Lusthaus Law regularly shares news and legal updates that could shake up franchising – whether it’s at the state, national, or industry level. Important changes and new rules pop up to govern and improve franchising. Let's review some updates from the last three months that could impact your NY franchise.
Proposed Labor Law Could Impact NY Franchisors
Introduced in April 2025, New York Senate Bill S7289 proposes to amend the New York Labor Law by adding a new Article 35-A, titled the New York State Fast Food Franchisor Accountability Act. The bill is designed to hold fast food franchisors jointly accountable for labor law violations committed by their franchisees within New York State.
The legislation would apply to fast food chains operating 50 or more establishments nationwide under a common brand or standardized operations. Covered locations include those that provide quick service, limited table service, and prepare food in advance for on-site or take-out consumption.
A key provision of the bill establishes joint and several liability between franchisors and their franchisees for violations of employment, workplace safety, workers’ compensation, public health, and emergency laws. This means that state agencies could enforce penalties, fines, and legal actions directly against franchisors, alongside or in place of franchisees.
The bill would also prohibit franchisor-franchisee contract provisions that shift legal liability away from franchisors, declaring such clauses void as against public policy.
Additionally, the proposed law empowers franchisees to seek legal remedies against franchisors whose contractual terms significantly impede their ability to comply with relevant laws or unreasonably increase compliance costs. In these cases, a rebuttable presumption would favor the franchisee’s claim.
As of June 2025, the bill remains under review in the Senate Labor Committee. Read it here.
SBA Franchise Directory Reopens
The Small Business Administration’s (SBA) Franchise Directory is back. The directory is an official, SBA-maintained list of franchise brands eligible for SBA-backed financing. Its primary purpose is to streamline the loan approval process by confirming a franchise system’s eligibility upfront, reducing the need for lenders to individually review and analyze franchise agreements for each loan applicant.
To qualify for inclusion, a brand must meet the Federal Trade Commission’s legal definition of a franchise or, in some cases, submit license or dealer agreements for SBA review. Importantly, inclusion in the directory does not imply endorsement or guarantee of success by the SBA — it simply confirms the brand’s structural eligibility for SBA lending programs. Approved franchisors receive a unique Franchise Identifier Code.
Without the directory, lenders face lengthier, more complex underwriting processes, which can deter prospective franchisees and slow system growth. The directory was discontinued in 2023, causing delays and inconsistencies in franchise lending, but was reinstated on June 1, 2025, addressing a key operational gap for the sector.
Franchisors must submit an updated “Franchisor Certification” by July 31, 2025, to remain listed. Missing this deadline risks removal and limits franchisees’ ability to access SBA-backed loans — a critical funding source for new unit openings and transfers. For franchisors, franchisees, and lenders alike, directory participation directly impacts system growth, resale markets, and access to capital.
Visit the directory and check out your eligibility here. Your NY franchise lawyer can help ensure you are accurately listed.
Awaiting Clear Guidance on Corporate Transparency
At the end of Q1, we discussed how the Corporate Transparency Act (CTA) was undergoing major restructuring. The CTA required most U.S. companies and certain foreign entities to report their beneficial ownership information (BOI) to FinCEN to combat money laundering and corporate anonymity. In March 2025, an Interim Final Rule significantly narrowed the scope. Now, U.S.-based companies and individuals are exempt from BOI reporting. Only foreign entities registering to do business in the U.S. must file BOI reports with FinCEN.
FinCEN announced it would pause enforcement actions until deadlines pass and, with public comment closed, a final regulatory decision will be issued later in 2025. This regulatory shift relieves U.S. small businesses and franchisors from federal BOI reporting but leaves obligations in place for certain foreign firms.
Important changes occur regularly, along with new concepts designed to enhance and regulate the franchising sector. That is why franchisors and franchisees should collaborate with a qualified NY franchise lawyer to perform legal audits of their enterprises and review compliance with existing and forthcoming laws.
Contact Lusthaus Law
Lusthaus Law’s website is a resource for New York franchisors and franchisees. We have published two downloadable and complimentary e-books and our Insights blog is regularly updated to reflect industry trends and recent achievements in client representation.
Contact us today to learn more about how Lusthaus Law P.C. can help you navigate a clear path for your franchise’s successful future.
