As the government has been shut down for over a month, small business owners — including hundreds of thousands of franchisees across the country — are feeling the strain. Franchises rely on stability, access to capital, and consumer confidence – all of which are jeopardized by prolonged shutdowns.

Here are three ways the shutdown is hurting franchising – and why IFA is calling on Congress to pass a government funding measure to end the shutdown:

1.Access to SBA Loans and Capital

One of the most significant direct impacts for franchises is Small Business Administration (SBA) loans, as approximately twenty percent of all SBA loans go to franchises, with more than $15 million in SBA lending flowing to franchise businesses every day, according to FRANdata.

According to the SBA, 4,800 small businesses have been blocked from receiving $2.5 billion in capital since the start of the shutdown. Every day the shutdown continues means another 320 small businesses will not have access to the SBA-backed commercial loans these businesses were counting on for expansion and growth. For entrepreneurs who have been waiting to open their doors, to those whose future hangs in the balance, this government shut down has pumped the breaks for too many looking to get started in business.

“Each day the SBA lending system is frozen, hundreds of franchise small business owners lose access to the capital they need to open doors, hire employees, or reinvest in their communities,” said Edith Wiseman, President, FRANdata. “Franchisees represent nearly 20% of SBA 7(a) loan dollars—so when that flow of funding stops, the effects ripple through neighborhoods nationwide.”

SBA lenders, such as IFA-member Benetrends Financial, are doing everything they can to keep funding on track for future franchise owners so they are well positioned once the government reopens. Benetrends CEO Rocco Fiorentino said, “There’s still critical work being done every day, from business planning and underwriting to pre-qualifications with lenders. At Benetrends, we’re continuing business as usual to make sure our clients and franchisors are ready to move the moment SBA processing resumes.”

2. Delays in Federal Contracting, Permits, and Approvals

Franchise businesses in industries that depend on federal inspections, permits, or contracting — from food service to hospitality — are seeing delays and suspensions. These hold-ups not only stall growth but create uncertainty for both existing operators and entrepreneurs preparing to launch new locations.

Uncertainty is a tax for small businesses, a tax that franchise owners have already paid for dearly in recent years. External factors including a global pandemic, generational inflation, supply chain and labor challenges, ever-changing rules and heavy-handed and punitive regulations at the state and local level, have made business decisions incredibly difficult for franchise owners.  The unpredictability of the shutdown compounds matters.

3. Lower Consumer Confidence and Spending

When consumers pull back, local franchise businesses feel it first. The longer the shutdown continues, the more challenging it becomes for small business owners to plan, hire, and serve their communities. With hundreds of thousands of government employees furloughed or unpaid, consumer demand is taking a noticeable hit — affecting restaurants, retailers, and service providers alike.

This is not just in the D.C. area. Economists estimate that the shutdown will trim between 0.1 and 0.2 percentage points off annual growth in economic output each week. That amounts to between $7.6 billion and $15.2 billion a week based on hours that government employees aren’t working, according to Oxford Economics.

Franchises are cornerstones of local economies — creating jobs, driving investment, and building community wealth. But their ability to operate depends on a functioning government and access to essential federal resources.

“The government shutdown also undermines franchisors’ support to their franchisees,” said IFA President and CEO Matt Haller. “The cascading effect of new franchise locations being delayed from opening to customers not buying products or services to unrealized royalty revenue has the net effect of brands providing support to their franchisees, undermining the health of the franchise ecosystem. It’s a lose-lose for everyone – brands, franchise owners, employees and the communities they service. That’s why we need Congress to pass a clean CR.”

As IFA outlined in a recent coalition letter, the effects of the shutdown will only grow wider with each passing day unless the Senate acts. Passing a clean continuing resolution (CR) is a smart, responsible, and bipartisan course of action. It will provide certainty for small business owners, employees and workers who are counting on actions from their elected officials that produce certainty and stability. We urge every Senator to support a clean CR that allows the appropriations process to move forward to ensure the federal government remains open and operational.