WASHINGTON – Today, the House Small Business Committee held a hearing titled “A Small Part in a Big Company: Examining the Power of Franchising in the American Economy.” The hearing examined how economic instability and federal policies are affecting the franchise model, which includes many small, independently owned businesses across the country.
During the hearing, Ranking Member Nydia M. Velázquez (D-NY) warned that President Trump’s trade policies and failure to enforce transparency laws are creating serious challenges for small business owners operating under the franchise model.
“When combined with a generally weakening economy, the uncertainty and higher costs caused by the President’s tariff policies are beginning to force franchises and other small business owners to make difficult choices,” said Ranking Member Velázquez. “Franchises and other small businesses are especially vulnerable to tariffs and economic uncertainty.”
Velázquez pointed to new GDP data showing a 0.3 percent contraction in the first quarter of 2025, alongside inflation numbers indicating continued price increases. She noted that forecasters across the spectrum are increasingly warning of a potential recession, with J.P. Morgan placing the odds of a U.S. and global recession at 60 percent—directly attributing that forecast to Trump’s tariff policies.
In addition to economic instability, Velázquez raised serious concerns about the Trump Administration’s decision to halt enforcement of the Corporate Transparency Act (CTA). The bipartisan law was designed to prevent criminals, corrupt actors, and foreign adversaries from using anonymous shell companies to launder money, commit fraud, and distort the marketplace.
“Passed in 2021 with wide bipartisan support, the CTA requires the Treasury Department to develop and maintain a registry of the real beneficial owners of companies to crack down on shell companies in the U.S.,” said Ranking Member Velázquez. “While there were problems with the rollout, that’s no justification for refusing to enforce the law. Doing so puts law-abiding small businesses at a competitive disadvantage.”
Witness Gary Kalman, Executive Director of Transparency International U.S., testified that the rollback of the CTA creates serious risks.
“The Corporate Transparency Act, as originally intended, would provide law enforcement with the tools to uncover who is funding these organizations,” said Kalman. “The administration’s interim rule threatens to make the United States a magnet for foreign criminals across the world.”
