As a financial journalist at Epochedge.com, I’ve spent nearly two decades tracking how legislation shapes business landscapes across America. This week, a significant development caught my attention in Arizona’s legislative arena that could fundamentally alter the balance of power between franchise operators and their corporate parents.
Arizona lawmakers have introduced a groundbreaking bill designed to strengthen protections for small business owners operating within franchise systems. The proposed legislation, which began circulating in the Arizona State Legislature earlier this month, addresses long-standing power imbalances that have left many local franchisees vulnerable to what critics describe as predatory corporate practices.
The bill, formally titled the “Small Business Franchise Protection Act of 2025,” aims to restructure several critical aspects of the franchisor-franchisee relationship. According to documents obtained from the Arizona Capitol, the legislation would establish more transparent renewal terms, limit arbitrary termination rights, and create meaningful remedies for small business owners who face unfair treatment.
“What we’re seeing is an attempt to level what has historically been a deeply uneven playing field,” explains Maria Contreras, senior analyst at the Arizona Small Business Association. “Many franchisees invest their life savings only to discover the fine print gives corporate headquarters extraordinary power over their business operations.”
Data from the International Franchise Association shows that Arizona hosts more than 15,000 franchise establishments employing approximately 170,000 workers and generating $18.6 billion in economic output annually. These businesses span diverse sectors from quick-service restaurants to hotel chains, retail outlets, and service providers.
The legislation emerges amid growing national awareness of franchise relationship challenges. A Federal Trade Commission report released last quarter identified systematic issues within the franchise sector, including disclosure problems, unexpected fees, and territorial encroachment that threaten franchisee profitability.
“The current system often allows corporate franchisors to make unilateral changes that directly impact a franchisee’s bottom line with little recourse,” says Thomas Willingham, an attorney specializing in franchise law at Phoenix-based Maricopa Legal Partners. “This includes everything from mandating expensive store renovations to changing supply chain requirements without adequate consultation.”
Among the bill’s most significant provisions is a requirement that franchisors demonstrate “good cause” before terminating a franchise agreement. Currently, many contracts permit termination for minor infractions or through technical violations that franchisees argue are sometimes used strategically by corporate parents seeking to reclaim profitable locations.
The Arizona Restaurant Association has raised concerns about potential unintended consequences. “While we support fair business practices, we need to ensure this legislation doesn’t discourage national brands from expanding in our state,” notes their statement released yesterday. “There’s a delicate balance between protecting small operators and maintaining a business-friendly environment that attracts investment.”
Economic research from Arizona State University suggests franchise businesses have higher five-year survival rates (72%) compared to independent small businesses (48%), making them crucial vehicles for entrepreneurship. However, the franchise model’s benefits come with significant constraints on operational independence.
“The franchisor-franchisee relationship is fundamentally imbalanced,” observes Dr. Eleanor Sanchez, professor of business economics at ASU’s W.P. Carey School of Business. “Franchisees take on substantial financial risk while franchisors retain extraordinary control over nearly every aspect of the business operation. This legislation attempts to address that structural inequality.”
Industry response has been predictably divided. The Arizona Chamber of Commerce expressed reservations about “excessive regulatory intervention in private contracts,” while the newly-formed Arizona Franchisee Coalition has mobilized strong support, claiming to represent over 1,200 franchise owners across the state.
Mark Reynolds, a Phoenix-based owner of three franchise restaurants, shared his perspective: “I’ve invested nearly $1.2 million in these businesses and employ 42 people. Yet decisions made in a corporate office two thousand miles away can dramatically impact my ability to operate profitably. This isn’t about avoiding reasonable brand standards—it’s about basic fairness and reasonable protection for local entrepreneurs.”
Similar legislation has been introduced in seven other states over the past three years, with varying results. California passed a modified version last year, while efforts in Florida and Texas failed to advance beyond committee hearings.
The bill faces several legislative hurdles before potentially becoming law. The State Senate Commerce Committee has scheduled hearings for January 14th, where both supporters and opponents will present testimony regarding the proposal’s economic impacts.
For Arizona’s small business community, particularly the thousands operating under franchise agreements, the outcome will determine whether significant new protections reshape their business relationships or if the status quo prevails in one of the nation’s fastest-growing franchise markets.
