You know that hiring and retention are critical to franchisee success. When franchisees build strong teams, they win. When they struggle, everything else falls apart.
But the rules around what franchisors could safely do to help without crossing into joint employer territory were never clear and shifted with each change in presidential administration. It’s a real challenge and has been a friction point across the industry for years.
Many franchisors err on the side of caution and stay away from certain types of support. Some avoid offering people management tools altogether, while others provide limited guidance but hold back from comprehensive support.
The cost of that uncertainty shows up across franchise systems. Franchisees are struggling to fill positions and high turnover impacts consistent customer experiences. The business knowledge about how to help franchisees do better exists, but concerns about joint employer status and unintended liability hold everyone back.
The American Franchise Act (H.R. 5267) would give franchisors clarity
Introduced in September 2025 with bipartisan support, the American Franchise Act defines exactly what does and does not constitute joint employer status. No ambiguity or shifting standards, it offers a clear demarcation around what you can do to support your franchisees where it matters most.
Understanding where we are today
The current standard established by the National Labor Relations Board’s (NLRB) 2020 rule and still in effect already requires “substantial direct and immediate control” over essential employment terms for joint employer status. This is similar to what the American Franchise Act would codify.
Under the 2020 rule, franchisors can set brand standards, offer training materials, establish minimum staffing requirements, and provide support resources without crossing into joint employer territory.
But the problem is that the 2020 rule can be changed at any time by a future NLRB.
And it has been. The definition of joint employer has shifted four times in the past decade as administrations changed. In 2023, the NLRB tried to expand the definition dramatically (requiring only “reserved authority to control” rather than actual exercise of control), though that rule was struck down by federal court in March 2024. The uncertainty has been constant.
What makes the American Franchise Act important?
The American Franchise Act offers permanence and specificity. By writing these protections into federal statute rather than leaving them to NLRB rulemaking, the American Franchise Act would end the decade-long cycle of uncertainty. Franchisors could finally invest in people support systems knowing the rules won’t change with the next administration.
Rather than leaving “control” open to interpretation the way past rules have, the American Franchise Act provides concrete examples of what does and does not constitute joint employer status for each employment category. This level of detail removes guesswork and gives franchisors clear guardrails for supporting their franchisees.
What creates joint employer status?
The American Franchise Act identifies “essential terms and conditions of employment” and provides precise definitions for each:
- Permits franchisee to participate in franchisor’s benefits plan under an arm’s-length contract
| Category | Franchisor IS NOT a joint employer: | Franchisor IS a joint employer: |
| Wages & Benefits | Permits franchisee to participate in franchisor’s benefits plan under an arm’s-length contract | Determines wage rates, salary, or pay for individual employees or job classifications Determines which fringe benefits are provided to franchisee employees Selects specific benefit plans or dictates benefit levels |
| Hours & Scheduling | Establishes franchisee’s operating hours Establishes minimum staffing levels to meet service standards | Determines work schedules or work hours (including overtime) of franchisee employees |
| Hiring | Encourages, recommends, or requests staffing level changes Sets minimal recruiting/hiring standards for legal compliance, safety, or brand protection | Determines which particular employees will or won’t be hired |
| Discipline & Discharge | Brings misconduct/poor performance to franchisee’s attention (who makes the final decision) Expresses negative opinion of an employee Sets minimal performance/conduct standards for legal compliance, safety, or brand protection Refuses to allow an employee to perform work under the franchise contract | Decides to terminate employment of a franchisee employee Decides to suspend or otherwise discipline a franchisee employee |
| Supervision & Direction | Provides limited, routine instructions on what work to perform, where, and when (but not how) Sets brand standards for work performance Offers training materials for franchisee to use Establishes minimum training requirements Offers resources and tools for franchisee to consider using for directing work schedules, positions, and tasks | Consistently and directly instructs franchisee employees how to perform their workIssues employee performance appraisals Assigns particular employees their individual work schedules, positions, and tasks |
Ongoing control is the critical distinction
The American Franchise Act doesn’t just require “direct and immediate control.” It requires substantial direct and immediate control, defined as control that:
- Has a regular or continuous consequential effect on employment terms
- Is not sporadic, isolated, or de minimis
This protection exists under current law too. The 2020 NLRB rule uses the same language, so one-time interventions or occasional involvement don’t create joint employer status today. The control must be ongoing and meaningful.
For example, if you step in once to address a serious safety issue with a franchisee’s employee, that’s not joint employment. But if you’re regularly making those decisions for the franchisee, it crosses the line.
The American Franchise Act codifies this distinction into permanent statute, ensuring it can’t be changed by future NLRB rulemakings.
The American Franchise Act will support franchise growth
The American Franchise Act protects the fundamental franchise model: franchisors can maintain brand standards, quality control, and operational consistency without being deemed employers of franchisee staff.
The framework recognizes that:
- Franchisees are independent business owners who control day-to-day operations and labor relations
- Franchisors can enforce standards that protect brand integrity, consumer safety, and legal compliance
- Brand protection activities don’t create employment liability
This clarity unlocks the ability to build what franchisees need most: robust people systems.
When franchisors can safely provide hiring tools, retention strategies, and management training, franchisees build stronger teams. Stronger teams deliver better customer experiences. Better experiences drive revenue. And revenue growth benefits the entire system.
Where the American Franchise Act stands today
Current status: The American Franchise Act (H.R. 5267) was introduced in the House of Representatives on September 10, 2025, with bipartisan support led by Rep. Kevin Hern (R-OK) and Rep. Don Davis (D-NC). A companion bill (S. 3525) was introduced in the Senate in late 2025 by Senators Roger Marshall (R-KS) and Angus King (I-ME).
Committee review: The House bill is currently under review in the Committee on Education and Workforce.
Industry support: The bill has strong backing from the International Franchise Association and various business coalitions that have been advocating for joint employer clarity.
What to watch: If passed, the Act would amend both the National Labor Relations Act (NLRA) and the Fair Labor Standards Act (FLSA), creating a single, stable federal standard for joint employment in franchising. It would only apply prospectively—not to any proceedings commenced before the date of enactment.
Less ambiguity will help everyone succeed
The American Franchise Act creates a bright-line test that preserves the franchise business model while clarifying employer responsibilities. By specifically defining what constitutes joint employment across each essential employment category, the bill removes the ambiguity that has plagued the industry.
For franchise brands, this means the ability to protect brand standards and ensure quality without inadvertently becoming a joint employer.
For franchisees, it means maintaining true independence as business owners while getting the support they need to succeed with their people.
For the 8.4 million employees working in franchise businesses, it means clarity about who their actual employer is.
Most importantly, it means franchisors can finally help franchisees with what matters most: building great teams. The tools, training, and support that have sat on the shelf for fear of legal risk can now be deployed. That’s how franchise systems get stronger — not just in compliance, but in actual performance.
Note: This article is for informational purposes only and does not constitute legal advice. The American Franchise Act is pending legislation and subject to change. Consult with legal counsel regarding your specific situation.