Since the founding of our country, franchising has been the bedrock of the “American Dream,” allowing aspiring entrepreneurs to go into business for themselves, but not by themselves. 

Today, this engine of economic mobility supports 832,000 franchise small businesses and nearly 8.9 million jobs across the United States. However, a decade of regulatory uncertainty around the federal “joint employer” standard has threatened the future of local business owners and their employees.

The History

The joint employer standard is a critical legal benchmark that determines when two separate entities — such as a franchisor and a franchisee — are both legally responsible for the same group of employees. Since 2015, this standard has changed four times based on political control of the White House.

The consequences of an expanded joint employer standard are significant. Between 2015 and 2017, when an expansive joint employment standard was in effect, the franchise business model suffered:

  • A 93 percent increase in litigation against franchise businesses
  • $33.3 billion in lost economic output
  • The loss of 376,000 franchise jobs

Under the preferred “direct and immediate” joint employer standard, franchisors are free to provide essential resources — such as education, training, and employee recognition programs — without the fear of legal risk. The current regulatory environment remains unpredictable, with ongoing legal challenges threatening to shift the rules once again.

Who Bears the Cost?

This regulatory confusion impacts more than just corporate balance sheets; it hits the heart of local communities. Statistics show that 64 percent of local franchise owners are first-time business owners. Furthermore, franchises are more likely to be owned by women, veterans, and people of color compared to non-franchise businesses.

Beyond ownership, these businesses are vital community pillars. Approximately 85 percent of franchise owners live in the communities where they operate, and 83 percent contribute to local charities, schools, and youth sports. For workers, the franchise model provides higher wage growth and better benefits than non-franchise counterparts.

Without knowing consistent rules of the game, franchisors are less likely to expand through franchising, closing the door to opportunity.

A Bipartisan Path Forward

To provide permanent clarity, a bipartisan coalition has introduced the American Franchise Act (AFA) (H.R. 5267/S. 3525). Introduced in 2025 by U.S. Reps. Kevin Hern (R-OK) and Don Davis (D-NC), and in the U.S. Senate by U.S. Sens. Roger Marshall (R-KS) and Angus King (I-ME), the bill seeks to codify the “direct and immediate control” standard into federal law.

Specifically, the AFA would amend the Fair Labor Standards Act and the National Labor Relations Act to ensure a franchisor is only considered a joint employer if they exercise substantial, direct control over essential employment terms. This common-sense solution is endorsed by the U.S. House Problem Solvers Caucus and supported by over 100 organizations, including the Asian American Hotel Owners Association and the Coalition of Franchisee Associations.

By clarifying joint employer, Congress can protect the next generation of entrepreneurs and ensure the franchise model continues to thrive.

To help protect the future of local entrepreneurship, we encourage you to contact your representative by visiting https://franchise.quorum.us/campaign/140393/ and urging them to support the American Franchise Act today.

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