Local Ownership, National Brands: How Franchising Is a Pathway to Entrepreneurship (House Small Business Committee hearing, January 22, 2026)
Summary
Transcript of a January 22, 2026 House Small Business Committee hearing, Small Business Committee Document Number 119-029, on franchising as a path to owning a business. Chairman Roger Williams and Ranking Member Nydia Velázquez opened. Witnesses were Angie Katsanevas of Lunatic Fringe in Salt Lake City, Tina Patel of Promise Hotels in Tulsa, Clement Troutman of Troutman Management LLC in Odenton and Rico Macaraeg of StriveWell in Garwood. The appendix carries their prepared statements and an NFIB letter.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
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“Local Ownership, National Brands: How Franchising Is a Pathway to Entrepreneurship (House Small Business Committee hearing, January 22, 2026).”
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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
Small Business Committee Document Number 119–029
Available via the GPO Website: www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
62–604 WASHINGTON : 2026
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HOUSE COMMITTEE ON SMALL BUSINESS
ROGER WILLIAMS, Texas, Chairman
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
BETH VAN DUYNE, Texas
JAKE ELLZEY, Texas
MARK ALFORD, Missouri
NICK LALOTA, New York
BRAD FINSTAD, Minnesota
TONY WIED, Wisconsin
ROB BRESNAHAN, Pennsylvania
BRIAN JACK, Georgia
TROY DOWNING, Montana
KIMBERLYN KING-HINDS, Northern Marina Islands
DEREK SCHMIDT, Kansas
JIMMY PATRONIS, Florida
NYDIA VELÁZQUEZ, 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
(II)
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CONTENTS
OPENING STATEMENTS
Page
Hon. Roger Williams ................................................................................................ 1
Hon. Nydia Velázquez ............................................................................................. 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
(III)
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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 [chair-
man of the Committee] presiding.
Present: Representatives Williams, Meuser, Van Duyne, LaLota,
Wied, Downing, Velázquez, 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 to-
gether. 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 every-
body 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, Na-
tional Brands: How Franchising is a Pathway to Entrepreneur-
ship.’’
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
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burdensome regulations imposed by the Biden-Harris administra-
tion, 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 larg-
est 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 codi-
fying 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 oper-
ating in this country. Franchises employed nearly nine million peo-
ple, 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 ben-
efits to consumers, manufacturers, and most importantly, our local
communities.
The franchise business model offers aspiring entrepreneurs ac-
cess 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 tes-
timony today.
And with that, I want to yield to my distinguished Ranking
Member and friend from New York, Ms. Velázquez, for her opening
remarks.
Ms. VELÁZQUEZ. Thank you, Mr. Chairman.
Good afternoon, everyone.
Franchising is an important aspect of the small business econ-
omy, supporting an estimated nine million jobs and contributing
nearly $1 trillion to annual economic output.
Across key sectors, including restaurants, hospitality, and per-
sonal services, franchises offer entrepreneurs the opportunity to
participate in an established brand and proven business model.
For families, immigrants, and first-time business owners fran-
chising can provide a meaningful pathway to entrepreneurship,
high-earning careers, and financial independence while creating
jobs and opportunities for local communities.
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At its best, franchising is a mutually beneficial agreement.
Franchisees gain access to branding, systems, and national mar-
keting, while franchisors expand their footprint and share the suc-
cess 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 re-
strictions 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 incom-
plete or misleading financial information. More complete disclo-
sures 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 de-
faulted 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 recog-
nize 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 hir-
ing 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 Re-
serve paused interest rate cuts, delaying access to affordable cap-
ital 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 pro-
tect small business owners engaged in the franchising ecosystem
and the issues emerging from the absurd and chaotic economic poli-
cies 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,
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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 Hair-
styling Awards MBAA Award, and Lunatic Fringe later earned the
NAHA Salon Team of the Year Award in recognition of its leader-
ship 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 ac-
counting operations while providing strategic and operational lead-
ership 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 bach-
elor’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-per-
forming operation through a strong focus on leadership, service,
and execution.
Mr. Troutman is actively expanding his business with two addi-
tional locations in development and remains committed to commu-
nity engagement through job creation and local charitable events.
I am looking forward to hearing your testimony, too, Mr. Trout-
man.
I now recognize Representative McIver from the great State of
New Jersey to briefly introduce her constituent and the last wit-
ness 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 stim-
ulating 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 regu-
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latory requirements, all while responding to rising labor costs, in-
flation, 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 trans-
lates into real outcomes for workers and communities.
Decisions made in Congress affect whether small franchise own-
ers 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 tes-
timony.
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 re-
marks.
STATEMENTS OF MS. ANGIE KATSANEVAS, FOUNDER AND
OWNER, LUNATIC FRINGE; MS. TINA PATEL, CO-PRINCIPAL,
CHIEF FINANCIAL OFFICER, PROMISE HOTELS; MR. CLEM-
ENT TROUTMAN, FRANCHISE OWNER, TROUTMAN MANAGE-
MENT LLC; AND MR. RICO MACARAEG, CO-FOUNDER AND
CEO, STRIVEWELL
STATEMENT OF ANGIE KATSANEVAS
Ms. KATSANEVAS. Mr. Chairman, Ranking Member Velázquez,
and distinguished Members of the Committee, thank you for hav-
ing 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 House-
wives of Salt Lake City.’’ But long before I was on television, I was
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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 so-
cial media, they weren’t just about the usual response to drama,
they were overwhelmingly in support of my business and sup-
portive 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 busi-
ness.
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 in-
dustry, 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 cul-
ture, 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 em-
ploys local stylists and serves her community. And it is only pos-
sible 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.
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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 entre-
preneurs 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 busi-
ness 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 life-
time 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 busi-
ness model and the entrepreneurial opportunity it creates for small
business owners in America.
This is especially timely as you can consider policies that will im-
pact 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 eco-
system.
I am a proud first-generation American small business owner
and hotelier from eastern Oklahoma. We own and operate seven
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hotels representing 713 guest rooms and employing more than 165
associates.
Throughout the decades, we had been franchisees of several lead-
ing 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 oper-
ating a 54-room Best Western hotel in Sand Springs, Oklahoma.
This partnership with a national trusted brand gave us the con-
fidence 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 fed-
eral 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 Oppor-
tunity Zone program, which allowed us to develop a hotel in Tulsa’s
historic Greenwood District that now employs over 30 staff mem-
bers.
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 in-
troduced by my hometown Congressman Kevin Hern.
Franchisees like me need a permanent, commonsense joint em-
ployer definition. For decades, this rule has shifted with each ad-
ministration, 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 crit-
ical SBA financing is to starting a business. Today, capital has
been increasingly expensive, stifling new development and rein-
vestment.
I call on Congress to raise the 7(a) and 504 SBA loan limits. This
will enable more entrepreneurs to grow their businesses, support
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job creation, and drive tourism and economic activity in the com-
munities we live in.
Finally, continue to incentivize entrepreneurship. As outlined in
the Working Families Tax Cut Act, we must ensure more Ameri-
cans 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 ex-
pand 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 Velázquez, 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 store-
front. I come from humble beginnings rooted in the belief that de-
manding 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 sup-
porting 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
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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, emo-
tional 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 con-
tributions of the franchise community today. And will you please
pass the bipartisan American Franchise Act to protect the fran-
chise business model for the next generation of small business own-
ers?
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
Velázquez, and distinguished Members of the Committee, including
New Jersey’s own Congresswoman McIver, thank you for the op-
portunity to testify before you today.
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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 power-
ful 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 rambunc-
tious boys, working three jobs just to make ends meet. My father
was an immigrant from the Philippines who later became an Amer-
ican 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, earn-
ing 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 cre-
ate jobs, support healthier lives, and ultimately provide the founda-
tion for a lasting family legacy. And that is why we chose fran-
chising.
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 per-
cent 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.
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For a newly open small business, that kind of surprise imme-
diately 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, train-
ing, 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 trust-
ed and reliable source of information, but in reality, it is not mean-
ingfully regulated. Franchisors get to choose what financial data
and how they decide to present information in the financial disclo-
sure 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 tran-
sition. 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 ex-
perience.
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 my-
self 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 cyberse-
curity 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 expe-
rience that have helped shape your approach to running a success-
ful franchise?
Mr. TROUTMAN. Mr. Chairman, wow. Yes.
So, transitioning from the Navy through contracting into fran-
chising was a—skills we learned in the military were directly relat-
able to being in a franchise business.
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Standard operating procedures, which are common, of course, in
the military, have structured approaches to doing things and get-
ting 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 im-
portant 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 com-
pany. 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.
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Chairman WILLIAMS. Okay. Thank you for that.
I now recognize the Ranking Member for 5 minutes of questions.
Ms. VELÁZQUEZ. 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 im-
pacted 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 tar-
iff ups and downs, as we call them, and it provided a lot of uncer-
tainty 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 sta-
bility.
Ms. VELÁZQUEZ. 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 reve-
nues 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. VELÁZQUEZ. 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 im-
pacted 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 fed-
eral, 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.
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Ms. VELÁZQUEZ. 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 cur-
rently 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 Janu-
ary 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. VELÁZQUEZ. 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, ex-
cuse me—and it is not consistent across the board.
Ms. VELÁZQUEZ. 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 sev-
eral 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 Re-
publicans 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.
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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, Congress-
man.
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 fran-
chise can modernize the entire space with 12 stations a year. With-
out 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 up-
grade their space and salons years ahead of schedule which im-
proves 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 sup-
port 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.
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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, up-
dated 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 ad-
vantage 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 com-
munity 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 un-
known. 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 fran-
chises. 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
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and spices are. They use them in Bangladesh and Brazil and so
many other places. KFC is eaten by Japanese families on Christ-
mas 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 ad-
ministration are creating right now for our small business owners.
Whenever I am around talking to small business owners, the num-
ber 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 Ca-
nadians, we are seeing how they have stopped drinking bourbon.
When is fried chicken going to be next in some of these coun-
tries? 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, ingre-
dients, 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 utili-
ties 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 state-
ment on the tariffs. You must have had some exposure to these tar-
iffs 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 busi-
ness right now?
Mr. TROUTMAN. We are seeing increases in pricing. That is oc-
curring. 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
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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 fran-
chise owner hit harder by tariffs, especially tariffs that are imple-
mented 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 alter-
nate 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 Com-
mittee 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 entrepre-
neurship in our economy. It is built upon the principle of local own-
ership.
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, in-
vestment, 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 en-
trepreneurs 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, particu-
larly when it comes to the joint employer rule.
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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 inde-
pendent 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 Ameri-
cans can achieve their dream of business ownership and continue
strengthening their local communities.
Ms. Angie K, in your testimony you describe how franchising al-
lows stylists to move from employees to become independent busi-
ness owners.
What is it about the franchise model that makes that sort of up-
ward mobility and the American Dream more accessible.
Ms. KATSANEVAS. Well, thank you for the question, Congress-
woman.
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 commu-
nity. 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 busi-
ness 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
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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 in-
volved in the business, if they get too involved, then it gets in the
way of what, as an independent business owner, me making deci-
sions, 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 try-
ing 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 busi-
ness 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.
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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 Con-
gress—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 busi-
ness has been impacted—I know you have answered this in a num-
ber of different iterations—but by specifically the shifting joint em-
ployer 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 cer-
tainty 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.
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Can you explain briefly why franchises, in particular, are vulner-
able to absorbing these tariff costs?
Mr. MACARAEG. Yes. We are vulnerable because we have to de-
cide 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 leader-
ship.
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 employ-
ment 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 dif-
ferent industries. It created franchisors, the same as prime contrac-
tors, 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 distinc-
tions 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 im-
mediate control over essential employment terms, protecting work-
ers where control is real while preserving the independence of inde-
pendent local franchise owners. That is clarity, fairness, and ac-
countability 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.
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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 an-
swer. 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 con-
struction 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.
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Mr. LALOTA. Great.
In closing, Mr. Chairman, the American Franchise Act takes a
narrower approach than the bill that has been mentioned. It recog-
nizes the joint employer status only when there is substantial, di-
rect, and immediate control over employment decisions. I appre-
ciate 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 busi-
ness but may not have the resources to start entirely from scratch.
Franchising allows small business owners to operate independ-
ently in their communities while benefiting from established
brands, operating systems, and customer trust.
For many first-time entrepreneurs, that structure can make busi-
ness 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 dan-
gerous 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 govern-
ment 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 inter-
ests 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 cred-
its 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 em-
ployees?
Mr. MACARAEG. Thank you for the question, Congresswoman.
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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 re-
sult of the rising costs of the healthcare system.
Mrs. MCIVER. Thank you for that.
Have you personally seen or experienced yourself a delay in hir-
ing 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 chal-
lenged 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 be-
cause we hear those stories all the time about folks trying to pro-
tect 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 di-
lemma do we absorb those costs or do we pass them on to our cus-
tomer. 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.
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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 mili-
tary. And Rico can speak to this as well.
But if you are on a ship—and I can speak from a Navy perspec-
tive—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 high-
lighted that veterans are nearly three times as likely to own fran-
chises 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, with-
out 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 amaz-
ing 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. Infor-
mation 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
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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 munici-
palities, 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 oper-
ate 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 commu-
nities.
Mr. DOWNING. Outstanding.
Unfortunately, I have run out of time. But thank for your re-
sponses.
And on that, Mr. Chair, I yield.
Mr. LALOTA. The gentleman yields.
You can never get enough Navy at one Small Business Com-
mittee 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 actu-
ally did purchase a franchise and opened up a business. But, unfor-
tunately, 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 entre-
preneurs 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 re-
ceived here, I can guarantee you the FDD that I have received and
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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 in-
dustry such as franchising, which, I think was mentioned, almost
a trillion dollars of our GDP is so unregulated that it can look vast-
ly 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 pre-
sented, 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, Congress-
man.
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.
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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 be-
come 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 essen-
tial 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 up-
hold 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 ad-
vance policies that cut red tape, keep taxes low, and provide the
certainty franchise owners need to meet their obligations and con-
tinue, 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 stand-
ards?
Ms. PATEL. Very consistent. It affects everybody in the franchise
world in that brand.
Our customer set expects to see the same business model wheth-
er 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.
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And so brand consistency and upholding our standards are para-
mount 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 vio-
lations? 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 under-
standing 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.
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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 own-
ers.
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 eventu-
ally 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 back-
bone 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 con-
tribute 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 immi-
grant 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 immi-
grants 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.
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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 busi-
ness owners, your ability to hire, retain workers, plan for the fu-
ture?
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 see-
ing 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 De-
partment 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 in-
fused 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 Jer-
sey in the room here today. And with that, I recognize Dr. Con-
away from the Garden State for 5 minutes.
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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 im-
pact 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 pro-
duction for them.
And, of course, raising those costs are often passed on to con-
sumers, 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 afford-
ability 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 busi-
ness 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 con-
sumers.
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
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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 owner-
ship 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 Cor-
porate 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 as-
sisting those who are attacking our country, who are money laun-
dering, 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 an-
swer 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 Congres-
sional 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 Fran-
chise Act. I think it is an important step forward for this Com-
mittee, for this Congress, and for this country.
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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 mili-
tary 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 fran-
chise model not only can do that; as we see, it often does.
I also want to applaud Richie for Celebree supporting many phil-
anthropic 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 suc-
ceed, 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, Congress-
man.
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 in-
creases as well in our cost of goods. So, as we look at our COGS,
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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 pan-
demic. 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 light-
hearted 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 Com-
mittee 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 ad-
ditional materials and written questions for the witnesses to the
Chair, which will be forwarded to the witnesses. I ask the wit-
nesses 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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File and source
- File
- CHRG-119hhrg62604.pdf
- Size
- 9,433,102 bytes
- SHA-256
- 5b21a7cf8df63cbf7c3d34e52c960211ae26ec22466cf863363f959455ad6748
- Our copy
- CHRG-119hhrg62604.pdf
- Original
- www.govinfo.gov