Franchising succeeds because of the unique franchise relationship – a franchisor who creates the brand and business concept, and a franchisee who licenses the right to run the business as its own independent operation.
That’s why IFA supports The American Franchise Act, which clarifies the joint employer standard as requiring direct control of narrowly defined essential terms and conditions of employment to ensure franchisees continue to receive franchisor support while they operate independently and that brand standards can be enforced to protect the equity each franchisee has built in their business.
Protecting the Franchise Model: Why Congress Must Act Now on Joint Employer Reform
Franchising is a uniquely American success story—fueling opportunity, empowering entrepreneurs, and driving local job creation. Across the country, over 831,000 franchise small businesses employ nearly 9 million Americans (roughly 5% of the American Workforce in 2024) and generate nearly $900 billion in annual economic output. But the future of this proven model has been at risk for the past decade due to an unstable and politically driven legal doctrine known as the “joint employer standard.”
Why does the Joint Employer Standard matter?
At the heart of every franchise is a partnership between a franchisor (the brand) and a franchisee (a local small business owner). This model works because it strikes a balance: franchisees operate independently, hiring their teams and running their businesses day to day, while franchisors provide brand consistency, training tools, and support.
However, the joint employer standard—which determines when a franchisor can be held liable for a franchisee’s employees—has shifted wildly in recent years. Since 2015, the standard has changed four times, with each new administration offering its own interpretation. This back-and-forth has created confusion, stifled support, and discouraged growth. The 2015 NLRB standard cost franchise businesses over $33 billion per year, resulting in 376,000 lost job opportunities, and led to 93% more lawsuits. View our detailed timeline of joint employer changes below.
All these changes have created a confusing and negative situation for everyone. Franchisors hesitate to offer help, franchisees risk giving up their independence and equity, and everyone loses—especially consumers and employees.
What’s the impact of Joint Employer uncertainty?
The Solution: a permanent, clear Joint Employer Standard for franchises
The bipartisan, bicameral American Franchise Act modestly amends the Fair Labor Standards Act (FLSA) and the National Labor Relations Act (NLRA) to clarify that: “A franchisor may be considered a joint employer of the employees of a franchisee only if the franchisor possesses and exercises substantial direct and immediate control over one or more essential terms or conditions of the employees of the franchisee.” This is consistent with historical precedent and current NLRB policy.
The American Franchise Act applies only to franchisors and franchisees alleged to be joint employers under the FLSA and NLRA. Non-franchise independent contractor relationships and other tests of multi-party liability – e.g., misclassification, single employer, agency – are not covered by the legislation.
Franchisors are not immune from a joint employer finding under the legislation. Actions such as setting minimum standards for brand protection – including to protect the franchisor’s trademarks and IP – and offering training materials or other operations resources do not amount to direct and immediate control.
Legislation is the only way to ensure that the standard won’t continue to change with each new administration or through the courts. With a permanent solution, franchise businesses can rest easy that a workable joint employer standard is here for good.
Read IFA’s one page American Franchise Act summary
Read the full text of the American Franchise Act bill
Solving the issue within franchising – and beyond
The IFA-led Coalition to Save Local Businesses represents a wide swath of organizations that support a fair, consistent, and transparent joint employer standard that protects independent local business owners. Its members include IFA, the American Hotel and Lodging Association, the Health and Fitness Association, the International Salon and Spa Business Network, the International Spa Association, the National Restaurant Association, NATSO, the Professional Beauty Association, SIGMA, and the Small Business and Entrepreneurship Council.
What does the American Franchise Act mean for franchising?
For Franchisees:
For Franchisors:
For Employees:
For Consumers:
For the U.S. Economy:
How can franchisees, franchisors and suppliers make this happen?
Joint Employer: Timeline of Changes
Over the past decade, the definition has unnecessarily become a partisan issue, changing four times, creating legal confusion, eroding trust, and stifling growth for thousands of small businesses across America.