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?

• Lost Jobs & Opportunities: The 2015 expansion of the joint employer standard cost franchise businesses an estimated $33 billion annually, eliminated 376,000 job opportunities, and led to 93% more lawsuits.
• Stunted Growth: Franchisors pull back support due to unclear legal guidance, leading to lower franchisee success and reduced brand quality.
• Fewer Entrepreneurs: Brands are less likely to expand through franchising, reducing opportunities for emerging brands and first-time business owners—especially from underserved communities.
• Consumer Experience Declines: Inconsistent training and brand standards affect product and service quality.

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:

• Remain true independent business owners
• Access better training and support from franchisors
• Grow their equity and protect their investment

For Franchisors:

• Provide meaningful tools and guidance without legal risk
• Better support franchisee success
• Ensure systemwide brand consistency

For Employees:

• A clear line of reporting without multiple bosses in far-off places
• An environment made to grow and thrive
• Greater opportunity for upward mobility

For Consumers:

• Benefit from reliable service and product quality
• Enjoy safer, more consistent experiences across locations
• Lower prices and a more personal experience

For the U.S. Economy:

• Promote job creation and upward mobility
• Foster entrepreneurship in every community
• Ensure the growth of hundreds of thousands of small businesses

How can franchisees, franchisors and suppliers make this happen?

Make Your Voice Heard: Join Us in Washington. The 2025 IFA Advocacy Summit, September 15–17 in Washington, D.C., is your chance to drive real change. Over the years, the franchise community has helped stop the harmful joint employer rule from going into effect. This year, we’re going on offense to stop it for good—and we need you to help finish the job.

By showing up in person, you send a powerful message: franchising works, and Congress must protect it. You’ll meet face-to-face with lawmakers, share your story, and explain how your business, your employees, and your community benefit from a lasting legislative solution. Now is the one time to get it done, and we need all voices in franchising to do so.

Be part of the movement to safeguard the future of franchising. Your voice matters—let’s make it count.

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.

• 1980s-2015:NLRB joint employer standard is based on “direct and immediate control of essential terms and conditions of employment” (Standard #1)
• 2015-2017:Browning-Ferris decision expanded joint liability on franchise businesses (Standard #2)
• 2017:Hy-Brand decision reverted to pre-2015 standard, then decision is nullified (Standard #3 & 4)
• 2018:NLRB proposed joint employer rule based on “direct and immediate control”
• 2020:NLRB joint employer rule becomes effective (Standard #5)
• 2021:SEIU challenged 2020 NLRB joint employer rule; case ultimately stayed
• 2023: NLRB proposed new, expansive joint employer rule
• 2024:Expansive joint employer rule struck down in federal court
• 2025: SEIU revived its request for review of the 2020 rule before D.C. Circuit of Appeals