Franchise businesses across the U.S. are closely tracking the near-daily headlines and ripple effects of global tariffs. The subsequent geopolitical tensions and market volatility present challenges for franchisors and franchisees alike in operating their businesses and planning for the months ahead.

This week, IFA President and CEO Matt Haller emphasized the role of our collective planning and action:

“Franchising has always been resilient—but we are entering a period where proactive engagement and collaboration are essential. The IFA continues to provide tools, insights, and a strong advocacy voice in Washington to ensure the franchise business model is protected and promoted—both in the short term and for the long run.”

IFA continues to serve as a resource to its members, providing practical guidance to support our brands in an unpredictable environment, including IFA’s “Tariff Strategies for Franchise Companies” webinar presented by the international trade practice of the global law firm Baker McKenzie: Whether you’re leading a global brand or operating a single unit, understanding how these changes affect your business—and acting strategically now—is essential.

Here are several facts about what the tariffs mean – and don’t mean – for franchise businesses:

Tariffs Do Not Directly Impact Cross-Border Franchise Agreements

U.S. tariffs currently apply to tangible goods and do not extend to the intellectual property license granted by a franchisor to a franchisee under a franchise agreement or the payments due to the franchisor by a franchisee for the license. However, cross-border supply to franchised businesses—both sourcing from foreign suppliers to U.S. franchised businesses and supply to foreign franchised businesses from U.S. suppliers—may be impacted by tariffs.

While tariffs currently are not applicable to intangible intellectual property licenses, IFA advises members with international operations to remain alert. Trade wars may lead to complications with IP enforcement or increased regulatory scrutiny abroad. Trademark and brand protections remain a cornerstone of franchising, and vigilance is key in intellectual property rights.  Consult with your international IP law firm regarding the impact of rising geopolitical tension on international operations.

Tariffs May Indirectly Impact Franchise Supply Chains and Consumer Strength

Supply Chain Disruptions

Franchise companies should conduct a supply chain risk assessment—including supply chain related to development materials and continuing supply of goods used in build out and operation of the U.S. franchised business—and country of origin analyses on all imported goods. Consult with your international trade and supply chain counsel to discuss:

  • Potential supply chain disruption for goods that are supplied by a single source;
  • Opportunities to review and modify contractual language to shift the burden of tariff payments;
  • Identify opportunities for exclusions from tariffs; and
  • Develop an onshore manufacturing strategy.

Franchise companies that supply goods from the U.S. to franchised locations globally should also monitor the impact of retaliatory tariffs on outbound supply chain.

Consumer Price Sensitivity

Uniformity is essential in franchising—consistency in service, branding, and product availability is what keeps customers loyal. If tariffs disrupt the flow of goods or make certain imports prohibitively expensive, it can erode the brand experience and impact consumer trust.

Delays or shortages in branded packaging, imported goods, or critical parts can put even high-performing units at risk of disappointing consumers and losing revenue.

Franchise brands are also encouraged to monitor consumer boycotts of certain U.S. brands in foreign markets resulting from rising geopolitical tensions and the impact to franchised businesses operating in those markets.

Lastly, where consumer price increases are included in a tariff mitigation strategy, franchised businesses should evaluate current market conditions and be mindful of consumer spending trends in today’s economy where many consumers already feel squeezed.  In many industries, even modest price increases can shift customer behavior or open the door for competitors to gain market share. This is particularly concerning in an environment marked by inflation and economic anxiety.

IFA Is Here to Help: Tools, Insights, and Advocacy

The IFA has been actively involved through advocacy on the Hill and providing resources and expert analysis to our members to help navigate the ongoing global trade uncertainty. You may access resources available through IFA members below.

DLA Piper: President Trump’s sweeping “reciprocal tariffs” Executive Order: Key points | DLA Piper

Baker McKenzie: International Trade Compliance

Haynes Boone: President Trump Announces New “Reciprocal Tariffs” for Almost All Imports into the United States | News | Haynes Boone

Lathrop GPM: Should Your Business Be Worried About Tariffs? – Lathrop GPM

Polsinelli: New Tariffs Take Effect: What Franchisors and Franchisees Need to Know; What Franchisors and Franchisees Need to Know About the New Tariffs

Cassels: ‘Liberation Day’ Reciprocal Tariffs Announced April 2, 2025 | Cassels.com; Trump Administration’s Trade Policies (including Tariffs) and What It Means for Canadian Businesses (Cassels Webinar) | Cassels.com (For webinar access)

 

Search