    [House Hearing, 119 Congress]
    [From the U.S. Government Publishing Office]

                      LOCAL OWNERSHIP, NATIONAL BRANDS: HOW
                           FRANCHISING IS A PATHWAY TO
                                ENTREPRENEURSHIP

    =======================================================================

                                    HEARING

                                   before the

                          COMMITTEE ON SMALL BUSINESS
                                 UNITED STATES
                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED NINETEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                  HEARING HELD
                                JANUARY 22, 2026

                                   __________

                   [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                Small Business Committee Document Number 119-029
                 Available via the GPO Website: www.govinfo.gov

                                     ______

                        U.S. GOVERNMENT PUBLISHING OFFICE

    62-604                       WASHINGTON : 2026

                       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

    Ms. Angie Katsanevas, Owner and Founder, Lunatic Fringe, Salt
      Lake City, UT..................................................     5
    Ms. Tina Patel, Co-Principal, Chief Financial Officer, Promise
      Hotels, Tulsa, OK..............................................     7
    Mr. Clement Troutman, Franchise Owner, Troutman Management LLC,
      Odenton, MD....................................................     9
    Mr. Rico Macaraeg, Chief Executive Officer and Co-Founder,
      StriveWell, Garwood, NJ........................................    10

                                    APPENDIX

    Prepared Statements:
        Ms. Angie Katsanevas, Owner and Founder, Lunatic Fringe, Salt
          Lake City, UT..............................................    38
        Ms. Tina Patel, Co-Principal, Chief Financial Officer,
          Promise Hotels, Tulsa, OK..................................    45
        Mr. Clement Troutman, Franchise Owner, Troutman Management
          LLC, Odenton, MD...........................................    51
        Mr. Rico Macaraeg, Chief Executive Officer and Co-Founder,
          StriveWell, Garwood, NJ....................................    59
    Questions for the Record:
        None.
    Answers for the Record:
        None.
    Additional Material for the Record:
        NFIB Letter..................................................    62

       LOCAL OWNERSHIP, NATIONAL BRANDS: HOW FRANCHISING IS A PATHWAY TO
                                ENTREPRENEURSHIP

                                  ----------

                           THURSDAY, JANUARY 22, 2026

                      House of Representatives,
                   Committee on Small Business,
                                                        Washington, DC.
        The Committee met, pursuant to call, at 2:04 p.m., in Room
    2360, Rayburn House Office Building, Hon. Roger Williams
    [chairman of the Committee] presiding.
        Present: Representatives Williams, Meuser, Van Duyne,
    LaLota, Wied, Downing, Velazquez, McGarvey, Scholten, McIver,
    Cisneros, Tran, Olszewski, and Conaway.
        Chairman WILLIAMS. Before we get started, I want to
    recognize Congressman Cisneros from the great State of
    California that will lead us in our prayer and our pledge. Will
    you please stand?
        Mr. CISNEROS. We will do the prayer first.
        Lord, thank you for gathering us here today and bringing us
    together. Please watch over our nation, please watch over the
    people of the United States, and this great country, and the
    entire world.
        And as this winter storm crosses our country, please keep
    everybody safe, whether they are in the air or on the roads or
    traveling by rail. Make sure everybody can get to their
    destination safely, and watch over us and guide us.
        In Your name we pray, amen.
        Chairman WILLIAMS. Amen.
        Mr. CISNEROS. Repeat after me.
        ALL. I pledge allegiance to the Flag of the United States
    of America, and to the Republic for which it stands, one
    nation, under God, indivisible, with liberty and justice for
    all.
        Chairman WILLIAMS. Good afternoon, everyone. 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.
        I want to say welcome to today's hearing, ``Local
    Ownership, National Brands: How Franchising is a Pathway to
    Entrepreneurship.''
        Today's hearing will be the Committee's second hearing in
    the 119th Congress regarding the franchise business model.
        Our first hearing largely focused on the importance of
    extending President Trump's Tax Cuts and Jobs Act and on the
    impacts of burdensome regulations imposed by the Biden-Harris
    administration, such as the disastrous joint employer rule.
        Fortunately, the Congress delivered in a critical moment
    and President Trump signed the Working Families Tax Cuts, the
    largest tax cut in American history, into law on July 4 of last
    year.
        Now, this legislation not only prevented a tax hike on
    America's small businesses but also made the 20 percent 199A
    small business deduction permanent. That means main street will
    have more cash on hand to invest and grow their businesses.
        President Trump's tax bill also cuts taxes on tips and
    overtime, helping small businesses retain employees and reward
    them for their hard work.
        Now, today we expect to hear from franchisees and
    franchisors about how President Trump's tax cuts will help
    their businesses and employees. We will highlight the continued
    importance of codifying a deregulatory agenda for small
    businesses, including a clear and reasonable definition of the
    joint employer standard.
        This clarity will give small businesses, including
    franchises, that operate in every corner of America the
    certainty they need to grow and succeed.
        There are an estimated 831,000 franchise business owners
    operating in this country. Franchises employed nearly nine
    million people, or roughly 5.5 percent of U.S. employment, and
    contributed $550 billion to the U.S. GDP.
        My family has been part of the franchise model--and still
    is--in the car business for over 80 years. I have seen
    firsthand the benefits to consumers, manufacturers, and most
    importantly, our local communities.
        The franchise business model offers aspiring entrepreneurs
    access to resources and tools to assist with the many
    challenges of business ownership.
        By lowering taxes, reducing regulations, and promoting
    access to capital we can empower these entrepreneurs to thrive,
    invest in their employees, and continue building stronger
    communities across our nation.
        I want to thank our panel of witnesses for taking time
    today to come here and bring their small business story with
    them and to participate in this important hearing. We look
    forward to your testimony today.
        And with that, I want to yield to my distinguished Ranking
    Member and friend from New York, Ms. Velazquez, for her opening
    remarks.
        Ms. VELAZQUEZ. Thank you, Mr. Chairman.
        Good afternoon, everyone.
        Franchising is an important aspect of the small business
    economy, supporting an estimated nine million jobs and
    contributing nearly $1 trillion to annual economic output.
        Across key sectors, including restaurants, hospitality, and
    personal services, franchises offer entrepreneurs the
    opportunity to participate in an established brand and proven
    business model.
        For families, immigrants, and first-time business owners
    franchising can provide a meaningful pathway to
    entrepreneurship, high-earning careers, and financial
    independence while creating jobs and opportunities for local
    communities.
        At its best, franchising is a mutually beneficial
    agreement. Franchisees gain access to branding, systems, and
    national marketing, while franchisors expand their footprint
    and share the success of local operators. In many cases this
    structure can lower the barrier to entry for entrepreneurs.
        Unfortunately, that is not always how this system
    functions. In exchange for the franchisor's brand and services,
    small business owners can give up a significant amount of
    freedom.
        To maintain certain brand standards, franchisors can place
    restrictions on small business owners, limiting their ability
    to set prices, source imports, or respond to local market
    conditions in ways that improve profitability.
        While a disclosure process exists, some have contained
    incomplete or misleading financial information. More complete
    disclosures could deter small business owners and lenders from
    making such a large capital investment, including with loans
    backed by the Small Business Administration.
        In fact, the FTC found that franchise and non-franchise
    loans defaulted at similar rates, but defaults associated with
    some brands were as high as 20 percent, indicating issues with
    the business model.
        The brands noted in that brief for their high default rates
    remain in the Franchise Directory today.
        As we discuss the benefits of franchising, it is important
    to recognize the real risks and seek ways to strengthen the
    process and protect small business owners.
        No matter the model, nobody is being spared from the
    economy being created by the President and congressional
    Republicans. Over the past year, small business growth has
    stagnated and hiring has basically ground to a halt.
        Since the President unveiled his Liberation Day tariffs,
    the growth plan of many small firms has been crushed as they
    face higher prices on their imports and more uncertainty about
    the business environment.
        Nervous about the impact of tariffs on prices, the Federal
    Reserve paused interest rate cuts, delaying access to
    affordable capital for small business owners.
        Now the President is threatening criminal charges against
    the Federal Reserve Chairman because he refuses to cut rates
    based on anything other than data.
        As my Republican colleagues do a victory lap on their
    egregious tax cut for the rich, small business owners are
    seeing their healthcare costs skyrocket, some by much more than
    any benefit they receive from the pass-through deduction.
        I hope this hearing sheds more light on steps we can take
    to protect small business owners engaged in the franchising
    ecosystem and the issues emerging from the absurd and chaotic
    economic policies of the President.
        I yield back.
        Chairman WILLIAMS. The gentlelady yields back.
        We will now move to witnesses introductions.
        Our first witness today is Ms. Angie Katsanevas. She is the
    owner and founder of Lunatic Fringe in Salt Like City, Utah.
    She has co-founded Lunatic Fringe, a hair salon business, in
    1999, growing the company into a multilocation operation that
    includes salons, a beauty school, and a beauty supply store.
        In 2010, Ms. Katsanevas had received the North American
    Hairstyling Awards MBAA Award, and Lunatic Fringe later earned
    the NAHA Salon Team of the Year Award in recognition of its
    leadership and business performance.
        So thank you for being here today, and we appreciate your
    story.
        Our next witness is Ms. Tina Patel. Ms. Patel is the co-
    principal and chief financial officer of Promise Hotels in
    Tulsa, Oklahoma. In her role, Ms. Patel oversees the company's
    financial and accounting operations while providing strategic
    and operational leadership to strengthen performance.
        Ms. Patel previously served as an ambassador for the
    Central Midwest Region of the Asian American Hotel Owners
    Association and is a Member of the Board of Directors of the
    Federal Reserve Bank of Kansas City.
        Ms. Patel is a graduate of the University of Missouri,
    Kansas City--that covers both sides, doesn't it?--where she
    earned a bachelor's of science in biology.
        I am looking forward to your testimony, and thank you for
    being here.
        Our next witness today is Mr. Clement Troutman. Mr.
    Troutman is a franchise owner who operates Troutman Management
    LLC in Capitol Heights, Maryland.
        Mr. Troutman began his career in the United States Navy
    before transitioning to defense contracting and cybersecurity
    consulting.
        Mr. Troutman, thank you for your service to this country,
    too, by the way. We appreciate that.
        In 2017, Mr. Troutman opened his first Tropical Smoothie
    Cafe with no prior food experience, and has since built a high-
    performing operation through a strong focus on leadership,
    service, and execution.
        Mr. Troutman is actively expanding his business with two
    additional locations in development and remains committed to
    community engagement through job creation and local charitable
    events.
        I am looking forward to hearing your testimony, too, Mr.
    Troutman.
        I now recognize Representative McIver from the great State
    of New Jersey to briefly introduce her constituent and the last
    witness appearing before us today.
        Mrs. MCIVER. Thank you, Chairman and Ranking Member, for
    convening this hearing today.
        I am pleased to introduce our witness, Rico Macaraeg,
    executive officer of StriveWell, to the Committee today. Rico
    is a franchise small business owner and operator who runs
    wellness and fitness businesses across the region, including
    SweatHouz in Garwood, New Jersey, located in my amazing Tenth
    Congressional District.
        I had the pleasure of visiting this SweatHouz location
    personally and meeting the hardworking staff there.
        Franchise businesses like SweatHouz play a crucial role in
    stimulating the growing economy in my district, employing
    families and increasing GDP.
        As CEO of StriveWell, Rico manages physical locations,
    employs teams, meets payroll, connects with customers, and
    navigates regulatory requirements, all while responding to
    rising labor costs, inflation, real estate pressures, and
    changing consumer behavior. His perspective comes directly from
    operating businesses on the ground, not from theory.
        In addition to his role as an operator, Rico brings
    experience as an investor and an employer who understands how
    policy translates into real outcomes for workers and
    communities.
        Decisions made in Congress affect whether small franchise
    owners can hire, expand, offer benefits, and keep their doors
    open. His testimony reflects the practical consequences of
    those decisions at the local level.
        Prior to founding StriveWell, Rico held senior leadership
    roles across retail, healthcare, education, and technology. He
    is also a U.S. Navy veteran--thank you for your service--and he
    completed multiple deployments and earned three Navy and Marine
    Corps Commendation Medals.
        Rico brings a practical, operator-focused perspective on
    what franchise small businesses need to remain viable, support
    their workers, and continue serving their communities.
        I appreciate his willingness to testify before the
    Committee and look forward to his insight, especially right
    before a snowstorm.
        Welcome, Rico.
        Chairman WILLIAMS. The gentlelady yields back.
        I want to thank all of you again for being here.
        We have a few rules here, very few rules. But, before
    recognizing all of you, I would like to remind you that your
    oral testimony is restricted to 5 minutes in length.
        If you see the light turn on red in front of you, it means
    your 5 minutes has concluded, and you should wrap it up with
    your testimony.
        If you keep talking, you will hear this [Chairman Williams
    taps gavel], and it will get louder, and then we are going to
    have to ask you to stop. Okay? But I know you all will do it
    right on time.
        So, I want to thank all of you again.
        I now recognize Ms. Katsanevas for her 5-minute opening
    remarks.

    STATEMENTS OF MS. ANGIE KATSANEVAS, FOUNDER AND OWNER, LUNATIC
    FRINGE; MS. TINA PATEL, CO-PRINCIPAL, CHIEF FINANCIAL OFFICER,
    PROMISE HOTELS; MR. CLEMENT TROUTMAN, FRANCHISE OWNER, TROUTMAN
      MANAGEMENT LLC; AND MR. RICO MACARAEG, CO-FOUNDER AND CEO,
                               STRIVEWELL

                     STATEMENT OF ANGIE KATSANEVAS

        Ms. KATSANEVAS. Mr. Chairman, Ranking Member Velazquez, and
    distinguished Members of the Committee, thank you for having
    me, for the invitation to be here today with my fellow
    franchise business friends.
        My name is Angie Katsanevas. I am here with my husband
    Shawn and my daughter Elektra.
        Some of you may know me as Angie K from ``The Real
    Housewives of Salt Lake City.'' But long before I was on
    television, I was a hairdresser, and I went on to start a hair
    salon and business with my husband, Shawn, called Lunatic
    Fringe.
        Before I knew it, we had an opportunity to grow our
    business and provide the same opportunity for other stylists to
    own their own business.
        We grew our business using the franchise model. So while
    the world may know me as Angie K, I am first a small business
    owner, and more than even a small business owner, I am a
    franchise brand founder.
        I am passionate about franchising, and you may have seen
    that passion come through on camera a few months ago when a
    fellow housewife who partners with a fast food brand questioned
    whether I was a real business owner because I franchise. In
    that moment, I responded with, ``You do French fries; I do
    franchise,'' and the clip blew up online.
        But what struck me about that moment and the comments on
    social media, they weren't just about the usual response to
    drama, they were overwhelmingly in support of my business and
    supportive of the franchise model, because when I told my co-
    star on the show I do franchise, it meant I didn't open my own
    business, I opened a franchise business that allowed other
    entrepreneurs to also thrive in the system that we started.
        And so I am here today in partnership with the
    International Franchise Association to share what franchising
    has meant to me, my family, and the people that I have had the
    privilege of working alongside.
        Mr. Chairman, we started out with humble beginnings. I am
    the daughter of a Greek immigrant. My father came to this
    country with nothing but the clothes on his back. He taught me
    that if I wanted something, I had to work for it, and he taught
    me that there is dignity in every job.
        And that is taking care of your people. That is what
    business is really about. That is the philosophy we brought to
    Lunatic Fringe. We had a vision to create a salon where
    stylists could grow their careers. We sought to build business
    and a culture where someone could walk in as an assistant or a
    hairdresser, and if they worked hard and learned the craft,
    they could eventually own their business.
        Let me tell you about Kati Torres. Kati lived in Salt Lake
    City, Utah, and she is an incredible hairstylist. Over 25 years
    in the industry, Kati trained stylists across the country, and
    she knows the craft inside and out.
        Kati joined our team in 2017. She learned our systems, our
    culture, and how we do things. And last year, she and her
    husband, Reuban, opened a salon of their own, a Lunatic Fringe
    location in Draper, Utah.
        Kati is a franchisee now. She owns her own business. She
    employs local stylists and serves her community. And it is only
    possible because of franchising.
        Because Shawn and I learned the hard lessons, reduced the
    risks, and took the hits, now Kati and our future franchisees
    are able to open businesses with proven systems, with the
    support and infrastructure that Lunatic Fringe is proud to
    provide.
        From that first 700-square-foot space, my husband and I
    have now built a network of salons across Utah, Idaho, and
    Ohio, we own and operate three salons, and we have franchised
    six salons to local entrepreneurs who run them as their own
    business.
        Look, I know some people hear the word ``franchise'' and
    they think of a big corporation, but it is not true. Franchises
    are small businesses. My business is a small business, and it
    is franchise model that has allowed me to grow my small
    business. And that is why I am here today to tell you about how
    much the franchise model has meant to so many.
        Moving forward, when you hear ``franchise,'' I hope you
    think about our franchisees, about Kati, who spent decades
    perfecting her craft and through franchising came to her own
    business, and now she is passing along that success to others.
        That is what the franchise model does. It lets people who
    wouldn't otherwise start a business from scratch become
    entrepreneurs in their own communities. It lets people achieve
    the American Dream of business ownership. And those American
    Dreams are worth protecting.
        This Committee has the rare opportunity to protect my
    business and the businesses of fellow witnesses today. Congress
    can pass the bipartisan American Franchise Act to protect the
    franchise business model for the next generation of new
    entrepreneurs.
        This is perhaps the most important thing Congress can do
    for 830,000 franchise businesses in the United States and their
    nine million employees that are the fabric of neighborhoods
    across America.
        Mr. Chairman, I am proud to be here today, proud to
    represent this business model, and proud to work alongside
    organizations like IFA that fight every day for the small
    business owners who make franchising what it is.
        Thank you again for the invitation. It really is the honor
    of a lifetime to be with you all today.
        Chairman WILLIAMS. Thank you very much.
        I now recognize Ms. Patel for her 5-minute opening remarks.

                        STATEMENT OF TINA PATEL

        Ms. PATEL. Good afternoon, Chairman and Ranking Member and
    distinguished Members of the Committee. Thank you for your
    invitation to testify today on the importance of the franchise
    business model and the entrepreneurial opportunity it creates
    for small business owners in America.
        This is especially timely as you can consider policies that
    will impact small business owners who fuel this nation's
    economy.
        My name is Tina Patel. I am the co-principal and chief
    financial officer of Promise Hotels, a hotel development and
    management company based in Tulsa, Oklahoma.
        I am honored to be here on behalf of the American Hotel and
    Lodging Association, the national voice of the lodging
    industry. AHLA represents thousands of hotel owners,
    franchisees, iconic global brands, property managers, and all
    parts of the hotel ecosystem.
        I am a proud first-generation American small business owner
    and hotelier from eastern Oklahoma. We own and operate seven
    hotels representing 713 guest rooms and employing more than 165
    associates.
        Throughout the decades, we had been franchisees of several
    leading hotel companies and operated properties under
    nationally trusted brands, including Best Western, Choice
    Hotels, IHG, Hyatt, Hilton, and Wyndham.
        In 1979, my family and I immigrated to the United States
    from England seeking better opportunities. We found the
    American Dream in Sedalia, Missouri.
        For 15 years the small roadside motel my parents owned was
    our business, and as a family we did every job. We were the
    front desk clerks, the housekeepers, maintenance, and
    accountants. We did everything we needed to do to make our
    business work.
        In 1997, my husband Pete and I began our life together by
    operating a 54-room Best Western hotel in Sand Springs,
    Oklahoma. This partnership with a national trusted brand gave
    us the confidence to launch our first adventure.
        We lived inside this hotel and operated it 24 hours a day,
    7 days a week. We determined that hotel franchising provided
    the most viable path for long-term success, allowing us to
    build a future for our two sons, Jaden and Talen.
        For thousands of hoteliers and millions of other
    entrepreneurs like me, franchising is the most accessible
    pathway to building a business. In the lodging sector alone,
    franchise hotels support more than 2.8 million jobs, account
    for nearly 60 percent all U.S. hotels, and generate nearly a
    hundred billion in economic impact annually.
        The franchise model has provided the foundation to expand
    our business across different brands, support hundreds of
    careers, and reinvest into our communities. A predictable and
    pro-growth federal tax environment is a central pillar of
    economic stability for the hotel and lodging sector.
        I want to thank you for passing the Working Families Tax
    Cuts Act last year. This legislation prevented a massive tax
    hike on small businesses like mine.
        A key provision for my company was the reauthorized
    Opportunity Zone program, which allowed us to develop a hotel
    in Tulsa's historic Greenwood District that now employs over 30
    staff members.
        On behalf of America's lodging industry, I recommend three
    key actions Congress can take to support small business.
        First, pass the bipartisan American Franchise Act which was
    introduced by my hometown Congressman Kevin Hern.
        Franchisees like me need a permanent, commonsense joint
    employer definition. For decades, this rule has shifted with
    each administration, creating significant risk and uncertainty.
        I want to ask you to pass the American Franchise Act so
    owners can focus on running their business operations with
    confidence no matter which administration is in office.
        Second, increase access to capital. I have seen firsthand
    how critical SBA financing is to starting a business. Today,
    capital has been increasingly expensive, stifling new
    development and reinvestment.
        I call on Congress to raise the 7(a) and 504 SBA loan
    limits. This will enable more entrepreneurs to grow their
    businesses, support job creation, and drive tourism and
    economic activity in the communities we live in.
        Finally, continue to incentivize entrepreneurship. As
    outlined in the Working Families Tax Cut Act, we must ensure
    more Americans can create small businesses, employ our
    neighbors, and create jobs in our communities to keep them
    thriving.
        Chairman, Ranking Member, and Members of the Committee,
    thank you for your leadership and the opportunity to share my
    story. I am proud to represent the hotel owners who share this
    American Dream, and I look forward to working with you to
    expand entrepreneurship, strengthen access to capital, and
    support the continued growth of small businesses nationwide.
        Thank you.
        Chairman WILLIAMS. I now recognize Mr. Troutman for his 5-
    minute opening remarks.

                     STATEMENT OF CLEMENT TROUTMAN

        Mr. TROUTMAN. Thank you, Chairman Williams, Ranking Member
    Velazquez, and distinguished Members of the Committee. Thank
    you for asking me to appear today. It is so good to meet all of
    you, including my fellow witnesses.
        My name is Clement Troutman, and I am a franchise owner,
    along with my wife Jackie who is here with me today. I have two
    Tropical Smoothie Cafe locations in Capitol Heights and Bowie,
    Maryland. Later this year, I am also opening a PJ's Coffee of
    New Orleans location. So, we are a growing Maryland business.
        I am a true franchise business owner. I am here today on
    behalf of the International Franchise Association. And next
    month, I will be pleased to be joining IFA's board of
    directors.
        I stand before you today as a man defined by service. But
    my journey began long before I donned a uniform or opened a
    storefront. I come from humble beginnings rooted in the belief
    that demanding work is the only currency that never devalues.
        My story includes service in the United States Navy for 23
    years where I learned that leadership is not about rank; it is
    about the person standing to your left and to the right.
        Today, I am deeply humbled to be here. To go from the deck
    of a ship to testifying before the leaders of our nation is a
    testament to the American Dream; a dream I now live every day
    as a small business owner.
        Just as my life has been about service and small business,
    I am grateful to each Member of this Committee for your service
    and for your support of small business.
        After my Naval career and years as a defense contractor
    supporting our warfighters, I thought I had fulfilled my
    mission. But in 2015, a simple research project by my daughter,
    Jocelyn, then a student at Howard University, reignited a fire
    in me that I did not know was still burning.
        I remember that first game change, that lunch at a Tropical
    Smoothie Cafe. As a Baby Boomer, the smoothie industry was a
    new industry to me. However, shortly thereafter, I was
    returning from a meeting and was asked by a colleague as to
    whether I had ever been to a Tropical Smoothie Cafe. My answer
    was no; I was not familiar with it. Yet, we stopped. It was not
    the food. I saw the spirit of the enterprise and team. I just
    really wanted to lead.
        Despite just having zero background in food service, my
    wife Jackie and I took a leap of faith. We did not just open a
    business; we opened a family legacy.
        Franchising is not a model for big corporations, it is a
    model for veterans like me, and people like Angie, Tina, and
    Rico. Especially for veterans like me, franchising is a
    mission.
        My first hire at my Tropical Smoothie Cafe was my daughter
    after she graduated from Howard University. Today, we are a
    nine-year family business. We have employed eighty people
    across two locations in Maryland.
        These are not just staff. We are a team. And they are
    tomorrow's leaders.
        As a local franchise owner, I have had the unique
    opportunity to partner with Mission of Love Charities as well,
    which I sit on the board of directors of, to provide services
    like food and support items to the community of Capitol Heights
    and the surrounding area.
        It is no surprise that veterans possess a leadership
    toolkit, emotional intelligence, and resilience forged in the
    heat of service. We do not just want to make a profit; we want
    to make a difference.
        I am here to ask you to protect this engine of upward
    mobility. And I am grateful for the tax law that provides
    critical tax refunds that allow small business to have enough
    capital to invest in our employees and to grow, like a new PJ's
    Coffee location, so a family-run business like mine can create
    more possibilities for our people.
        We are grateful for the certainty on taxes. Now franchise
    small businesses are asking for business model security as
    well.
        My message to you is this: Thank you for highlighting the
    contributions of the franchise community today. And will you
    please pass the bipartisan American Franchise Act to protect
    the franchise business model for the next generation of small
    business owners?
        Thank you, Mr. Chairman and all the Members of the
    Committee who already cosponsored the AFA, including our very
    own from Maryland, Congressman Johnny O.
        I hope all Members of the House Small Business Committee
    can support franchises, small businesses, and cosponsor the
    AFA. It is the best chance for a bipartisan win for small
    businesses.
        Mr. Chairman, thank you for allowing a veteran from humble
    roots to share his story. Franchising gave me a second chance
    to serve, to lead, and to build something that will outlast me.
    Please help us protect that dream for the millions of Americans
    who wake up every day ready to work for it.
        I look forward to your questions.
        Chairman WILLIAMS. I now recognize Mr. Macaraeg for his 5-
    minute opening remarks.

                       STATEMENT OF RICO MACARAEG

        Mr. MACARAEG. Chairman Williams, Ranking Member Velazquez,
    and distinguished Members of the Committee, including New
    Jersey's own Congresswoman McIver, thank you for the
    opportunity to testify before you today.
        My name is Rico Macaraeg. I am a veteran, a franchise
    owner, and a small business operator with the distinguished
    pleasure of operating StriveWell, both SweatHouz and Strong
    Pilates franchise brands.
        I am here to speak to you about how franchising can be a
    powerful pathway to entrepreneurship and how the systems
    surrounding it are creating unnecessary barriers.
        I believe context matters. We all have origin stories and
    mine helps explain why this work matters so deeply to me.
        Not dissimilar to my fellow panel members, I grew up poor.
    My mother was a superwoman, single mother, raising three
    rambunctious boys, working three jobs just to make ends meet.
    My father was an immigrant from the Philippines who later
    became an American citizen and worked at our local shipyard for
    the Department of the Navy for 30 honorable years. There was no
    generational wealth, there was no safety net, only hard work
    and resilience.
        I served honorably in the United States Navy for 8 years,
    from 2003 until 2011, with deployments across the Middle East,
    South America, Africa, and Europe. When I left, I transitioned
    directly into the workforce with no clear plan, just grit and
    strong military work ethic.
        At the same time, I studied nights and weekends full-time,
    earning my bachelor's degree from National University and going
    on to earn my MBA from Georgetown University's McDonough School
    of Business.
        I have had the honor of holding senior corporate leadership
    roles at Lamborghini North America and Lord & Taylor.
        By many measures, I had a very successful corporate career.
        My co-founder and husband, Steven, also chose a path of
    service. He served our nation as a Peace Corps volunteer in
    Morocco for nearly 3 years, working directly with local
    communities and women to help build small businesses from the
    products it created.
        Service to our country and others has always been part of
    our DNA. Together, we wanted to build an organization that
    would create jobs, support healthier lives, and ultimately
    provide the foundation for a lasting family legacy. And that is
    why we chose franchising.
        Franchising often presents a structured and supported entry
    into entrepreneurship, particularly for veterans and mission-
    driven founders, one that allows local owners, like myself and
    others here, to succeed with the backing of national brands.
    And in many ways, it works.
        But what is often overlooked is how shifts in the
    macroeconomic environment and policy decisions that are
    happening today impact us as local franchisees and business
    owners.
        First, tariffs.
        Tariffs matter because they directly affect the cost of
    building and equipping our businesses, long before a single
    dollar of revenue is ever earned. Most fixtures and furniture
    come from overseas.
        As a result, I personally have seen cost increases of 25 to
    50 percent in the cost of our equipment in the last six months.
        Our most recent project, I received a $30,000 tariff bill
    three months after our studio had opened. That cost was never
    forecasted and could have never been planned or anticipated
    for.
        For a newly open small business, that kind of surprise
    immediately drains our working capital, and it forces us to
    charge prices higher to the consumer.
        Second, economic instability and inflation.
        For small business owners, predictability is essential.
    When costs change rapidly, it becomes extremely difficult to
    budget, hire, and grow responsibly.
        Earlier this year, we opened our second location, and
    within six months of the other one that we had previously
    opened, our costs had increased 25 percent, just for the cost
    of material.
        Those increases reduce our capital available for staffing,
    training, marketing, and employee benefits. We as local
    business owners end up absorbing these costs.
        The franchise disclosure documents.
        For first-time entrepreneurs, the FDD is often treated as a
    trusted and reliable source of information, but in reality, it
    is not meaningfully regulated. Franchisors get to choose what
    financial data and how they decide to present information in
    the financial disclosure documents.
        When we purchased our first franchise in 2024, we were
    shown financial data that did not reflect subsequent material
    changes to design, operations, or costs. While those costs are
    important, we were not able to forecast those changes.
        Veteran access to capital.
        Veterans are encouraged to become entrepreneurs. Yet, there
    is no meaningful capital product through the VA to support this
    transition. The VA offers education and housing benefits, but
    they do not offer products that help us fund these businesses.
        Starting a business has been our dream, but economic
    instability, rising costs, lack of transparency, and the lack
    of capital have made that journey harder for us than ever
    possible.
        Franchising can be a pathway to entrepreneurship, but only
    if policy keeps pace with the realities faced by local owners.
    This is not a partisan issue, it is about preserving our
    entrepreneurial experience.
        Chairman WILLIAMS. The gentleman's time is up.
        Mr. MACARAEG. Thank you so much. And I look forward to your
    questions. Appreciate it.
        Chairman WILLIAMS. We will now move to Member questions
    under the 5-minute rule that we talked about. I now recognize
    myself for 5 minutes.
        Mr. Troutman, before you opened your first Tropical
    Smoothie, you had an entirely different career in the Navy, as
    you have talked about--and we thank you for that--and later as
    a cybersecurity defense contractor. I recently learned that
    veterans account for about 14 percent of all franchise owners
    today.
        So could you share with us some lessons from your military
    experience that have helped shape your approach to running a
    successful franchise?
        Mr. TROUTMAN. Mr. Chairman, wow. Yes.
        So, transitioning from the Navy through contracting into
    franchising was a--skills we learned in the military were
    directly relatable to being in a franchise business.
        Standard operating procedures, which are common, of course,
    in the military, have structured approaches to doing things and
    getting things done, training, organizational formats align
    directly with franchising, if you will. It allowed us to have a
    blueprint, if you will, on how to do it.
        I had no experience, obviously, of Tropical Smoothie or
    food, but there was a template. And even when I did the
    application, I said no to all the things you asked me about as
    far as food service. But I did check that I could serve, and I
    can follow orders, and we can follow guidelines and templates
    and systems, and that is what we did.
        Chairman WILLIAMS. Well, let me ask you this. What aspects
    of the franchise business model make it particularly well-
    suited for veterans to succeed? You have touched a little bit
    on that.
        Mr. TROUTMAN. What aspect of the franchise? One more time.
        Chairman WILLIAMS. What aspects of the franchise business
    model make it particularly well-suited for veterans like
    yourself to succeed?
        Mr. TROUTMAN. What aspects of it? Building teams.
        Chairman WILLIAMS. Yeah.
        Mr. TROUTMAN. Building teams and empowering others. Those
    are the aspects of the business----
        Chairman WILLIAMS. All right.
        Ms. Patel, I am a current sponsor of the bipartisan
    American Franchise Act led by Congressman Hern, which we have
    talked about, in your district. This bill would provide
    permanent clarity to the joint employer standard for
    franchisors and franchisees alike.
        What would a clear, predictable, and permanent joint
    employer standard mean not only for your business, but for the
    franchise model as a whole?
        Ms. PATEL. Thank you, Mr. Chairman.
        It would provide us clarity and certainty.
        As a small business owner, I need to have certainty for my
    long-term planning, for my business, my staff, and my
    customers. And the back-and-forth in each administration on
    this rule makes it hard for a small business owner like me to
    project and plan for the future and long-term planning. So we
    need to codify this rule.
        Chairman WILLIAMS. Ms. Katsanevas, can you tell us how
    important franchising is to the community's small business that
    you serve?
        Ms. KATSANEVAS. Yes, Shawn and myself have been able to
    provide opportunity and employ people in our community.
        Also, growing people within our teams that have been loyal
    to us and had the skill set to become a salon owner. And we
    were able to provide them the blueprint to do that.
        And it could stay within our family and grow within the
    company. We were able to set them up for success by passing
    along our years of discoveries, failures. We took all the hits
    to get to where we needed to be today to offer them a salon
    that was set up for success.
        But we employ several people in Salt Lake City and also
    outside of our network in Ohio and Boise, and we are growing
    organically and continuing to add people to our team.
        Chairman WILLIAMS. Okay. Thank you for that.
        I now recognize the Ranking Member for 5 minutes of
    questions.
        Ms. VELAZQUEZ. Thank you, Mr. Chairman.
        Mr. Macaraeg, over the past year the President has
    instituted broad tariffs on every other country, sometimes
    fluctuating from day to day.
        How has the constant uncertainty of these tariffs affected
    your ability to navigate the business environment and how has
    it impacted your profits?
        Mr. MACARAEG. Thank you for the question.
        As Ms. Patel said and my other panelists, we rely on
    certainty in our business. And, more specifically, during one
    of our projects, the administration was going through the
    variety of trade and tariff ups and downs, as we call them, and
    it provided a lot of uncertainty about the cost that it was
    going to impact us in opening our studios.
        As I mentioned in my statement, we did end up getting a
    $30,000 tariff bill three months after opening that I could
    have not planned for. And, ultimately, that takes working
    capital. And that is capital that we had planned for maybe
    growing a new location, to hire 20 more people, or bringing
    healthcare to our employees for that quarter.
        So it makes it hard because we do need certainty, we need
    stability.
        Ms. VELAZQUEZ. Thank you.
        Ms. Patel, hotel owners often rely on importing for much of
    the furniture they use in hotels. How would recently proposed
    Section 232 tariffs on upholstered furniture, kitchen cabinets,
    and vanities impact hotel owners?
        Ms. PATEL. Thank you, Ranking Member, for that question.
        I can only speak to my business, and from my experience
    with my hotels in Oklahoma.
        Our industry hasn't actually fully recovered from the
    pandemic levels, and costs have been rising over the past 5
    years, and revenues have not kept in pace. And so we continue
    to see stark shrinking margins. So we have seen it happen since
    5 years back.
        Thank you.
        Ms. VELAZQUEZ. Thank you.
        Mr. Macaraeg, last year my Republican colleagues passed a
    large tax cut for businesses while refusing to extend tax
    credits for health insurance. Has their refusal to extend these
    credits impacted your business or employees?
        Mr. MACARAEG. Thank you for the question.
        Yes, it has, and this is as simple as the difference
    between a P&L and cash flow.
        P&L offers you a look at the business from a holistic view,
    and a tax credit, while as beautiful as it is, if we don't make
    it to the end of the year to enjoy that tax credit benefit,
    then we don't have a business to operate.
        And so when the government, whether it is local, state, or
    federal, provides these subsidies to us that allow us to offer
    healthcare or allows us employees to have affordable
    healthcare, they enjoy those benefits, and we can make it to
    the end of the year.
        Ms. VELAZQUEZ. How will that affect the skyrocketing cost,
    for example, for health insurance, and has that impacted your
    ability to recruit and retain high-quality staff?
        Mr. MACARAEG. Yeah, it does make it challenging. We are
    currently still in early stages of our organization. We have
    opened three locations in nine months, and we are currently
    opening two more in the next six months.
        So we are growing very fast. But it makes it very
    challenging for us to offer healthcare, because we can't afford
    healthcare as a small business to offer to our employees.
        We did offer a stipend to our leadership and to employees
    as part of their benefits package. And, unfortunately, as of
    January, those colleagues that we offered the stipend to came
    to us and said the stipend they are offering today isn't making
    a meaningful impact and I actually can't afford the healthcare.
        And so we have had employees that have come to us since
    January and have said they are no longer on a healthcare plan.
    And the stipend that we can afford doesn't make an impact for
    them.
        Ms. VELAZQUEZ. I would like to ask you a question related
    to FTC regulating presale disclosure of franchise-related
    documents to potential franchisees.
        How could the franchise disclosure document be improved to
    level the playing field for entrepreneurs?
        Mr. MACARAEG. Great question.
        The franchise disclosure document is an important document,
    but it is very complicated. As a military veteran, E-5 coming
    out of the military with no college legal background, and I am
    handed a hundred-page document and said to understand and
    interpret it, it is very difficult. There is no legalese--it is
    all full of legalese, excuse me--and it is not consistent
    across the board.
        Ms. VELAZQUEZ. Thank you.
        Mr. Chairman, I yield back.
        Chairman WILLIAMS. The gentlelady yields back.
        I now recognize Mr. Meuser from the great State of
    Pennsylvania for 5 minutes.
        Mr. MEUSER. Well, thank you, Mr. Chairman.
        Thank you very much to all of our witnesses. Thanks for
    making the trip in. We hope we get you out of here before the
    snow hits.
        And congratulations. It is really a pleasure to hear your
    stories and your successes. It is wonderful to have you here.
    We want to learn as much as we can and learn also how to help
    you from a federal standpoint as much as possible.
        So of course we passed the Big Beautiful Bill, as it was
    known, as well as the Tax Cuts for Working Families, and in it
    were several tax relief measures for small businesses. Of
    course, 199A, bonus depreciation, R&D tax credit. Some will say
    it is as much as 30 percent tax increase would have occurred
    were it not for the Republicans voting this long-term and
    permanent tax reduction into effect.
        So would you mind--is it okay if I call you Ms. Angie K?
        [Laughter.]
        Ms. KATSANEVAS. Yes.
        Mr. MEUSER. All right. Thanks. You said all of America
    does, so I want to be part of all America.
        Ms. KATSANEVAS. Join the club.
        Mr. MEUSER. Can you tell us a little bit, tell us how the
    federal taxes, and anything else you want to speak about, the
    regulations that we are minimizing?
        Healthcare certainly came up. We are all working on that.
    We really didn't want to double down on what I consider to be a
    failed system because over the last 4 years your healthcare
    prices were going up. We just don't want to say, ``Hey, let's
    extend that because it is working wonderfully,'' because it is
    not. So we are trying to set up a more improved program.
        But that, as well as anything else you might want to say
    that you think, if you were sitting in our seat, you would be
    working on for small businesses and franchises.
        Ms. KATSANEVAS. Yes. Thank you for the question,
    Congressman.
        Chairman WILLIAMS. Microphone.
        Ms. KATSANEVAS. Oh. Excuse me. There we go.
        Thank you for the question, Congressman.
        We are appreciative of the bonuses depreciation provisions.
    In the salon business we require special equipment.
        A perfect example for us is our high-end ventilation
    system, salon seating. Under a hundred percent bonus
    depreciation, a franchise can modernize the entire space with
    12 stations a year. Without them, they may only be able to
    replace three stations at a time over 4 years.
        This immediate write-off has allowed several of our owners
    to upgrade their space and salons years ahead of schedule which
    improves the client experiences and grows their revenue
    immediately.
        It has been great for us to be able to reinvest in this
    space, in technology, in equipment, and take that money and
    reinvest it back in hiring new employees and reinvesting it in
    our existing team members to offer benefits.
        Mr. MEUSER. Good. Well, you sound enthused, and you sound
    optimistic. You looking forward to a strong 2026?
        Ms. KATSANEVAS. Yes, we are ready. We are doing great. And
    this is just continued support. So thank you.
        Mr. MEUSER. That is great.
        And, also, while I have you, the American Franchise Act, of
    course I am a cosponsor for, how will this piece of legislation
    support your franchise?
        Ms. KATSANEVAS. Well, just continued. No tax on tips has
    been a big part of our stylists' take-home pay. More money in
    their pockets to support them and all their hard work. And,
    again, just it is the continued health of the business.
        Mr. MEUSER. That is great. Your employees appreciate the no
    tax on tips?
        Ms. KATSANEVAS. Yes.
        Mr. MEUSER. That is really, really nice to hear. Thanks.
        Ms. Patel, some of the same questions. Why don't you just
    offer us what is working for you, what isn't, and maybe speak
    on the American Franchise Act, which I think we are all
    supporters of and we want to see get passed through on the
    House floor and have the President sign. So why don't you go
    ahead?
        Ms. PATEL. Thank you, Congressman.
        From the Working Families Tax Cut Act, it was beneficial
    for our business. We have a unique model in the franchise
    system where we actually own the real estate, we own the
    building.
        And so when we are able to deduct and bring more capital
    into--or leave more capital into our business--we can reinvest
    it back into our properties. I am sure everyone loves a fresh,
    clean, updated hotel room with a flat-screen TV and great WiFi.
        It helps us reinvest into our employees with training, and
    things like that.
        One specific thing that really our company was able to take
    advantage of--not advantage, but was able to use the
    Opportunity Zone program lease authorization.
        We were able to build one of our hotels in an underserved
    community of the Greenwood District in Tulsa, a historic
    district, and were able to build a $16 million hotel with 116
    rooms that provided 30 jobs and is still doing great, continues
    to serve that company. And we helped revitalize that area. So I
    am really proud of that one.
        Again, on the American Franchise Act, it gives clarity,
    like we have all said here. As a franchise owner, our biggest
    risk is the unknown. And we have plenty to do as small business
    owners that----
        Mr. MEUSER. Ms. Patel, I am out of time.
        Ms. PATEL. Oh.
        Mr. MEUSER. When I come and visit Representative Hern, I am
    going to stay in one your hotels.
        Ms. PATEL. Yes, please.
        Mr. MEUSER. See you then.
        And, Mr. Troutman and Mr. Macaraeg, 5 minutes goes fast. My
    apologies I didn't get to you. But thanks for being here.
        I yield back, Mr. Chairman.
        Chairman WILLIAMS. The gentleman yields back.
        I now recognize Mr. McGarvey from the great State of
    Kentucky for 5 minutes.
        Mr. MCGARVEY. Thank you, Mr. Chairman.
        I appreciate you all for being here today.
        Of course, I saw that we were going to be talking about
    franchises. And as a Kentuckian, when you hear something about
    franchisees, you immediately think of the Colonel.
        Colonel Sanders is not just from Kentucky. He is actually
    buried in a beautiful cemetery about 10 minutes down the road
    from where I live in Louisville, Kentucky.
        And of course you think about the Colonel because you think
    what is possible, that somebody from Kentucky can start
    something that then goes across the entire world.
        KFC is iconic. Thirty thousand restaurants worldwide. More
    than 150 countries and territories have a KFC in them. In fact,
    people used to ask me, like, when I first got elected, they
    said, ``So have you learned anything cool since you have been
    elected?'' I said, ``Oh, yeah. If you are a Congressman from
    Kentucky, they tell you the 11 original herbs and spices.''
        [Laughter.]
        Mr. MCGARVEY. That is not true. Those are under lock and
    key. But you know what? People know what the 11 original herbs
    and spices are. They use them in Bangladesh and Brazil and so
    many other places. KFC is eaten by Japanese families on
    Christmas Day. And, of course, it is so important for us in
    Louisville.
        And so we are talking about this and we are talking about
    rules and regulations, which no doubt are important. But I want
    to zoom out for a second, too, because franchising and the
    franchise model is so important in places like Louisville,
    Kentucky.
        I worry about the environment that the President and this
    administration are creating right now for our small business
    owners. Whenever I am around talking to small business owners,
    the number one complaint I hear about right now is tariffs.
        So we can talk about some of these rules and regulations,
    but when we are talking about the macro environment that is
    really hurting small businesses, the way this President uses
    tariffs, the way he threatens our military against our most
    loyal allies when we have franchises that are expanding across
    the world, even Canadians, we are seeing how they have stopped
    drinking bourbon.
        When is fried chicken going to be next in some of these
    countries? And that may sound a little ridiculous, but I don't
    think it is farfetched. If you watched his performance in Davos
    yesterday, you know he has lost the plot.
        So this is tough. Everything from higher costs in uniforms,
    ingredients, packaging, equipment. Our small business owners,
    our franchisees who are already operating on the thinnest of
    margins.
        Everything is getting more expensive. And now consumers are
    seeing those expenses, too, in everything from healthcare to
    utilities to rent, and it is impacting our businesses.
        So, Mr. Troutman, I will start with you. Earlier this year
    the CEO of your company, of Tropical Smoothie Cafe, issued a
    statement on the tariffs. You must have had some exposure to
    these tariffs because they are being placed on things like
    coffee, tea, and tropical fruits, other products that we cannot
    produce here in the United States. They are impacting our
    businesses.
        Can you tell us a little bit how tariffs have impacted your
    business right now?
        Mr. TROUTMAN. We are seeing increases in pricing. That is
    occurring. But we are doing what we need to do in this
    environment.
        Mr. MCGARVEY. Are those prices that you are seeing
    increased on your ingredients or supplies, how are you
    absorbing those? Or are you having to pass them along to the
    customers?
        Mr. TROUTMAN. Some we absorb. Some we pass. We do our best
    to keep things affordable for the customer, obviously, to
    absorb some of that if we can, where we can.
        Mr. MCGARVEY. But it is tough because you operate on thin
    margins. And, again, Mr. Macaraeg said this. We are talking
    about if we make it to the end of the year.
        I mean, this is a very tough environment, and it is created
    by policies coming out of this administration, I think, quite
    frankly, are going into effect without any thought or strategy
    or certainly input from the businesses and the customers that
    they impact.
        Mr. Macaraeg, I will go with you.
        When we talk about a franchise agreement, and you sign it,
    it explains the restrictions that franchisors may place an
    franchisees--for example, what you must buy, where you must buy
    it, what you can sell, and where and how you sell it.
        Can you explain how this lack of flexibility leaves a small
    franchise owner hit harder by tariffs, especially tariffs that
    are implemented as haphazardly as these are?
        Mr. MACARAEG. Yes. So we enjoy the framework of a
    franchise. That is why we buy in the business. It is a business
    in a box.
        But when a franchisor requires us to buy certain equipment
    that is only manufactured out of the continental United States,
    we are held at the whim of those tariffs and the dollars that
    are coming attached to those items.
        We work in collaboration with franchisors to come up with
    alternate product sourcing, hopefully made in the United States
    of America. But it is a domino effect. With the healthcare
    situation the way that it is and our economy the way that it
    is, they can't afford to pay earning wages for somebody to
    build some of the equipment that is required for our
    businesses.
        Mr. MCGARVEY. Thank you.
        And, Mr. Chairman, before I yield back, I just want to say
    this hearing is important, but let's not lose the forest for
    the trees. We are talking about what is really hurting our
    small businesses--these tariffs with these rising prices. And
    it is something this Committee can do something about.
        I yield back.
        Chairman WILLIAMS. The gentleman yields back.
        I now recognize Ms. Van Duyne from the great State of Texas
    for 5 minutes.
        Ms. VAN DUYNE. Thank you very much, Mr. Chairman.
        Let's get back to why we are here, our great witnesses here
    who are franchise owners.
        Franchising is the most and the strongest pathway to
    entrepreneurship in our economy. It is built upon the principle
    of local ownership.
        According to the International Franchise Association, more
    than 85 percent of franchisees live and work in the communities
    that they serve, and 64 percent are first-time business owners.
        These are not large corporations. These are local
    entrepreneurs who took a risk to build something on their own.
        Local ownership serves local communities, and it keeps
    jobs, investment, and charitable giving rooted close to home.
    In fact, more than 80 percent of franchisees give to local
    charities.
        I know, Ms. Angie K, we talked about it last night.
        And these franchises collectively contribute millions of
    volunteer hours each and every year.
        Franchising also creates high-quality jobs. The IFA's
    ``Value of Franchising'' report shows that franchise employees
    experience faster wage growth, more generous benefits, and
    higher retention rates than employees of non-franchise
    businesses.
        This model works because it lowers barriers to entry. It
    offers entrepreneurs a proven system. It establishes branding
    and ongoing support, making ownership more accessible for all.
        As I meet with small business owners, including
    franchisees, I continue to hear concerns about regulatory
    uncertainty, particularly when it comes to the joint employer
    rule.
        When Washington blurs the lines between franchisors and
    franchisees, it creates confusion, it discourages growth, and
    it makes it harder for local owners to be able to succeed.
        And that is why earlier this year I joined my colleagues,
    led by Representatives Hern and Davis, in introducing the
    bipartisan American Franchise Act. This legislation clarifies
    joint employer standards under federal law, preserving
    longstanding precedent, and it provides the certainty
    franchisors and franchisees need to invest, hire, and grow.
        I appreciate you commenting on that, Ms. Patel.
        It ensures fairness while recognizing that franchisees are
    independent small business owners. With more than 800,000
    franchises operating across the country, the stakes are high.
        The American Franchise Act helps ensure that the franchise
    model remains strong, competitive, and fair, so that more
    Americans can achieve their dream of business ownership and
    continue strengthening their local communities.
        Ms. Angie K, in your testimony you describe how franchising
    allows stylists to move from employees to become independent
    business owners.
        What is it about the franchise model that makes that sort
    of upward mobility and the American Dream more accessible.
        Ms. KATSANEVAS. Well, thank you for the question,
    Congresswoman.
        You said it earlier, that we have--it is a tried and true
    model. And our team is set up for success. Our team, the
    majority of them start with us and grow with us. And we have a
    very strong career path that is focused and gives them the
    opportunity to grow and stay with the company, stay within the
    family, and they are set up for success.
        So it gives them the opportunity also to have a path
    forward to ownership and to becoming an entrepreneur rather
    than staying stagnant over time. And so we offer that growth
    and a successful business plan for them.
        Ms. VAN DUYNE. What is it about being a small owner that
    makes you want to give back to your community? Can you just
    show some of the ways in which you have been able to do that?
        Ms. KATSANEVAS. Yes. We have been involved in several
    causes in our community. We are deeply embedded in our
    community. We employ hundreds of stylists in our business. And
    through that, we are giving back.
        The majority of our guests are local guests that are
    neighbors, friends. And the name on our door represents our
    family. And that is important to us, that the service that we
    provide and giving back to our community is a representation of
    our family.
        So for us it is just--our goal is to have a strong,
    successful business model and continue to grow however we can
    to give back to causes and support everyone in our community.
        Our community supports us. It is about the relationships.
    And we want to continue to support them in return.
        Ms. VAN DUYNE. Thank you very much.
        Mr. Troutman, in your testimony you noted the joint
    employer standard has changed multiple times over the last
    decade. How does that kind of regulatory whiplash affect the
    franchisor and franchisee relationship?
        Mr. TROUTMAN. Yes. The whiplash effect is significant. When
    it is broadly scaled, if you will, expanded, then attorneys,
    they tell the franchisor to hold back from helping out to
    provide necessary support to the franchisee that we may need in
    training, things like that.
        But by the same token, the whiplash also can be encountered
    from the other side as well, whereby if the franchisor is too
    involved in the business, if they get too involved, then it
    gets in the way of what, as an independent business owner, me
    making decisions, if you will, for my business. So, it is like
    a two-edged sword.
        Ms. VAN DUYNE. Thank you very much.
        I yield back.
        Chairman WILLIAMS. The gentlelady 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 our great witnesses for being here today
    to hold this incredible hearing.
        Ms. Katsanevas, thank you so much for being here today, the
    very first Real Housewife to testify before Congress.
        Ms. KATSANEVAS. Thank you, Congresswoman. It is an honor.
        Ms. SCHOLTEN. Thank you. Thank you for being here.
        As you said in your testimony, before you were on TV, you
    were a humble small business owner. You have taken a small
    business to an incredible system of businesses that support so
    many through the powerful franchise model.
        Now, the franchise system, especially the rules around
    them, can be incredibly confusing, more confusing even than
    Lisa Barlow trying to explain how she knows Ben Affleck. But,
    Ms. Katsanevas----
        [Laughter.]
        Ms. KATSANEVAS. And that is confusing.
        Ms. SCHOLTEN. And that is very confusing.
        You, however, help to break down for your franchisees so
    that they can be successful in their model.
        What steps do you take as a franchisor to support your
    franchisees in their development?
        Ms. KATSANEVAS. Thank you for the question Congresswoman.
        It is our job to support our team. They are not singular,
    they are not alone in this process. We do it together. They are
    not in business by themselves, but they are in business teamed
    up with us at Lunatic Fringe. And we have created a sustainable
    business model. And we are fully in support along every step of
    the way with all of our franchisees.
        And, again, just to add to that, I believe that we have 26
    years of hard work behind us. And so we have really truly been
    able to set them up for success and do it as a team.
        Ms. SCHOLTEN. It is a real model for success.
        Ms. KATSANEVAS. Thank you.
        Ms. SCHOLTEN. Thanks for your work.
        Ms. Patel, I want to turn to you for one moment.
        In your testimony you talked about the American Franchise
    Act. We have been discussing it a lot here today. I am not only
    a proud cosponsor but a proud co-lead of that bill with Rep.
    Hern, and as a co-chair of the Franchising Caucus.
        I think it is really important to draw a distinction
    between this bill and other bills that purport to address the
    joint employer rule, such as the Save Local Business Act, which
    came before Congress--tried to come before Congress, excuse
    me--last week, which attempts to apply a much narrower joint
    employer standard to every business across the board, franchise
    or not.
        The franchise model is unique, and we need a bill that
    targets specific issues that face this industry. This is not a
    one-size-fits-all solution. Workers need protection within
    every business model, but not every business model is a
    franchise. This bill will bring clarity without decimating
    certain worker protection issues.
        With that said, Ms. Patel, can you please explain how your
    business has been impacted--I know you have answered this in a
    number of different iterations--but by specifically the
    shifting joint employer rule?
        Ms. PATEL. Sure. Thank you, Congresswoman.
        Again, we go back to certainty. Specific to my business, as
    we grew from one hotel to what we have now, our staff grew with
    us. And we were able to train them and give them upward
    mobility.
        I had some of my staff members that came to us and joined
    our company as housekeepers, and now they are the general
    manager of their own hotels.
        So not only does it give me certainty, it gives certainty
    to my staff that are growing with me as I continue to grow. It
    is a team effort.
        The number one asset is not my real estate, not the hotel,
    or the name on the building, it is the staff that work and live
    and breathe that property 24 hours a day, 7 days a week.
        So we need certainty. We need to know that I own the
    hotels, my staff have a position to play in those and want to
    grow with me. And we can't do any long-term planning, we can't
    figure out in 4 years what is going to happen to a small
    business. We need certainty, and that is paramount.
        Thank you.
        Ms. SCHOLTEN. I hear that as the number one issue when I
    speak to franchisors and franchisees in my district as well.
    The certainty is what allows you to continue to grow a business
    over 26 years and beyond.
        And the unique setup of a franchise model deserves its own
    rule, which is why I am so proud to champion the American
    Franchising Act.
        I have got just a few seconds. I would be remiss if I
    didn't also hit on tariffs.
        Mr. Macaraeg, we are going to come to you. You highlight in
    your testimony how tariffs have created these certain
    challenges.
        New research reported by The Wall Street Journal has found
    that foreign countries have absorbed only 4 percent of the
    burden brought on by tariffs, meaning Americans are responsible
    for the rest of the 96 percent.
        Can you explain briefly why franchises, in particular, are
    vulnerable to absorbing these tariff costs?
        Mr. MACARAEG. Yes. We are vulnerable because we have to
    decide to absorb the cost or pass it on to our customer. That
    is just it, point blank. No one else is carrying those dollars
    in between.
        Ms. SCHOLTEN. Yep, exactly. Thank you.
        Thank you, Mr. Chairman, I yield back.
        Chairman WILLIAMS. The gentlelady yields back.
        I now recognize Mr. LaLota from the local great State of
    New York for 5 minutes.
        Mr. LALOTA. Thank you, Chairman. Thank you for your
    leadership.
        Good afternoon.
        For years, federal labor law and executive orders have
    lacked a clear and consistent definition of when two entities
    are considered a joint employer. That ambiguity has created
    uncertainty around wages, working conditions, and liability,
    and it has been especially disruptive for franchise businesses.
        In franchising, local owners operate under a national
    brand, but they are small business owners who control the day-
    to-day employment decisions: hiring, pay, scheduling, and
    workplace conditions. When the law ignores that reality, it
    creates confusion for workers and small business owners alike.
        That is why several pro-labor Republicans and I opposed a
    bill last week that claimed to address the joint employer issue
    but did so by applying the one-size-fits-all standard to
    fundamentally different industries. It created franchisors, the
    same as prime contractors, on complex construction sites, even
    though contractors often exercise direct control over job site
    safety and wages while franchisors typically do not. That
    approach blurs critical distinctions and risks weakening worker
    protections where real control actually exists.
        Conversely, the American Franchise Act takes a better
    approach. It establishes a clear standard based on substantial,
    direct, and immediate control over essential employment terms,
    protecting workers where control is real while preserving the
    independence of independent local franchise owners. That is
    clarity, fairness, and accountability done right.
        Angie K, good to see you.
        Ms. KATSANEVAS. Good to see you.
        Mr. LALOTA. In addition to being a well-known TV star, you
    are in the franchise business?
        Ms. KATSANEVAS. Yes.
        Mr. LALOTA. Great. Given your experience in that business,
    who makes the day-to-day decisions about hiring, firing, wages,
    scheduling, and work conditions at your locations, the
    individual franchisee or the franchisor?
        Ms. KATSANEVAS. Thank you for the question, Congressman.
        The actual individual franchisee in their respective
    location.
        Mr. LALOTA. Great. Thank you.
        Ms. Patel, good to see you here today.
        Ms. PATEL. Thank you.
        Mr. LALOTA. You own and operate a hotel franchise, and you
    previously spoke about overseeing the construction at least at
    one site.
        Based upon that experience, wouldn't you agree that a prime
    contractor on a construction site who exercises direct control
    over at least the job safety at that site and often other labor
    conditions and paying compensation is fundamentally different
    from a franchisor who does not control the day-to-day
    activities in that franchise?
        Ms. PATEL. Thank you, Congressman.
        Unfortunately, I handle the finances, and so I am not as
    familiar on the development side of the day-to-day construction
    operations. But I am happy to have our AHLA reach out to you
    with additional information.
        Mr. LALOTA. I appreciate it.
        Ms. PATEL. Thank you.
        Mr. LALOTA. I was leading with the question. I know the
    answer. Typically, the prime contractor does, in fact, control
    a lot of the safety conditions, at least, and sometimes the
    compensation for the secondary or the subcontractor.
        Given that dynamic, don't you think that that reality
    prescribes that Congress has two different approaches, one to
    franchise, like things that are in the AFA, and one that are
    things on the construction sites?
        Ms. PATEL. Congressman, I am sorry, I am just not as
    familiar with that part of my business. Again, I can have AHLA
    reach out to you with all the additional information on the
    development side.
        Mr. LALOTA. I appreciate that.
        Ms. PATEL. Thank you.
        Mr. LALOTA. I will give the next question to my shipmate,
    Navy man, Mr. Troutman, over there.
        Thank you for your service.
        Mr. Chairman, you packed the seats today. I know we have a
    TV star in other places, but I think these two Navy men over
    here are the cause of a lot of folks that are here with us
    today.
        Mr. Troutman, you own and operate several Tropical Smoothie
    locations?
        Mr. TROUTMAN. Congressman, yes, sir.
        Mr. LALOTA. I have three daughters. We go to branches in
    New York all the time there. We love it.
        From a practical standpoint, sir, what happens to small
    franchise owners like yourself when fundamentally different
    situations, such as construction sites and smoothie shops, are
    lumped together under the same joint employer standard?
        Mr. TROUTMAN. So, what happens for us is that as business
    owners we are looking to run our businesses ourselves as far as
    construction sites.
        The franchisor is not involved in that aspect of it. They
    do assist us when it comes to helping us identify a location
    based on their resources. But at the end of the day, it is up
    to the franchisee as my business to make that happen.
        Mr. LALOTA. At your location, sir, the franchisee is the
    one who controls the pay, the hours, the work conditions, sir?
        Mr. TROUTMAN. Yes, sir. That is correct.
        Mr. LALOTA. Great.
        In closing, Mr. Chairman, the American Franchise Act takes
    a narrower approach than the bill that has been mentioned. It
    recognizes the joint employer status only when there is
    substantial, direct, and immediate control over employment
    decisions. I appreciate that.
        And I yield back.
        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, again, Chairman, and thank you to
    the Ranking Member, for convening this hearing.
        And also to Mr. Rico Macaraeg, thank you so much for being
    here.
        As I mentioned before, he is a successful franchise owner
    in my district.
        And I am thankful for you sharing your expertise today.
        Local franchise ownership has become an important pathway
    to entrepreneurship for many Americans who want to build a
    business but may not have the resources to start entirely from
    scratch.
        Franchising allows small business owners to operate
    independently in their communities while benefiting from
    established brands, operating systems, and customer trust.
        For many first-time entrepreneurs, that structure can make
    business ownership more attainable and sustainable.
        That role is especially important right now.
        Small business owners, including franchisees, truly have
    their work cut out for them as they fight to keep staff
    employed and make a profit. Costs of everything from critical
    business equipment to food are rising and profit margins are
    shrinking, a truly dangerous combination.
        While the national brands may have scale and leverage,
    local franchise owners still bear the day-to-day risks of
    payroll, rent, supply cost, and financing. They feel inflation
    immediately. They face the same labor shortages, and they
    observe higher healthcare and borrowing costs just like other
    small businesses.
        Congress has heard directly from small business owners
    across the country for over a year now that they need a federal
    government that understands how policies play out on the
    ground. We have heard from many in this Committee.
        Franchise owners, in particular, need assurance that their
    interests as independent small businesses are not overshadowed
    by large corporate actors within the same systems.
        Small business owners need a Congress that is focused on
    real-world conditions, not partisan priorities.
        With that, Mr. Macaraeg, I would love to talk more about
    how many small business owners are now facing higher healthcare
    costs after the Republican majority let the Affordable Care Act
    tax credits expire, forcing businesses to cut benefits, wages,
    and hiring.
        You talked a little bit about it already, but what impact
    has the expiration of the ACA tax credits had on your ability
    or the ability of franchise owners generally to offer
    affordable healthcare to employees?
        Mr. MACARAEG. Thank you for the question, Congresswoman.
        The transition and landscape of the healthcare has done a
    couple of things. One is we have seen colleagues at our
    organization have to go and seek a second job elsewhere for
    these larger corporations that provide healthcare, which is
    absolutely a great benefit for the larger corporations. But
    what it does is it makes it challenging for us as small
    business owners to employ these colleagues.
        The second thing that I have seen happen is it has put a
    strain on our colleagues in our organization where they have
    gone and taken second jobs to afford healthcare on the open
    market as a result of the rising costs of the healthcare
    system.
        Mrs. MCIVER. Thank you for that.
        Have you personally seen or experienced yourself a delay in
    hiring or reduced benefits or shift costs onto workers as a
    result?
        Mr. MACARAEG. Yes, we have. I have had several colleagues
    come to me within our organization that have expressed that
    they have had to leave us because they needed to go work at
    another company that provided healthcare benefits, one of the
    larger, again, multinational organizations.
        I had another colleague we offered a promotion to who was
    challenged at accepting this promotion because this individual
    was on Medicaid and she was scared that taking a W-2 role was
    going to jeopardize her healthcare that she desperately needed.
        And so those are just a couple of the challenges we have
    faced within our organization.
        Mrs. MCIVER. Yeah. I am happy you bring up that point
    because we hear those stories all the time about folks trying
    to protect the healthcare that they have and scared to lose it,
    or making a decision between healthcare and everything else. So
    thank you so much for sharing that.
        I want to pivot just a little bit really quickly about the
    rise in energy and utility costs.
        Can you talk a little bit how the rise in utility costs has
    affected your business?
        Mr. MACARAEG. Yes, and I will do a gentle nod to Governor
    Mikie Sherrill, State of New Jersey, to please help us there as
    well.
        Being that SweatHouz is a business in the infrared sauna
    space, we do consume a lot of electricity, and we have seen our
    energy costs within the State of New Jersey--I can only speak
    to that--have doubled. And it is unattainable.
        And, again, we as small business owners are forced with the
    dilemma do we absorb those costs or do we pass them on to our
    customer. There is no one else that I can hand them off to.
        Mrs. MCIVER. Thank you. Thank you so much for that.
        With that, Mr. Chairman, I yield back.
        Mr. LALOTA. [Presiding.] The gentlelady yields.
        I now recognize Mr. Downing from the great State of Montana
    for 5 minutes.
        Mr. DOWNING. Thank you, Mr. Chair.
        And thank you to all the witnesses for being here. This has
    been a really interesting conversation So far.
        I am going to start with Mr. Troutman.
        I want to begin with you in your path to franchise
    ownership.
        As you outlined in your testimony, you served in the Navy
    before becoming a franchise owner. I was in the Air Force,
    which I have been told is just like the military. So I
    appreciate your service.
        Your experience demonstrates how for many veterans,
    including myself, entrepreneurship is a meaningful opportunity
    to continue to contribute to our communities after our military
    service. It is a message I have also said many times.
        But I would love if you could elaborate on how the skills
    that you developed in the Navy have aided you in owning and
    operating your franchises.
        Mr. TROUTMAN. Thank you, Congressman. Thank you for your
    service and for that question as well.
        So military experience, again, working in an environment
    where we work for a mission, for goals, to achieve a common
    place or be at a certain place, that is something that we
    learned in the military. And Rico can speak to this as well.
        But if you are on a ship--and I can speak from a Navy
    perspective--everyone has a job to do. And to get to a
    destination, we must do it together.
        A lot of that likewise goes in franchising the same way,
    working as a team, working as a system. The franchisor and the
    franchisee must be in lockstep for the model to work. And when
    it does, it is a beautiful thing. It is truly a mutually
    beneficial relationship. That is why it is such an amazing
    thing.
        But the military helps us tap into those types of skill
    sets.
        Mr. DOWNING. And veterans--in your testimony, you
    highlighted that veterans are nearly three times as likely to
    own franchises as nonveterans. Why do you think that is?
        Mr. TROUTMAN. Familiarity. We look for--we all have goals,
    dreams and missions if you will. Even after, if you work, say,
    without being in the military, after retirement, you are still
    asking the question, what is next?
        Mr. DOWNING. Right.
        Mr. TROUTMAN. What happens is, is that franchising gives us
    a framework to work together to achieve missions and goals. And
    it continues on and on and on. It never ends. It is really an
    amazing thing.
        Mr. DOWNING. Well, thank you. I appreciate that.
        What do you think are the main barriers that aspiring
    veteran entrepreneurs face when building their businesses?
        Mr. TROUTMAN. Barriers? Access to capital. Information.
    Information on--that is where it exists. Sharing of information
    more than anything else.
        Knowing that franchising is a model that exists. The IFA,
    the great people of the IFA are here today. Matt Haller and his
    team do an amazing job in getting the word out to everyone
    considering, most people still do not really know that it
    exists.
        Mr. DOWNING. Right.
        Mr. TROUTMAN. Education truly is the framework, I think,
    most needed right now.
        Mr. DOWNING. Well, thank you. I appreciate your answer. In
    the interest of time, I am going to move on here.
        The franchising business model is an important component of
    rural economies, including those of my home district of central
    and eastern Montana. And franchisees help fill in service gaps.
    It helps create local jobs, boost tax revenues in areas where
    low population density can make sustaining small business
    difficult.
        I am going to move on to Ms. Patel here.
        Through your experience operating Promise Hotels in eastern
    Oklahoma, can you speak to the impact that your business has
    had on local employment and economic growth in the region?
        Ms. PATEL. Yes. Thank you, Congressman.
        Huge economic impact. Besides acquiring hotels, we also do
    ground-up development. So we are creating taxes for our
    municipalities, creating jobs. And whether I continue to own
    that hotel or not, those will continue to be paying dividends
    off in tax dollars to the federal government, to the county,
    the city, the sales, and then payroll taxes, and continue to
    keep employees employed there long after I am gone.
        And so we feel like we are stewards of the community and
    play a role in making sure that our city can continue to
    thrive.
        Mr. DOWNING. Building on that, how do you approach building
    and maintaining your relationships with the communities you
    operate in?
        Ms. PATEL. Oh, open dialogue, networking, serving. We serve
    on boards. Just today, we got a call from a nonprofit because
    of the storm saying, ``We need to house volunteers and the
    unsheltered for the storm.'' And our team jumped into action
    and planned to house them over the storm. So we continue to
    serve our communities.
        Mr. DOWNING. Outstanding.
        Unfortunately, I have run out of time. But thank for your
    responses.
        And on that, Mr. Chair, I yield.
        Mr. LALOTA. The gentleman yields.
        You can never get enough Navy at one Small Business
    Committee hearing.
        With that, I recognize my friend from California, a Navy
    veteran, Mr. Cisneros, for 5 minutes.
        Mr. CISNEROS. Thank you, Mr. Chairman.
        Thank you to my two fellow shipmates for being here today
    and testifying.
        Like yourselves, when I got out of the Navy my wife and I
    actually did purchase a franchise and opened up a business.
    But, unfortunately, we are finding out a lot of first-time
    entrepreneurs are getting burned by franchises, particularly
    when they get lured by low-cost, unproven franchise models.
        Mr. Macaraeg, you mentioned in your testimony that expenses
    doubled after purchasing your franchise in 2024.
        What should entrepreneurs look for or focus on when
    considering the type of franchise that they want to buy?
        Mr. MACARAEG. Thank you for the question, and go Navy, beat
    Army.
        What I would say to that is, quite honestly, to my fellow
    entrepreneurs out there, is do your diligence because we cannot
    rely on the government to equal the playing field for us.
        The FD documents and other disclosures that we have all
    received here, I can guarantee you the FDD that I have received
    and my colleagues here with the hospitality industry and the
    quick serve industry all look vastly different. But we all deal
    with the same things. We deal with payroll, rent, construction,
    and so many other things.
        But they all look different. Why is that? Why is that, that
    an industry such as franchising, which, I think was mentioned,
    almost a trillion dollars of our GDP is so unregulated that it
    can look vastly different?
        That is tough. So my feedback to fellow entrepreneurs is do
    your diligence, speak to franchisees. I guarantee you the four
    of us on this panel will probably take your call and answer
    your questions. Because we cannot expect the franchisors to
    provide us everything that we need to make a sound and safe
    decision.
        Mr. CISNEROS. Is there a better way that we can increase
    transparency between the franchisor and the franchisee?
        Mr. MACARAEG. Yeah. Standardize the information that is
    presented, first of all. I think franchisors are required to
    present 23 items in the FDD, also known as Item Number 1, 2, 3,
    4, through 23. And there is no standardization across the
    board.
        Franchisor A and Franchisor B can present different
    information, which is in Item Number 19, which is the financial
    information of performance of a business. And franchisors get
    to choose what they put in there. And that is the information
    that we make decisions off of, is what is in Item 19 and all
    those other 22 items.
        Mr. CISNEROS. All right. Thank you very much for that
    answer.
        Ms. Katsanevas, I got to admit I am a fan of the Bravo
    universe, ``Vanderpump Rules,'' ``Below Deck.'' And still one
    of the first ones my wife got me addicted on and I still watch
    today is the ``OC Housewives.''
        Unfortunately, I have not had time to see your show, but
    maybe after today that will change.
        Ms. KATSANEVAS. It is the best, but it might be for the
    best.
        [Laughter.]
        Mr. CISNEROS. I did see one of your viral moments, though,
    where you said somebody--you told them they do French fries,
    and you do franchise.
        Ms. KATSANEVAS. Yes.
        Mr. CISNEROS. So I wanted to ask you what would your advice
    be to help somebody who wants to become a franchisor to become
    a franchisor?
        Ms. KATSANEVAS. Okay. Thank you for the question,
    Congressman.
        I really believe that it takes years to, obviously, compile
    all the information and offer a sustainable business model.
        But I think integrally you need to have everything
    organized for your franchisee and make sure the model is tried
    and true before you offer it. Make sure you understand all
    aspects of the business so you are setting a future franchisee
    up for success.
        Mr. CISNEROS. All right. Well, thank you very much for that
    answer.
        Ms. KATSANEVAS. ``Housewives'' is a franchise, just so you
    know.
        [Laughter.]
        Mr. CISNEROS. It is. It is.
        Ms. KATSANEVAS. You are just watching the wrong ones.
        Mr. CISNEROS. Mr. Troutman, just one question for you.
        What do you think veterans need to be successful when they
    become franchisors? How can we help more veterans become
    franchisees?
        Mr. TROUTMAN. Congressman, thank you for that question, and
    thank you for your service.
        Mr. CISNEROS. Thank you.
        Mr. TROUTMAN. So, the Transition Assistance Program will be
    one effective way of really focusing on franchising in that
    transition if you will. They may talk about business or things
    like that. But to be specific to talk about franchising in the
    TAP program would help.
        In addition to that, yes, just make sure that programs like
    Boost to Business, if you will, are promulgated and available,
    working with the SBA as well. But getting the information out
    there, going to the bases, would really help that process.
        Mr. CISNEROS. I am running out of time, but I got one real
    quick one if you can answer this--both of you, actually.
        When you got out of the Navy and you went to TAP class, did
    you get information about franchises, coming into that
    business?
        Mr. TROUTMAN. No.
        Mr. MACARAEG. Negative.
        Mr. CISNEROS. All right. Thank you very much. I yield back.
        Mr. LALOTA. Neither did I.
        I now recognize Mr. Wied from Wisconsin for 5 minutes.
        Mr. WIED. All right. Thank you, Mr. Chairman.
        Thank you to our witnesses for being here today.
        As a former franchise owner myself, I know firsthand how
    essential that it is that franchisees understand their
    obligations and that franchisors have the tools to enforce
    them.
        Recent events in Minnesota where a franchise hotel failed
    to uphold required brand standards remind us that the strength
    of this model depends on clarity, consistency, and
    accountability. When one operator steps outside those standards
    it just doesn't create a local problem, it undermines the
    reputation and hard work of every responsible franchisee who
    does things the right way.
        As we look ahead my hope is that today's discussion helps
    us advance policies that cut red tape, keep taxes low, and
    provide the certainty franchise owners need to meet their
    obligations and continue, of course, to grow their businesses.
        Ms. Patel, I am going to start with you.
        In light of those recent incidents in Minnesota where a
    franchise Hilton property refused service to federal law
    enforcement, leading to the public backlash and removal from
    the brand's network, how important is it for franchisees to
    consistently uphold brand standards?
        Ms. PATEL. Very consistent. It affects everybody in the
    franchise world in that brand.
        Our customer set expects to see the same business model
    whether it is in Tulsa, Oklahoma, California, or Texas. They
    want to see, when they walk into a hotel, it is the exact same
    room wherever they go.
        And so brand consistency and upholding our standards are
    paramount for the brand trust throughout the system.
        Mr. WIED. So like when a franchisee discriminates against
    guests in such a public way, it undermines the entire brand.
        How do responsible operators work to prevent those kinds of
    violations? And what tools do franchisors provide to reenforce
    those?
        Ms. PATEL. Well, I can speak to--my hotels are in Oklahoma,
    and we follow all the rules, we follow federal law, state law,
    local law, and welcome all guests. Thank you.
        Mr. WIED. So incidents like this, I mean, it highlights how
    quickly franchisees can find themselves navigating legal,
    political, and public relations challenges.
        How important is it for regulatory clarity? You had
    mentioned the stable joint employer standard in your remarks.
    How important is that in helping franchisees understand their
    responsibilities and avoid costly missteps?
        Ms. PATEL. It is paramount. We need clarity in every aspect
    of our business, from human resources, financing, to loan
    documents, to everything.
        And so none of us are attorneys here. We went into this
    business to be business owners and work for ourselves. And so
    clarity and just commonsense standards for us to live by.
        Thank you.
        Mr. WIED. Thank you.
        Ms. Katsanevas, you mentioned the viral moment where
    someone questioned whether franchise owners are real business
    owners.
        What do you wish policymakers understood about the
    realities of running a franchise?
        Ms. KATSANEVAS. Thank you for the question, Congressman.
        I think that it is the hard work that comes years before
    it. I said that earlier. You lose sleep, you lose money, you
    lose hair. We have been through the wringer.
        But it is just that there is so much put into what comes
    before we actually offered our franchise to the public. And so
    just understanding that it is tried and true, it is consistent.
    We would not be offering it if we weren't a hundred percent
    sure that we could recreate our model, not only in our city but
    outside the city.
        Mr. WIED. You mentioned stylist Kati----
        Ms. KATSANEVAS. Yes.
        Mr. WIED.--who went from employee to an owner because of
    the franchise model.
        From your experience, what are the biggest barriers that
    prevent talented workers from becoming owners? And how does
    franchising remove those barriers?
        Ms. KATSANEVAS. I think there is fear for someone that is
    more on the creative side--for example, a hairdresser--not sure
    if they understand the business side of it. It is a whole other
    side of--different than what they are doing on the daily.
        So I think just allowing them to be part of--us to be part
    of the process and supporting them. And for us, we basically,
    we have done everything for them. So they can too learn as we
    did. We started out as hairdressers, So we are the prime
    example. And now we own multiple locations and opened a
    franchise company.
        So it is possible with the support of a franchise company
    who has done the work for you.
        Mr. WIED. All right. Thank you all for being great business
    owners.
        Ms. KATSANEVAS. Thank you.
        Mr. WIED. I yield back.
        Mr. LALOTA. The gentleman yields.
        I now recognize the gentleman from California, Mr. Tran,
    for 5 minutes.
        Mr. TRAN. Thank you, Mr. Chairman.
        Thank you to all the witnesses for being here.
        Ms. Angie K, in your testimony you shared that you are the
    daughter of Greek immigrants who came to this country with very
    little, and you built yourself a life through hard work and
    eventually creating jobs and ownership opportunities for
    others. That is truly the American Dream.
        In districts like mine, which is home to Little Saigon in
    Orange Country, immigrant entrepreneurs are workers who are the
    backbone of neighborhood salons and barbershops.
        For Vietnamese refugees who fled their homeland due to the
    Vietnam War, they found success and a pathway to the middle
    class in the nail industry.
        My question to you is, from your perspective, as a daughter
    of an immigrant, owner, and a franchisor, how do immigrants
    contribute to the successful small businesses like yours?
        Ms. KATSANEVAS. Thank you for the question, Congressman.
        I believe that one value that your immigrant parents will
    pass down to you is hard work, saying yes to every opportunity.
    You are here for the opportunity in America to have a better
    life for not only yourself but your children and grandchildren.
        So one thing I have experienced being the daughter of an
    immigrant is that I had a job at 15 years old, I was taught
    that if I wanted something, I had to work for it, and no one
    was going to give me anything without seeing that I was willing
    to do the hard work for it.
        And that is my experience with most immigrant children that
    I have met. We have all been raised the same. So we took hold
    of any opportunity. We all had jobs earlier than we should
    have, and it continued on into adulthood.
        So it is the work ethic, it is the values, it is the say
    yes to every opportunity that comes your way.
        Mr. TRAN. That is a great answer. Thank you for that.
        Ms. KATSANEVAS. Thank you.
        Mr. TRAN. I am going to ask the same question. How do
    immigrants contribute to the success of small business?
        Ms. Tina P?
        Ms. PATEL. Thank you, Congressman.
        Vastly. Most everyone who has immigrated here came here for
    a better opportunity. We did not have generational wealth, most
    of us. And what I learned from my parents as well is hard work.
    You do whatever it takes to make it work.
        And so when you have that every day as a child, saying,
    ``Look, we are poor, hungry, and determined,'' so we work off
    of that.
        My dad used to--after the oil bust, there was nobody
    traveling back in the 1980s. He had to go get a job as a
    machinist so he can bring back a paycheck and pay for the
    mortgage because there was no access to capital there. And we
    had almost predatory lending back then because we had to do
    owner financing with extremely high rates.
        And so it is important. Immigrants are the backbone and
    risk-takers, and they are determined to make it successful
    here.
        Mr. TRAN. Thank you for that.
        And really quickly, can I just ask you, too, what do you
    think of the climate of fear around deportation, how that
    affects small business owners, your ability to hire, retain
    workers, plan for the future?
        Ms. Angie K, why don't you start?
        Ms. KATSANEVAS. Thank you for the question, Congressman.
        In this climate, we just continue to support everyone as
    much as possible. We continue to be inclusive in our hiring in
    hopes of seeing that continued growth and success for everyone.
        Mr. TRAN. Ms. Patel?
        Ms. PATEL. Thank you.
        Again, it is a theme of today, saying certainty. That can
    ease any fears or heartburn. So we just need certainty as small
    business owners. We have enough to deal with as small business
    owners, and so adding more certainty would help us immensely.
        Mr. TRAN. Thank you.
        Mr. Troutman, Mr. Macaraeg, as a fellow veteran, I thank
    you so much for your sacrifice to our nation. I know what it
    takes to serve because I come from the Army, not the Navy.
    Thank you.
        Let me ask you first, Mr. Macaraeg, what can this Committee
    do to better help veterans start franchises?
        Mr. MACARAEG. Thank you so much for the question.
        I think what my colleague here said, Mr. Troutman, it
    starts with the Transition Assistance Program, also known as
    TAP, for people that are transitioning out of the military.
        When I got out, it was a two-week crash course on how to
    tie a tie and do a resume, and then out you go.
        And so I think there is a great opportunity there with the
    Department of Defense and maybe like an IFA on how we can get
    what we do out there to transitioning service people, because
    what we have is grit. You give us duct tape and 550 cord and we
    will build you an airplane.
        Mr. TRAN. And with the few seconds I have left, Mr.
    Troutman?
        Mr. TROUTMAN. Yes, sir. Again, sir, thank you for your
    service. I will not hold the Army against you, though.
        But, no, Congressman, yes, that is it concisely, to really
    make sure that we are doing it intentionally to get to that
    granular. I think the IFA going to military bases or having
    curriculums infused into the military would be a definite gain.
        Mr. TRAN. Thank you so much.
        Chairman, I yield back.
        Mr. LALOTA. The gentleman yields.
        So we have a lot of Navy in the room. We also have a lot of
    Jersey in the room here today. And with that, I recognize Dr.
    Conaway from the Garden State for 5 minutes.
        Mr. CONAWAY. Thank you, Mr. Chairman.
        Mr. Macaraeg, you raised an important issue--I am a little
    bit off my notes--but you raised this question of energy. And
    our new governor, Mikie Sherrill, is taking some very decisive
    action to deal with the rising energy costs that are not only
    facing New Jersey but around the country.
        One of the reasons--and we are going to talk about some
    Trump policies here and how it is impacting businesses--when
    you take off free energy, when you encumber solar, when you
    encumber wind, that causes dirty energy, higher-priced energy
    to become the market leader and set the price for energy.
        It is one of the reasons why we are seeing energy prices go
    up and we are seeing the impacts on small business, such as
    yours, that you mentioned as part of your statement.
        But let me get onto tariffs, another policy which has been
    quite damaging to small businesses.
        I have met with small business owners in my district. And
    we know that global supply chains and international trade
    directly impact small business across the nation. A lot of our
    small businesses in the conversations I have had get parts and
    material for their own products that they sell in the United
    States and overseas from overseas to begin with. And those
    tariffs are raising the cost of production for them.
        And, of course, raising those costs are often passed on to
    consumers, which is why so many consumers are seeing their
    costs go up by hundreds and thousands of dollars per year.
        My constituents have raised concern over the confusion
    around tariffs, tariffs at one level one day, it is in another
    level one day. It is one in one country. We tariffed an island
    with nothing but penguins on it during this year.
        And so it has increased the cost of raw materials and had a
    major impact on consumer prices and the cost of living and
    affordability concerns that impact so many Americans.
        And we found that people, of course, are trying to dodge
    these tariffs as they will do either through payoffs or other
    special deals for them. Chinese companies are setting up shell
    companies in the United States in order to evade the tariffs.
        Can you explain to us how tariffs might be impacting your
    business and how you are managing the cost, that tax on
    Americans, as you try to sell your services?
        Mr. MACARAEG. Thank you for the question.
        As I previously mentioned, tariffs impact us and our
    ability to open a location, build and equip a location, because
    oftentimes the material that is used, the equipment, the
    furniture, the fixtures come from overseas. That is the problem
    there.
        The dollar amount of that tariff is whether or not we as
    small business owners absorb that to our bottom line, our
    profits, which prohibit us from growing and providing
    healthcare, take out a line of credit to pay that tariff bill,
    or do we pass it on to the consumers.
        I will tell you, Congressman, this year, not on the topic
    of tariffs, but more on the topics of uncertainty, there were
    days where I would get a call and say when is the boat going to
    land so I can look at the news to see what the tariff was of
    the day, because that was going to be the dollar amount that I
    had to go find for our business.
        We just want certainty.
        Mr. CONAWAY. We have heard that over and over again.
        Let's move to another Trump policy here.
        The Corporate Transparency Act was enacted in 2021 with the
    intent of combating illicit finance. The intention of the
    Corporate Transparency Act was to increase transparency in
    business ownership in order to combat certain financial crimes
    like tax evasion, money laundering, and terrorist financing.
        However, on March 2, 2025, the Trump administration and the
    Treasury Department started the process of dismantling the
    Corporate Transparency Act. The administration said that they
    will no longer enforce the penalties and fines against domestic
    companies and individuals that intentionally fail to complete
    their beneficial ownership information report and only require
    beneficial ownership information reports from foreign firms.
        And it is thought that this would unleash American
    prosperity. And I feel that these firms--I have a small
    business myself--it doesn't seem particularly complicated.
        But we know it is important and the war on terror. And in
    terms of enforcing laws, most people would say that you ought
    not be assisting those who are attacking our country, who are
    money laundering, involved in trafficking of human beings, and
    everything else. So I consider those changes extremely
    reckless.
        How has weakening of the Corporate Transparency Act
    impacted small business? If you can answer that or anyone else
    who can answer that question, I would certainly appreciate it.
    And do you think transparency in corporate structure of the
    United States is important for deterring fraud as it relates to
    small business?
        And I will yield back. I think I just ran out of time
    there.
        Mr. LALOTA. The gentleman yields.
        I now recognize from the great State of Maryland Mr.
    Olszewski for 5 minutes.
        Mr. OLSZEWSKI. Thank you very much, Mr. Chairman.
        And thank you to all of our witnesses today. Thank you to
    the servicemen and -women of both our witness table, as well as
    my colleagues here on the dais. I will just get that out of the
    way. We are grateful for your service to this fine country.
        I want to open by saying how proud I am that my home State,
    Maryland, is home to 15,000 franchisees and franchise locations
    that employ more than 155,000 people.
        Mr. Troutman, thank you for the shout-out earlier. I
    apologize that I wasn't here for it in person. But please allow
    me to return the favor to you and just say how proud we are to
    have you all over Maryland. I am not sure if you are in
    Maryland's Second Congressional District, but we are going to
    work on that. And much success to you in your new cafe that is
    about to open up as well.
        But it is a business model that we know that creates jobs,
    that strengthens our economy, and it is why I am also proud to
    join the bipartisan group of legislators cosponsoring the
    American Franchise Act. I think it is an important step forward
    for this Committee, for this Congress, and for this country.
        Closer to home, in my own district, a constituent and a
    friend, Richie Huffman, he founded the Celebree School in 1994.
    That started as a single preschool. It is now a nationally
    recognized brand and franchise with over 30 locations operating
    in 18 States.
        The growth of these high-quality daycare and preschool
    programs has now provided for more than a thousand jobs across
    the country and empowered their customers to also pursue their
    dreams in the process of having high-quality childcare.
        Recently, Richie, now president and CEO of Celebree
    Schools, traveled to Louisville, Kentucky, to help mentor a
    couple with military service--since we are on the theme of
    military--and teaching backgrounds. They now are interested in
    applying these skills through a franchise like Celebree.
        We talk a lot about, this Committee, how we support and
    serve veteran entrepreneurs looking for their next step. And
    the franchise model not only can do that; as we see, it often
    does.
        I also want to applaud Richie for Celebree supporting many
    philanthropic ventures through partnerships with Ronald
    McDonald House, local children's hospitals, ensuring that their
    franchisees and the children they teach also know the value of
    giving back to their communities.
        We know that franchising gives Americans opportunities to
    succeed, and they enrich our community. So I am excited to wrap
    up this productive conversation we have had today.
        A little lighthearted way to start here, Ms. Katsanevas, if
    I could. Your franchise is called the Lunatic Fringe. Is that
    right?
        Ms. KATSANEVAS. Yes.
        Mr. OLSZEWSKI. Did you take any inspiration in naming it
    from Members of Congress.
        [Laughter.]
        Ms. KATSANEVAS. Well, thank you for the question,
    Congressman.
        No, that wasn't the inspiration, but maybe after today it
    will have inspiration on future locations and their names.
        Mr. OLSZEWSKI. I appreciate that.
        I am going to open this up to everyone. If we can start
    with Mr. Macaraeg. I just want to open up the conversation of
    tariffs a little bit. I think we started to dive into it.
        Ms. Patel, you mentioned the need for continuity and
    certainty in conducting your work. I am just curious if--and,
    again, we can start there and work our way down if folks want
    to weigh in--I am just curious if you could discuss the cost
    and the disruption to that certainty that you have experienced
    through this tariff process, if you have felt it at all. And we
    can start there and just work our way down.
        Mr. MACARAEG. Yes. As previously mentioned, the uncertainty
    just causes a disruption in our business, a disruption for our
    growth, and a disruption for the colleagues that we employ.
        While they aren't aware of the tariff costs, it is our
    responsibility to carry that burden as leaders, but nonetheless
    it still causes a disruption in our business and requires us to
    make decisions on where those dollars go.
        Mr. TROUTMAN. Yes, Congressman. Yes, we are seeing
    increases as well in our cost of goods. So, as we look at our
    COGS, as they are called, we do see increases. Likewise, too,
    for a new build-out, equipment costs are likewise elevated.
        Ms. PATEL. Congressman, honestly, in our business, I think
    I have said this before, we haven't fully recovered from the
    pandemic. It was a gut-wrenching time. And we continue to see
    costs going up over the last 5 years and no end in sight. So
    hopefully something can be done where we could start seeing
    some certainty in pricing.
        Ms. KATSANEVAS. Thank you, Congressman.
        Our business, our particular business, hasn't really been
    affected, it sounds like, as much as others at this time.
        Mr. OLSZEWSKI. And I will just close by returning to our
    lighthearted start by saying that I am very proud this is a
    Committee that doesn't--that that isn't the case. This is a
    bipartisan Committee where we often come together on important
    issues just like this. And I hope that that is something we
    continue both for this Committee, this Congress, and this
    country.
        And I thank you all for your time.
        With that, Mr. Chairman, I yield.
        Mr. LALOTA. Well said. The gentleman yields.
        I would like to thank our witnesses for their testimony and
    for appearing before us today.
        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. I ask the witnesses to please respond promptly
    should that happen.
        If there is no further business, without objection, the
    Committee is adjourned.
        [Whereupon, at 3:52 p.m., the Committee was adjourned.]
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