many in my day as well, so I
understand. The tax provisions, 199A, obviously affect your
long-term planning and your investment strategies for your
businesses? Okay. So, very important.
You know, onto this beneficial ownership rule. Listen, when
it was, well, you know, when it was passed, there were four
questions that, on a regulatory basis, the Biden Department of
Treasury 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 percent
of small businesses actually submitted. And yet, and 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. Why would you think that that
would be something that should have been implemented or express
to me why you are very happy it wasn't? I will start with you,
Mr. Cross, and we will go down if you can answer in a short
period of time.
Mr. CROSS. Again, Congressman, thank you for the question.
I think it is just the uncertainty of how to comply and the
fear of the fines. And again, I mentioned it in my previous
response. We don't maintain on-site legal counsel to help us
navigate these issues.
Mr. MEUSER. Right
Mr. CROSS. And with my franchisor hat on, because of the
limitations of the joint employer, I as a franchisor am limited
with the support that I can provide our franchisees to help
coach and guide them through it.
Mr. MEUSER. Thank you. Mr. Wright?
Mr. WRIGHT. I think that was said very well. There is not a
single franchise owner that we have has any legal counsel at
all. And they will absolutely have to have some help in getting
that documented completed.
Mr. MEUSER. Ms. Beaudoin?
Ms. BEAUDOIN. Yeah. And we are thankful to have the
franchise association that kept us abreast of this issue. That
being said, though, it is just another administrative burden
that small business--if I were not part of a franchise, I pray
for the small business owners daily of what they are missing,
and it is the fear of what am I going to miss and what am I
going to be--have an exorbitant penalty for. And I am not sure
the penalties around this, but there are just so many
administrative things that franchisees or small business owners
can miss.
Mr. MEUSER. Thank you for your honest real-world
information so we can base policy and support for small
business based upon it. Thank you very much.
Chairman WILLIAMS. Gentleman yields back. I now recognize
Mr. Cisneros from the great state of California for 5 minutes.
Mr. CISNEROS. Thank you, Mr. Chairman. And as a former
franchisee, I appreciate the witnesses being here today to
share their views with us, but I--I need to take a few moments
to 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. Legislation about the SBA
has been pushed through this committee with no input or insight
from the SBA on how it will be implemented. 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? What specific offices or departments within
the SBA are affected by the reduction in the workforce 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 in student loan
portfolios while cutting 43 percent of their staff and also
having staff not trained to work with such a complex student--
complex student loan system?
So, 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 ahold of
the SBA, I am very concerned about how long, 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.
So, that being said, Mr. Kalman, many opponents of the
beneficial ownership information reporting requirements claim
the penalties for small business owners 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. Why is this inclusion of the word
willful so important and how does it impact small business
owners?
Mr. KALMAN. Thank you for the question. I think in the
lead-up to the passage of the bill, there was a lot of
discussion. Nobody wanted a negligence standard. No one wanted
a reckless standard. For those that are not familiar with these
terms, all the sort of `` I forgot, `` `` I didn't know the law
existed, `` and ``I didn't realize that that was what I was
supposed to report, `` those are not punishable under the
system. It is a willful standard. The original standard was
knowing, and they changed 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, choose to violate the law. And we
think that that is a safer standard and therefore the
punishments are appropriate.
Mr. CISNEROS. So if a small business owner accidentally
makes a mistake on their submission, what are the consequences?
Mr. KALMAN. Nothing.
Mr. CISNEROS. All right, thank you for that. As I stated,
the SBA administrator is going to be here the first week of
June. I would love to hear from our franchisees if there is
anything specific that you would like us to address with the
SBA administrator that could go and help your businesses.
Mr. WRIGHT. I would like to thank the SBA for once again
opening up the SBA directory for both banks and lenders and
potential franchisees to be able to see that information.
Mr. CISNEROS. Anyone else?
Mr. CROSS. Anything that could be done to streamline the
process for our prospective franchisees. Franchisees that are
using SBA funds, it typically takes--it is an onerous process
to get them through it.
Ms. BEAUDOIN. I tried to apply for an SBA loan with my
steakhouse, and it was such an onerous process that I backed
off, and I found other investors to come in and help me get it
started.
Mr. CISNEROS. All right, well, thank you for your
testimony. I will make sure that we address those issues when
she is here. And I yield back.
Chairman WILLIAMS. Gentleman yields back. I now recognize
Mr. Jack from the great state of Georgia for 5 minutes.
Mr. JACK. Thank you, Mr. Chairman, and thank you for
convening this hearing. And I will start with Ms. Beaudoin. Is
that the right pronunciation?
Ms. BEAUDOIN. It is Beaudoin, but anything works.
Mr. JACK. Beaudoin. Yeah, I say that because I know a lot
of our colleagues on both sides of the aisle have already tried
to affirm their loyalty to the franchise that is Buffalo Wild
Wings. But I suspect I am the only Member of this committee
that has eaten at perhaps one of your restaurants within the
last week. So very excited that you are here. And I, you know,
I think what is important--important about this hearing, in all
seriousness, is that, you know, for so many of our colleagues,
it is instructive to know that, you know, franchisees are small
businesses. You think of these massive corporations with these
huge brands, trillions of dollars in brand value, but
ultimately, they are small businesses. And I am just curious,
you know, states such as Oregon and Illinois have instituted
minimum wage laws that treat franchisees as if they were part
of their franchisor. This includes attributing the franchisor's
total employee count to the local franchisee. What say you to
that and is this treatment of franchisees fair?
Ms. BEAUDOIN. It has been tough on my colleagues in those
states for sure, to where they are looking at different ways to
handle their service models. They are working on ways to cut
team members. They are looking at automation. They are looking
at using computers to, or for servers, to have tablets to cut
servers on the floor. So, yes, I know it has been extremely
burdensome on those franchisees in those states.
Mr. JACK. Mr. Wright, I will give you a chance to comment.
Mr. WRIGHT. Yeah, I agree. Anything that we are doing to
hinder the growth of the franchise owners is--it is--it is just
not common sense. The process, in my opinion, and the
regulation is just not common sense.
Mr. JACK. Sure. And to help me understand scale as it
relates to just how many. I think you noted, ma'am, that you
have got five restaurants, and given your leadership across
Buffalo Wild Wings writ large, what is the average size of a
small business that operates a few restaurants? Is it three,
four, five? What do you see the average being for the
franchisee?
Ms. BEAUDOIN. Across Buffalo Wild Wings, I believe the
average is around 14. I don't know for sure.
Mr. JACK. That is great. And Mr. Wright, curious about
Aqua-Tots?
Mr. WRIGHT. Yeah, the average franchise owner is three
schools.
Mr. JACK. Three schools.
Mr. WRIGHT. Mm-hmm.
Mr. JACK. And Mr. Cross?
Mr. CROSS. Mostly single unit operators with six to eight
employees.
Mr. JACK. Got it. Okay, very helpful. One of the things we
are talking about today is that many Members of our leadership
are meeting with folks right now to talk about the extension of
the Tax Cuts and Jobs Act. You have seen it over and over and
over across this hearing, but also across 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, Mr. Cross,
and work our way down. What is the impact of us passing the
extension of these tax cuts going to do to small business?
Mr. CROSS. For me personally, I am going to get to reinvest
more in my operation with additional management staff, with
additional sales staff, with vehicles to go out and perform the
service.
Mr. JACK. Wonderful, thank you. Mr.----
Mr. WRIGHT. Yes, we will be able to reinvest back in our--
in our team members as well to provide greater support for our
swim schools.
Mr. JACK. Wonderful.
Ms. BEAUDOIN. And we are looking at opening two additional
locations, so this will help us invest in that.
Mr. JACK. Perfect. The only other question I have is when
we talk about regulations, one of the things that I am really
proud of having accomplished this Congress is ensuring the
passage of a bill that repealed a regulation that drastically
impacted a factory in my district. 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 foisted
upon businesses across the country right before that
administration ends. I am just curious if you could all three
of you speak just very briefly to how we can best serve you as
it relates to in ensuring there is a regulatory environment
that enables you to thrive. We will start with you, Mr. Cross.
Mr. CROSS. 54 seconds isn't enough. It is the Save Local
Business Act and making sure this joint employer legislation
goes away. It is detrimental to franchising and it threatens to
take away the retirements of thousands of small business owners
across the country.
Mr. JACK. Thank you. Sir?
Mr. WRIGHT. I would say the Joint Employer Act as well.
Holding a franchisor responsible for franchisee employment
practices is just not good process at all.
Mr. JACK. Absolutely, thank you. Ma'am?
Ms. BEAUDOIN. And I would agree it is the joint employer
standard that needs to be loosened up.
Mr. JACK. Wonderful. Well, Mr. Chairman, I applaud you for
convening this hearing, and, as so many of our colleagues on
both sides of the aisle have noted, there is a point of pride
in a lot of communities when some of these brands move in and
have an opportunity to serve 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.
Chairman WILLIAMS. Gentleman yields back. Now, I recognize
Mr. Tran from the great state of California for 5 minutes.
Mr. TRAN. Thank you, Mr. Chairman, Ranking Member for the
panel today and the hearing today. Panelists, welcome. I
appreciate you being here. My first question is for Mr. Kalman.
Recent SBA reporting determined there are more than 34.8
million small businesses in the U.S., making up 99.9 percent of
all U.S. businesses. Despite 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, their hardware stores, or their investment
advisory companies. First, can you explain why smaller
businesses or firms might attract or are more likely to be
victims of ransomware attacks?
Mr. KALMAN. Yeah. In our discussions with a number of small
business organizations, and I think it is something that my
colleagues on the panel here have alluded to, is they don't
actually have in-house counsel. They are not large
institutions. Large institutions are much more likely to try
and fight back. They are likely to protect their brands. They
are likely to have the resources to do that. So while any
individual attack might be a smaller amount of money, it is
much more likely that a small business owner might go, I am
going to pay this amount rather than higher legal costs to try
and fight it.
Mr. TRAN. Thank you. And then follow-up to that, can you
explain how the Trump administration's decision not to enforce
the Corporate Transparency Act's beneficial ownership
information reporting requirements makes legitimate small
businesses more vulnerable to these types of attacks?
Mr. KALMAN. Well, if one were to try and go to law
enforcement to try and get help or actually try and pursue some
remedy, they would hit a brick wall. Without beneficial
ownership information, these companies open up and shut down
overnight. They can move across the street, they can move
across the globe, and there is no way of tracking them.
Mr. TRAN. And what could Congress do to help small business
owners who are likely targets of ransomware attacks carried out
by North Korea or China?
Mr. KALMAN. I mean, I think there are 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 are now 100 countries around
the world that have pledged to start beneficial ownership
directories so that we could begin to track this stuff across
countries and across continents. I would urge us to get back
into that and follow up with all those countries.
Mr. TRAN. And Mr. Kalman, your organization published a
fact sheet with numerous examples of shell companies from the
fentanyl drug trade, which is 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 would the Corporate Transparency Act help reduce their
prevalence in this illegal market?
Mr. KALMAN. So anonymous companies are not just a mistake
or an occasional use by drug cartels. It is a feature of how
they operate. And the President, for example, in his latest
budget, has proposed to increase funding for border and customs
protection. That is only part of the problem. It is just trying
to stop drugs that come into the country. There are numerous
ways in which they are going to get here. But bankrupting the
drug cartels is actually seen by DEA 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.
Mr. TRAN. Thank you for that. Mr. Wright, the government
guarantee provided by the SBA in the 7A, the 504, and other
capital access programs enables lenders to offer more
affordable loans with more advantageous repayment terms than
they would otherwise have. This helps small businesses--small
business borrowers overcome many of the economic pressures we
are discussing here today. And I am always looking for ways to
improve awareness of the SBA's capital access programs and the
benefits they provide. How do you think we can help the SBA
improve awareness of these programs for franchisee owners and
small business borrowers?
Mr. WRIGHT. I would say working with the IFA, making sure
that you are providing that information to the International
Franchise Association, who does a fantastic job of
communicating to all of the small businesses and the
franchisors about this opportunity. We do that. We, as part of
our process of onboarding a new franchise owner, we provide
them with a pretty large list of opportunities, usually through
lenders who are working that process across the country. So it
has been--SBA has been vital to the growth of our business.
Mr. TRAN. Thank you so much for that, Mr. Chairman. I yield
back the rest of my time.
Chairman WILLIAMS. Gentleman yields back. Now recognize Mr.
Alford from the great state of Missouri for 5 minutes.
Mr. ALFORD. Well, thank you very much, Mr. Chairman, and
thank you, Ranking Member Velazquez. As a previous small
business owner, I know firsthand one of the most difficult
parts of starting any business is staying in business is your
branding and your marketing. And of course, capital 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. I am proud to be on this committee.
Mr. Wright, in your testimony you mentioned that franchises
typically represent about 20 percent of SBA loans by $ volume.
I am currently working on legislation that would seek to raise
the current maximum loan of SBA backed loans. How could raising
the limit on 7A and 504 loans benefit entrepreneurs looking to
start small businesses?
Mr. WRIGHT. That is a great question.
Mr. ALFORD. That is why I asked.
Mr. WRIGHT. Literally this past week I was talking to a
franchise owner who is up against that $5 million cap because
of multiple schools that they have owned. And they are looking
to grow, and they are looking at options other than the SBA to
do that. So it would absolutely be beneficial to our owners who
are opening multiple locations.
Mr. ALFORD. We got to get that done. Missouri represents
about 16,000 franchise establishments contributing to about
170,000 jobs in the Show Me State. And we are proud in our
district to have Fish Window Cleaning headquartered there. Mr.
Cross, are there any policy changes at the federal level that
you believe would significantly benefit small franchise owners
like yourself?
Mr. CROSS. Yes, Congressman, thank you for the question. I
appreciate the red tie, that is our branding.
Mr. ALFORD. That is why I wore it.
Mr. CROSS. I appreciate it. It goes back to the joint
employer. Again, it is the single biggest issue that is
affecting us as franchisors to being able to support our
franchisees and their pursuits of small business ownership.
Mr. ALFORD. Ms. Beaudoin, is that how you pronounce it? Did
I get it right? Oh my goodness.
Ms. BEAUDOIN. That is perfect. That is the French version.
Mr. ALFORD. Brian Jack told me how to pronounce it. He
looked it up.
So thank you. Thank you for being here. How many wild wings
do you own, Buffalo Wild Wings?
Ms. BEAUDOIN. I have four.
Mr. ALFORD. Four?
Ms. BEAUDOIN. Yes.
Mr. ALFORD. How did you get into that business?
Ms. BEAUDOIN. So I started in college. My father--I went to
West Virginia University, and my father was looking at getting
into a different type of restaurant. He had started a
restaurant when I was three, and we grew up in it. And I told
him there was a place he should check out, and he called the
number on the back of the menu.
Mr. ALFORD. All right. I looked this up on Guac or Grok.
You know, on X, Grok. The hottest sauce at Buffalo Wild Wings
is the Blazin' Knockout.
Ms. BEAUDOIN. Yeah.
Mr. ALFORD. It is made with nine of the spiciest peppers,
including Devil's Breath, Carolina Reaper, Scorpion, Ghost,
Habanero, red and green peppers, 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
is significantly hotter than other sauces like wild or hot. My
question to you, Ms. Beaudoin, have you had this hot sauce?
Ms. BEAUDOIN. I have. I have. Actually, I tested four
blazin' sauces, four versions of a blazin' sauce, at one FAC
meeting. I would like to tell you I was the only member that
tried all four. And yes, and I frequently have participated in
the Blazin' Challenge with my team members.
Mr. ALFORD. How long does it take to get your taste buds
back after they are burnt off your tongue?
Ms. BEAUDOIN. It is a few days, yeah. It is--it is--yeah.
Mr. ALFORD. I have got about a minute and a half left. Just
for the folks who may be tuning in or maybe watching this on
one of our social media channels later, kind of describe how
the franchise model works. A lot of people don't realize, I
think, that it is--it is not a corporate-owned store.
Ms. BEAUDOIN. Correct. No, we are--we are our own
businesses. I wear many hats in my business. I coordinate the
contractors and the architects when we build. I am the last one
that checks payroll. I oversee our bookkeeper. I am head of HR.
I am the operations manager. They report up to me. So I wear
marketing, our local store marketing. I do have somebody that
handles our local store marketing, but again, she reports up
to--to me, and I handled that myself for 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. I do
set my own pricing. We have been very conservative in our
pricing, which has led to increased sales the last few years,
but we definitely run our own businesses well.
Mr. ALFORD. 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.
Ms. BEAUDOIN. Thank you.
Mr. ALFORD. And with that, Chairman, I yield back.
Chairman WILLIAMS. Gentleman yields back. I now recognize
Dr. Conaway from New--from the great state of New Jersey for 5
minutes.
Mr. CONAWAY. Thank you, Mr. Chairman, and thank you,
witnesses, for presenting yourself today to offer information
on this important issue. Enacted in 2020, the Corporate
Transparency Act increases transparency in business ownership
in order to combat certain financial crimes like tax evasion,
money laundering, terrorist financing, the trafficking in labor
and in the sex trade. These are important goals that protects
our country, protects the interests of small businesses and
individuals. The administration, however, last month decided
they would no longer enforce penalties and fines against
domestic companies and individuals that intentionally--that is
an important part of it--intentionally and willfully fail to
complete their financial ownership information. Information
that involves a name, address, perhaps a driver's license. It
takes 20 minutes to do, $85 to file, and you never have to do
it again once done. I view this action as reckless, and I think
I am joined by many in this, because I understand that the
American people have an interest in preventing drug lords from
flourishing and terrorists from gaining a foothold and
basically attacking freedom, attacking our country. Can you,
Mr. Kalman, speak to how these actions taken by the
administration will weaken national security?
Mr. KALMAN. Thank you for the question. There are numerous
examples of bad actors in the U.S., adversaries setting up
companies in the United States to exploit our financial system,
whether that be Chinese companies setting up in California to
access and purchase or get their hands on sensitive information
from our Defense Department. There was actually a Defense
Department contract at one point in Afghanistan--in which a
U.S. company was getting funding through the Defense Department
to provide services to the troops. That company--secretly had
ties to the Taliban. We 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 are doing
everything in our power to counter.
Mr. CONAWAY. Thank you for that. We have--there have been a
lot of concerns raised about the burden of complying with this
law, and there have been--it took 10 years for this law to be
passed. There were a lot of interest groups and law enforcement
agencies who were involved in its passage, good government
people, people concerned about national security. Can you put
more clothes on the coalition that came together to get this
law passed?
Mr. KALMAN. Yeah, I actually put this together because I
often get asked this question. So if you don't mind, I am 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. It was a wide coalition.
Mr. CONAWAY. Broad coalition, and that, I think, is a
testimony to how--to the strength of the desire to get this
bill passed and to bring security to the American people and to
protect small businesses from attack by these foreign
corporations. And indeed, in this climate of increased tariffs,
broad-based tariffs, people who can go unidentified will make
domestic shell companies here in order to get around the
tariffs and confound the administration's desire to collect
these tariffs and then pass it along to the wealthiest in our
country.
I met with small businesses in my district a couple of
weeks ago to talk about tariffs and the impact on small
businesses. This sort of whirlybird, back and forth and
uncertainty. I heard repeatedly from car dealers and people
involved in selling all sorts of items, insurance brokers, and
the like about how these are raising costs. Many small
businesses buy--make their products from items purchased
overseas and also sell overseas. So they get hit coming and
going, and of course the consumer pays for all of these. Can
you comment on how this--this--the CTA, helps with the terror
problem that--that so many of us are facing?
Chairman WILLIAMS. Time is up.
Mr. CONAWAY. I don't know if you can answer that now?
Chairman WILLIAMS. Time is up. I now recognize Mr. Patronis
from Florida, from the great state of Florida, for 5 minutes.
Mr. PATRONIS. Thank you, Mr. Chairman. I got to admit, I
was really excited when you had a restaurateur come up. My
family, my great granddaddy was in the restaurant business. My
granddad, my dad, and now my family. And you know, just to be
able to pick your brain and maybe empathize a little bit. Is
it--oh, I am sorry. First timer, rookie problem. Horrible. No
excuse. Does my clock start over? Nobody heard what I was
saying. Thank you, sir. But as I like to tell people, the
restaurant business is intoxicating, but it is 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. And I struggle sometimes, and I think about the days
of pre-COVID and how it seems like life was so much better back
then and then how the workforce has changed so dramatically
since then. And then I want to get you to elaborate on
specifically, because of the competitive nature of your
industry and what you have dealt with in your family's
evolution, how much help did you get from the government when
you decided to open up your first restaurant?
Ms. BEAUDOIN. Our first restaurant, none.
Mr. PATRONIS. Yeah. You know, and I mean, you took that
risk.
Ms. BEAUDOIN. My father did. My father, he financed it. I
mean, after 30 years of working in the restaurant business, he
saved every penny he had. We rarely went on vacation. Well, we
went on one vacation a year to the beach.
Mr. PATRONIS. Sure.
Ms. BEAUDOIN. And the restaurant closed that week. But
yeah, so he funded our first restaurant.
Mr. PATRONIS. Yeah, I relate. Our restaurant would close in
the month of December and that is when dad would take us on our
trip.
Ms. BEAUDOIN. Yep.
Mr. PATRONIS. And all of the hundreds of jobs that you have
created, the families that you have put to work, any assistance
from the government in any way, shape, or form?
Ms. BEAUDOIN. I mean, through Covid with PPP----
Mr. PATRONIS. PPP.
Ms. BEAUDOIN.--and RRF, yes. Otherwise, no.
Mr. PATRONIS. Yeah. What are some of the--if you had a
magic wand and say, you know what, if I could change this one
element, and I don't care if it is state, local, or government,
what would make your life easier when it comes to growing your
business?
Ms. BEAUDOIN. I think it is two things, actually. I think
it is access to capital without having to personally guarantee
it. That is a burden that my father takes on, and I am grateful
for. But also, I think it is the 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.
Mr. PATRONIS. And do you ever look around at other
businesses and get envious of assistance they may receive in
comparison to what you are eligible for?
Ms. BEAUDOIN. I think I focus on my restaurants and just on
my--on my road, yeah.
Mr. PATRONIS. The restaurant business, I tell people, and I
would tell mom all the time, look, if you don't take care of
the customer, somebody else will.
Ms. BEAUDOIN. Correct.
Mr. PATRONIS. But when you get into government, it is hard
to have that type of attitude. So I have always been in front
of my coworkers and my employees, and anywhere I have been in
government, my attitude has always been, if you don't take care
of the customer, I am going to find somebody else that will.
And it is a culture that doesn't happen overnight. 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 by telling 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
have got a proven track record. It is obvious, you know, what
you are doing. Otherwise, you wouldn't continue to expand the
way you have. What about supply chains?
Ms. BEAUDOIN. Supply chains have got, again, if I did not
have a franchisor, I don't know what we would have done through
COVID. There was a point where we had no wings. That has gotten
drastically better. But as a small business owner, if it
weren't for the franchisor, we would not have been able to
survive.
Mr. PATRONIS. Well, congratulations on getting your
daughter into the business.
Ms. BEAUDOIN. Thank you.
Mr. PATRONIS. So my dad had four boys. My three brothers
are still there. I am 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 are taking care of the customers.
Ms. BEAUDOIN. Yeah.
Mr. PATRONIS. So, anyway, it is just a real treat to have
you come up and give some reality to this group.
Ms. BEAUDOIN. I appreciate you guys having us. Thank you.
Mr. PATRONIS. I yield back.
Chairman WILLIAMS. Gentleman yields back. I now recognize
Ms. Simon from the great state of California for 5 minutes.
Ms. SIMON. Thank you all so much, and this has been a great
panel. To the gentlewoman who came in thinking about you. My
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,
you all are providing such an incredible service in the
community. I ran a youth program some years ago for a long time
for young women, really young women who are struggling. So many
of their first jobs out of foster care, out of the juvenile
justice system, were in local small business franchises. So
thank you so much for lifting up, really, what is so important.
You know, I have a few short comments, and I want to make
sure that, you know, I associate my comments to the comments of
Ranking Member Velazquez. You know, although I was not in
Congress when the Corporate Transparency Act was passed, I
understand and agree with Mr. Kalman and your remarks earlier
this hearing. Mr. Kalman, I was extremely concerned listening
to your testimony about the potential consequences of rolling
back the law. And I am committed to working with this committee
and, again, our partners on the ground and communities to
making sure that we get it right.
Now, while my Republican colleagues are using this hearing
to justify really what is happening here in the House this week
and the tax cuts and 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. Restructuring supply chains in 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. And these port sellers, they are now
experts; they are expecting--these experts are expecting 20
percent fewer ships to call into 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.
Now, I have a question for one of our witnesses, but I do
want to say, in meeting with so many franchise owners and--and
so many small business owners in my district, we know that
approximately in this country, 30 percent of the employees that
are employed by franchises, food service workers, et cetera,
they are able to access Medicaid. Many of them are half-time
workers. Many of them, again, are paid a low wage. And their
health and their family's health are contingent upon them
being--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 am
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.
I do have a quick question. And actually our Ranking
Member, she lifted up and 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
what is at stake. And in my short question, Mr. Kalman, would
you quickly explain how U.S. law enforcement would identify
shell companies, we talked about these before, in the wake of
the Trump administration's decision not to enforce the
Corporate Transparency Act's beneficial ownership registration
requirement?
Mr. KALMAN. It will make it very difficult. I mean, we have
the experience prior to the Corporate Transparency Act being
passed 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 is very difficult.
Ms. SIMON. Thank you very much, and I will yield back.
Before I go, would anyone like my time? I have 32 seconds. All
right, there you go. Thank you, Mr. Chairman.
Chairman WILLIAMS. Did you give--go ahead. Okay. Gentlelady
yields back. Gentlelady yields back. And I recognize Mr. Wied
from Wisconsin, the great state of Wisconsin, for 5 minutes.
Mr. WIED. Thank you, Mr. Chairman, 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 is 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. For first-time entrepreneurs,
becoming a franchisee allows access to a recognizable brand,
the framework to begin their business, and potentially other
resources from the franchisor. This allows first-time business
owners to develop the skills to run their business while
receiving support from their franchisor. This type of increased
support makes the American dream more possible for thousands of
Americans across this great country.
The 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
franchisees and their franchisors, actively hurt these small
businesses. My Republican colleagues and I are committed to
advocating for franchise owners and their businesses just like
any other small business.
Mr. Cross, 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 the reinstatement of 100
percent bonus depreciation under the Section 168, the K, allow
you to reinvest in your small business?
Mr. CROSS. Yeah, great question and thank you. And yes,
everybody loves clean windows.
Mr. WIED. Oh yeah.
Mr. CROSS. It keeps us in business. Congressman, for me
particularly, again, it goes back to vans. Additional equipment
are the primary ways that additional--the depreciation expense
would help me there.
Mr. WIED. Great.
Mr. CROSS. Purchasing more vans.
Mr. WIED. Yeah, absolutely. So, Mr. Bode--Mrs. Beaudoin,
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 franchisees as part of their
franchisor. How do these laws negatively impact the owner of a
franchise like you?
Ms. BEAUDOIN. Yeah, as I spoke earlier, it is really under
our human resources policies. So we have to employ outside
counsel for our handbooks and to--for our workplace safety
training, for sexual harassment training. The franchisor can't
give us any feedback on that. If we have 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 with a really light
touch from the franchisor.
Mr. WIED. Also, what impact do higher minimum wage laws for
franchisees have on, you know, like businesses and especially
in the rural areas?
Ms. BEAUDOIN. Yeah, it is interesting. So I am in the
panhandle of West Virginia. I am on the 81 corridor. So you can
get to three states in about 45 minutes there. And so I am in
Virginia, West Virginia, and Maryland. We 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.
Just because it is--the other two states have a higher minimum
wage. But at my back of house, the kitchen wage is actually
lower in those states because there is a perceived--there is a
perception that they are going to get paid more. But I am
trying to attract workers in the lower minimum wage state. So
really, I am paying more in the state with a lower minimum
wage.
Mr. WIED. Well, thank you all for all that you do. You are
the heart--the heart of America. The small businesses and you
are main street. So appreciate that, and----
Ms. BEAUDOIN. Thank you.
Mr. WIED.--thank you all for being here today. I yield
back.
Chairman WILLIAMS. Gentleman yields back. I now recognize
Ms. Goodlander from the great state of New Hampshire for 5
minutes.
Ms. GOODLANDER. Thank you, Mr. Chairman, and thank you to
our witnesses for being here today. You know, I really
appreciate your--your testimony, especially tracing the roots
in the history of the franchise model. It is a deeply American
idea. The word, I learned recently, franchise comes from a
French word, but it is 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 with franchising and the franchise model.
We call Bill Rosenberg one of our own. And Bill Rosenberg, of
course, the founder of Dunkin Donuts. I am very upset to learn
that Dunkin Donuts is going to be leaving the Longworth House
office building. I learned that this morning. We will try to
fight that. But he helped to actually bring about the
International Franchise Association, and he left a long legacy
in New Hampshire.
We are also home to the McDonald's brothers. And 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
a woman, Leinani Deslandes, who worked--she started out her
career as a crew worker in a franchisee-owned McDonald's. She
was making $7 an hour. She worked really hard. And 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 said
someone who is making your fries today in 10 years could be
running six or seven McDonald's. That is what she believed.
That is at the bottom of what makes this such a powerful model.
She worked hard throughout her career. She got a pay raise.
She was making $12 an hour. And, you know, eventually a
management job opened up in another McDonald's not too far
away. She was prevented from actually even pursuing that job
because of a clause in a franchise agreement that is known as a
no-poach agreement. It basically restricts franchisees from
hiring workers from other franchises. This is at odds with the
antitrust laws in our country, which promote competition and
protect workers as equally as they protect small businesses. I
wanted to ask about this because, you know, this is a problem
that we have seen across the American economy and in a number
of different types of franchises. But I wanted to ask you about
this, Ms. Beaudoin. To your knowledge, do you have any
employment contracts or franchise agreements that include no-
poach provisions?
Ms. BEAUDOIN. Not to my knowledge.
Ms. GOODLANDER. But at one point there were such clauses in
agreements that Buffalo Wild Wings?
Ms. BEAUDOIN. I can't--I am not sure. I don't know the
exact provisions if there are.
Ms. GOODLANDER. Any of our other witnesses, are you aware
of any--any of those types of clauses?
Mr. WRIGHT. No, we do not have an anti-poach in our
agreement.
Mr. CROSS. And I am not--I am not aware.
Ms. GOODLANDER. Good. Well, can you help us understand
why--why those types of clauses might have been put into
contracts?
Ms. BEAUDOIN. I didn't develop it, so I really couldn't
speak to it. And again, if it is in my contract, I am not aware
of it.
Ms. GOODLANDER. So your testimony today is you see no need
for these types of agreements? 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?
Ms. BEAUDOIN. I think we are in the most competitive
employment environment that we have ever been in, and so I can
understand team members going back and forth. And as a
franchisee, having some security would be amazing. But again, I
understand, though, that we want to get the best help possible.
And if there is a better opportunity for my team members
elsewhere, I understand why they would go searching for it.
Ms. GOODLANDER. Well, I appreciate that. And I know, you
know, I have, talking to small businesses in my state, I know
there is--it is--it is a challenging moment right now. You are
facing a whole lot of uncertainty. I wanted to ask you about
the impact that tariffs have had on your bottom line in recent
weeks and what you would urge this committee to consider as we
are looking, as many of us are looking, to restore the
important role that Congress should be playing in the
imposition of tariffs.
Ms. BEAUDOIN. For me, it is just really providing more
certainty. As I shared in my opening testimony, restaurant
ownership is not for the weak. We work hard for every dollar
that comes through our doors, and so margins are thin. Anything
that increases cost raises concern. Uncertainty brings a lot of
discomfort. So really, for me, 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.
Ms. GOODLANDER. Well, I appreciate your testimony. I see my
time is up, so I yield back, Mr. Chairman.
Chairman WILLIAMS. Gentlelady yields back. I now recognize
Mr. Olszewski from the great state of Maryland for 5 minutes.
Mr. OLSZEWSKI. Thank you very much, Mr. Chairman, to our
Ranking Member, and to all of our witnesses really appreciate
your time here today and your feedback. Also appreciate the
contributions you are making both within your communities and
across this great country through your franchises. In my home
state of Maryland, we have over 15,000 franchisees and
franchise locations, which employs over 155,000 people. The
type of ecosystem that we know helps Marylanders and helps all
Americans.
I know we talked a lot about the CTA today, so I will try
not to talk too much about it, 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. Here with Police Week,
I want to especially thank my younger brother Jordan, who is in
law enforcement back home, for his service, along with the men
and women across this country who serve us all.
I do think it is a timely conversation that we are having
around the idea of countering corruption, though. Just this
week, our President publicly announced the possibility, floated
the possibility, of taking a $400 million gift from the
government of Qatar. A luxury plane that would be used first as
Air Force One and then donated to his presidential library. 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-making. So, unfortunately, it seems
in Congress, we are getting to a place where we are picking and
choosing which reporting requirements we require and which ones
we don't. 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.
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.
And so 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 well-established process. I know it was a 10
year, we talked earlier in testimony, this was a 10 year,
bipartisan, multi 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. We can do sufficient
resources if there are questions. Would that be something that
would be helpful if we were to take up that conversation? You
guys are being so succinct in your answers, and I really
appreciate it.
So since you have been so great with me and gracious with
me, I will just turn the floor open to all of you. In 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 that would best help you create more franchises
across this country? Anything new that we should be thinking
about?
Mr. CROSS. I think it has all been covered. Access to
capital to give potential franchise owners. Streamlining that
process, clarifying the joint employer standard, making it
easier for small businesses. I think I can speak for 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 have discussed today. So clarifying those things
and making it easier for those businesses that are simply just
trying to get this off the ground and put food on the table for
their families would be appreciated.
Mr. WRIGHT. Yeah. Removing burdensome regulations is
critical to the process. So we have talked a lot this morning
about the joint employer, but I would also add that the tax
policies that are going to--that are being reviewed right now
are also critical to the growth of the franchise committee.
Ms. BEAUDOIN. Yeah, I would agree. It is the tax policies
and also one that we have talked about but haven't really
talked about thoroughly is the increased estate tax as well as
addition--in addition to the 199A and the EBITDA standard. And
then just really it was--I appreciate Mr. Kalman explaining the
difference between willful negligence. That being said, that is
not true of all the provisions that franchise owners and small
businesses face. So it is just--it is really what we don't
know, what we don't know as far as some of these things that
come along administratively.
Mr. KALMAN. 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.
Mr. OLSZEWSKI. Hear, hear. Me too. Thank you all again so
much for your time. I yield back.
Chairman WILLIAMS. Gentleman yields back. And I want to
thank the witnesses today for your testimony and for your
appearing before us. And without objection, Members have 5
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. If there is no further business,
again, I want to thank all of you. You did a great job today.
It is a great hearing. I think you see we have got a really
good committee here representing you here in Washington. So
with that, done. Thank you.
[Whereupon, at 12:00 p.m., the committee was adjourned.]
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