After 4 Challenging Years, Here Are 3 Ways the Incoming Trump Administration Can Revitalize Franchising The President of the International Franchise Association explains 3 ways the incoming Trump Administration can revive the franchise model.
By Matt Haller Edited by Carl Stoffers
Key Takeaways
- Franchising spans over 300 industries, generating nearly nine million jobs in the U.S. alone.
- With its unique model, franchising offers pathways to ownership and career advancement, especially for underrepresented communities.
- To support sustainable growth, policymakers should work with the franchise industry to modernize the Franchise Rule.
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Of all the twists and turns in the 2024 election — debate meltdowns, assassination attempts, candidate swaps, garbage trucks — one of the most enduring scenes involved President-Elect Donald Trump's turn behind the fryer at a Pennsylvania McDonald's. It was a defining image in a contest with so many memorable moments.
Coupled with Vice President Kamala Harris' commercial referencing her time as a student working at McDonald's — a life experience she shares with more than one in eight Americans — the franchise model has been front and center in the national spotlight. In fact, at one point, a Wall Street Journal column declared flipping burgers, "the new coveted resume line."
As the Trump administration and leaders in Congress plan for next year, they would be wise to take stock of the franchise business model that drives McDonald's and apply its resonance with voters to their governing strategy. Far more than food, the franchise model spans more than 300 industries, ranging from home repair to payroll services to salons and pet care. In fact, franchising is responsible for nearly nine million jobs in this country. Here are 3 ways the Trump Administration can revitalize the franchise model.
Extend the TCJA
First, the pro-small business tax policies should be extended in the 2017 Tax Cuts and Jobs Act. The franchise community is especially interested in the permanence of the Section 199A business deduction that allows for a 20% deduction for income from pass-through businesses, enhancement of the Work Opportunity Tax Credit (WOTC), repeal of the estate tax, the foreign-derived intangible income incentive, and continuation of the
veteran tax credit.
The TCJA included $8 billion in federal tax savings for franchise businesses, including $2.5 billion in pass-through deductions and $2 billion in expensing of equipment purchase savings.
Early indicators suggest that the tax cuts are high atop the priority list in the new year, although more than half of the members of Congress were in office during their original passage in 2017. With franchise allies, including incoming Senate Majority Leader John Thune (R-SD) and U.S. Rep. Jason Smith (R-MO), Chairman of the House Ways and Means Committee, leading the charge, let's hope lawmakers join them in prioritizing the task to avoid getting anywhere near the fiscal cliff that looms at the end of 2025.
Related: International Franchise Association Pushes Back on Franchise Regulation
Reverse Job-Killing Regulations
Second, reverse the job-killing labor regulations of the previous administration. This starts with the NLRB's 2023 overly broad joint employer standard that would have collapsed the independence of franchisees as business owners, making them employees or co-employers with their franchisor, threatening the equity in their businesses and the viability of the entire model. Thankfully, a bipartisan coalition of lawmakers and a federal judge intervened. Now it's time to enact a law that would provide clarity for franchise businesses going forward — as we had for more than 30 years before the joint employer shenanigans began in 2015.
Beyond the NLRB, the Department of Labor (DOL) tried to raise the overtime exemption salary threshold to nearly $60,000, raising the cost of doing business for countless franchisees and jeopardizing thousands of jobs while increasing prices for consumers grappling with inflation. The Occupational Safety and Health Administration (OSHA) sought to implement a "walkaround" rule allowing union organizers, trial lawyers, and even direct competitors unprecedented access to workplaces.
IFA has challenged both these rules in court, but the Trump administration should signal a desire to reverse course. The Federal Trade Commission (FTC) wanted to impose a blanket ban on non-compete clauses in franchise agreements and also issued a negative option rule that harmed consumers and small businesses alike. The Commission's focus on so-called "junk fees" and noncompete agreements has been overly broad and far-reaching and exceeds the scope of its authority and the Commission must be reined in so it can focus on its core mission: protecting consumers.
Update the Franchise Rule
To that end, the next FTC chair should work with the franchise community to increase transparency in the franchise sales process and modernize the disclosures required under the Franchise Rule, which hasn't been updated since 2007. Under the current leadership of Chair Lina Khan, the FTC has opened multiple Requests for Information (RFI) on franchise agreements and franchisor business practices designed to elicit negative responses toward the model, while leaving desperately needed updates to the franchise rule unaddressed.
Despite five bipartisan and bicameral letters from congressional leaders, admonishment from the U.S. Government Accountability Office (GAO) and outreach from state regulators who oversee franchises, the FTC has shown little interest in working with our community to improve pre-sale disclosure requirements. We want to facilitate a stronger foundation for all franchise relationships by providing potential franchise owners with access to more fulsome information before they make a sound financial investment. We released a Responsible Franchising policy roadmap last May that represents a positive first step, but we need buy-in from the FTC to make meaningful progress.
The 2024 election is over, but its lessons should live on. Even in a divided country, it's telling that both major political parties were eager to associate themselves with an iconic American franchise brand. With the right policy roadmap, our model is poised to grow to even higher levels, providing untold opportunity for many seeking the American Dream.
Matt Haller is the President and CEO of the International Franchise Association.
