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Don’t harm small business franchisees

Without the COVID-19 pandemic driving the news cycle, some political figures on Capitol Hill are back to their favorite pastime: making big business America’s boogeyman.

Last month, the Senate Committee on Small Business and Entrepreneurship, chaired by my own Sen. Ben Cardin, D-Maryland, held a hearing on franchising looking at both the practices of franchisors and the local business owners like me who bring their products and services to customers across the country.

A report from Sen. Catherine Cortez Masto, D-Nevada, on so-called “deceptive practices” of franchisors was front and center, but if Congress heeds her call to crack down on these corporations through the U.S. Small Business Administration (SBA), it’s local entrepreneurs like me — veterans, people of color, inheritors of the American Dream — who will suffer the consequences.

Alongside nearly 14,000 other Marylanders, I’m a small business owner and proud franchisee. I own a Tropical Smoothie Café in Capitol Heights, bringing healthy options to an area considered a food desert. My business’ resounding success has allowed me to expand into a space nearly three times as large and consider additional locations in Bowie and Upper Marlboro.

While most Tropical Smoothies hire between 25 and 30 employees at a time, mine hires 40 to 45 in the busy summer months.

I’ve known I wanted to go into business for myself since I was 12 years old, but it wasn’t always clear how I’d get there. I’m a Black man born in inner-city Detroit, and we moved to Macon, Georgia, in the 1960s, which, at the time, wasn’t exactly a metropolis of opportunity for people like me. After I injured my shoulder playing college football, I joined the Navy, where I served until transitioning into cybersecurity.

While my family and I were happy, I never forgot my entrepreneurial dream. After all, dreams don’t expire, people do.

It was my daughter who introduced me to Tropical Smoothie Café, and almost immediately I knew this was my chance. Even from the application stage, it was clear they viewed their franchisees as respected partners. Because I’m a veteran, I qualified for paying half the franchise fee, and despite the fact that I only recently transitioned into business, the resources and support they provided made me feel like I’d been doing it all my life.

Because I didn’t have the access to capital needed to pay for legal fees, renting space, buying equipment, and more, I needed a loan. Like thousands of other Americans, to get that loan, I needed support from the SBA, which offers the federal government’s guarantee to reassure the bank the loan is a safe bet. Without the SBA’s guarantee, I’m not sure how I would’ve opened my business.

Misguided proposal

At least one proposal that was considered in the hearing would jeopardize that support. On its face, it would require a franchisor to disclose an abundance of financial performance information to any potential franchisee before the SBA provides their guarantee.

But here’s the kicker: For any “violations” of incomplete data, the SBA can force the corporation to pay the loan. Thousands of franchisees, multiplied by hundreds of thousands of dollars in each SBA-backed loan — a savvy corporation would never stomach that level of risk, leaving them no choice but to severely limit partnerships with people who need the SBA’s support to pursue business ownership.

Mandatory disclosure seeks to protect entrepreneurs from corporations that provide false information to sell more locations, and I don’t deny there are a few bad apples in the franchisor bunch. But that’s a localized problem that requires a razor-sharp solution.

The impact of this blunt instrument would harm the same people it’s intended to protect: the people of color from inner-city Detroit; the veterans who make up in leadership what they may lack in business experience; the immigrant and the refugee; the single mom; the returning inmate.

By exponentially increasing the risk our brands must shoulder to partner with people like us, policies like this inadvertently close the door of opportunity to those who need it most.

Going into business is risky no matter what, but because of the support I received from my franchisor, I was able to go into business for myself, without having to do it by myself. Franchising helped me achieve my dream — the American Dream. If Congress wants more people like me to achieve it too, they should abandon interventions against the franchise business model.

Clement Troutman, a Navy veteran and Odenton resident, is a franchise owner of a Tropical Smoothie Café in Capitol Heights, with two more Maryland stores opening soon.