The 2024 election cycle has culminated with the return of Donald Trump to the presidency. Amidst a tumultuous election season characterized by unpredictable events such as debate meltdowns, assassination attempts, and candidate swaps, one particularly memorable image stands out: President-Elect Donald Trump working behind the fryer at McDonald’s in Pennsylvania. This moment, juxtaposed with Vice President Kamala Harris’ advertisement reminiscing about her own time working at McDonald’s during her student years, underscores the significant role that franchising has played in American culture and the national economy.
Franchising encompasses far more than just the fast-food industry, covering over 300 sectors, including home repair, payroll services, salons, and pet care. This expansive model of business supports nearly nine million jobs in the United States alone. As the Trump administration and Congressional leaders prepare their strategies for the coming year, revitalizing the franchise business model could provide a pivotal boost to the economy.
Extending the Tax Cuts and Jobs Act (TCJA)
Importance of Small Business Tax Policies
The small business tax policies enacted through the 2017 Tax Cuts and Jobs Act should be extended. Within the franchise community, there is a particular interest in preserving the Section 199A business deduction, which allows for a 20% deduction on income from pass-through businesses. Additional key aspects include enhancing the Work Opportunity Tax Credit (WOTC), repealing the estate tax, sustaining the foreign-derived intangible income incentive, and maintaining the veteran tax credit.
Financial Impact of TCJA on Franchises
The TCJA has provided federal tax savings amounting to $8 billion for franchise businesses, which includes $2.5 billion in pass-through deductions and $2 billion in savings from equipment purchases. Early signs indicate that extending these tax benefits is a high priority on the legislative agenda, despite more than half of Congress having been in office since the original passage of the TCJA in 2017.
Legislative Support for TCJA Extension
With steadfast franchise advocates like incoming Senate Majority Leader John Thune (R-SD) and U.S. Representative Jason Smith (R-MO), who chairs the House Ways and Means Committee, the objective is to prioritize this initiative to avoid approaching the looming fiscal cliff set for the end of 2025.
Reversing Job-Killing Regulations
Addressing NLRB’s Joint Employer Standard
The administration should address and reverse several job-killing labor regulations stemming from the previous administration. Among the most critical measures is rectifying the National Labor Relations Board’s (NLRB) 2023 joint employer standard. If enforced, this standard would undermine the independence of franchisees by potentially categorizing them as employees or co-employers along with their franchisors, consequently jeopardizing their business equity and the entire franchise model.
Impact of DOL and OSHA Regulations
Beyond the NLRB challenges, the Department of Labor’s (DOL) attempt to raise the overtime exemption salary threshold to nearly $60,000 threatened to increase operating costs for franchisees, risking job losses and higher prices for consumers amid inflation. Similarly, proposals introduced by the Occupational Safety and Health Administration (OSHA) to implement a “walkaround” rule would have allowed union organizers and even direct competitors access to workplaces, posing significant risks for employers and employees alike.
FTC’s Overreach and Its Consequences
Additionally, the Federal Trade Commission (FTC) has proposed measures like a blanket ban on non-compete clauses within franchise agreements and enacted a negative option rule, which negatively impacts both consumers and small businesses. The FTC’s overreach in regulating non-compete agreements and so-called “junk fees” has diverted the Commission from its core mission of consumer protection. The incoming administration must rein in the FTC and refocus its efforts on upholding consumer interests without hampering small businesses.
Updating the Franchise Rule
Need for Increased Transparency
To further support the franchise community, updating the Franchise Rule to increase transparency in the franchise sales process is essential. The last update to the Franchise Rule occurred in 2007, and since then, there have been significant changes in the franchising landscape that necessitate revisiting these regulations.
FTC’s Role and Congressional Pleas
The current FTC leadership under Chair Lina Khan has issued multiple Requests for Information (RFI) regarding franchise agreements and franchisor business practices. However, these inquiries have predominantly sought to elicit negative feedback instead of addressing pressing updates to the Franchise Rule. Despite bipartisan and bicameral pleas from congressional leaders, admonishments from the U.S. Government Accountability Office (GAO), and outreach from state regulators overseeing franchises, the FTC has shown minimal interest in collaborating with franchise representatives to improve pre-sale disclosure requirements.
IFA’s Responsible Franchising Policy Roadmap
The franchise community seeks to provide potential franchise owners with comprehensive and detailed information, ensuring they can make sound and informed financial decisions. The IFA introduced the Responsible Franchising policy roadmap in May 2023, which represents a positive initial step, yet significant progress necessitates the FTC’s cooperation.
Conclusion
The 2024 election cycle concluded with Donald Trump’s return to the presidency. The election season was riddled with unpredictability, featuring debate meltdowns, assassination attempts, and last-minute candidate swaps. One memorable image remains: President-Elect Trump manning a fryer at a McDonald’s in Pennsylvania. This moment, alongside Vice President Kamala Harris’ ad reflecting on her own McDonald’s job during her student years, highlights the importance of franchising in American culture and the economy.
Franchising extends far beyond fast food, encompassing over 300 sectors such as home repair, payroll services, salons, and pet care. This expansive business model sustains nearly nine million jobs in the U.S. As the Trump administration and Congress develop their plans for the upcoming year, focusing on revitalizing the franchise model could significantly boost the economy. Emphasizing the importance of franchising could lead to strategies that invigorate various sectors, ultimately contributing to the nation’s economic resilience and growth.
