It’s a new year, with a new administration in Washington. Everyone’s looking at a crystal ball to figure out how the change in national leadership and moves made by the Federal Reserve will affect business. Here’s a dive into those topics, plus a look back at Donald Trump’s first term and how it impacted the industry.

Immigration policy and labor supply

It’s been estimated that there are some one million illegal immigrant workers employed in the United States hospitality industry. With the incoming administration’s promise to deport illegal immigrants, businesses may be under greater scrutiny with the push for stronger enforcement of immigration laws. Franchise owners should ensure all unit operators are hiring people who are legally able to work in the United States.

Those found to be out of compliance could face large fines. As undocumented workers shift to self-employment or informal, independent contractor work, the number of workers available for the general labor force may drop. This means franchise owners may find themselves forced to pay higher wages or they may choose to embrace automation efforts to fill the labor gap.

Tariffs and supply chains

The tariffs on imported goods and services promised by Trump have the potential to raise prices and disrupt supply chains. Pressure will be greatest on businesses that use imported products, such as seafood from Asia, out-of-season produce from South America, and spices from around the world. Even restaurants that use primarily domestic ingredients, however, may be affected, as new equipment purchases could become more expensive when they come from outside the U.S.

If the tariffs take effect, business owners should expect disruptions to supply chains and higher costs. Even prices of domestically made items may go up if their component parts originate outside the U.S. Suppliers may look for new sources to keep costs down but getting new arrangements up and running takes time and may not always go smoothly.

Franchise restaurant owners may have to once again increase menu prices, decrease their profit margins, or deploy creative cost savings measures—such as seasonal menus relying on local products—to ride out the effects of import tariffs.

Tax impacts

The Trump administration will be looking to reinstate or make permanent many of the provisions of the 2017 Tax Cut and Jobs Act, passed during his first term. Trump has made it a priority to renew the Act’s 100 percent bonus depreciation provision. If enacted, this provision will allow business owners to deduct 100 percent of the cost of many large purchases—equipment, technology upgrades, etc.—in the year they were purchased rather than being depreciated over time. This provision thus lowers the taxable income of a business and its tax bill.

Lowering of the corporate tax rate is likely under a Trump administration, as he has signaled a wish to drop the rate from 21 to 20 percent. He has indicated that he may push for an even lower rate for companies that manufacture in the U.S. He has also cast a favorable eye on lowering the capital gains rate, a move that could prompt some business owners who are considering retirement to sell.

Interest rates outlook

The Federal Reserve Board has already dropped the target Federal Funds Rate three times since its recent high in June 2024. While investors had hoped for several more cuts in 2025, recent jobs reports showing a still-hot economy have led the Fed to tamp down expectations. It is still unclear whether rates will increase, decrease, or stay level for the remainder of the year.

Making the most of this environment

Franchise owners can benefit from the likely changes ahead by considering M&A opportunities and making investments in technology to offset labor shortages. With help from a trusted lending partner, franchise owners can take advantage of the current climate and invest in growth.

Alicia Chandler is president of Indianapolis-based First Franchise Capital Corporation, a First Financial Bank company, which provides customized financial solutions for multi-unit quick serve restaurant franchisees of best-in-class concepts nationwide.

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