The American Franchise Act Aims to End The Joint-Employer Confusion in Franchising

Imagine you’re playing a game, but the rules keep changing every few minutes. It would be confusing and frustrating, right?

Well, for years, that’s what it has felt like for the more than 800,000 franchisees in America. A new bill in Congress, called the American Franchise Act, is trying to fix this by setting one clear rule for everyone to follow.

What is the American Franchise Act?

The American Franchise Act is a new bipartisan bill introduced in the U.S. House of Representatives on September 10, 2025. The bill aims to clear up confusion about when a franchisor can be held legally responsible for employment decisions made by individual franchise owners.

Key Takeaways of The American Franchise Act

1. A Fix for a Decade of Confusion: For the last ten years, the joint-employer rule determining if a major brand is legally responsible for the employees of a local franchise owner has changed multiple times. This has created costly uncertainty for franchise businesses.
2. A Bipartisan Bill Offers a Clear Standard: To solve this, two congressmen from opposing parties have introduced the American Franchise Act. The bill sets a clear definition: a franchisor is only considered a “joint employer” if it exercises “substantial direct and immediate control” over the franchisee’s employees, such as being directly involved in hiring or firing.
3. The Goal is to Protect Small Business Owners: The legislation aims to confirm that franchisees are independent small business owners. By creating a stable and predictable rule, the bill allows major brands to support their local partners without the fear of violating a complex and ever-changing standard.

The “Who’s the Boss?” Problem

The confusion is all about a question: who is the boss?

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In a franchise business, you have the main company, or “franchisor” (like McDonald’s), and the local owner, or “franchisee,” who runs the restaurant in your town.

With those things in mind, the big question is, if there’s a problem with an employee at the local store, who’s responsible?

Is it just the local owner, or is the main company also a “joint employer“? Good question.

Unfortunately, for the last ten years, the answer to that question has changed multiple times. This flip-flopping makes it hard for franchise owners to run their businesses. It creates uncertainty, which can be expensive and stressful for these small business operators. And now there may be an answer.

The American Franchise Act: A Bipartisan Solution to The Joint-Employer Problem

To solve this problem, two members of Congress from different political parties, Don Davis and Kevin Hern, have teamed up.

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Interestingly, Congressman Hern used to be a franchisee himself, so he understands the challenges firsthand. Their new bill, the American Franchise Act, aims to create a stable and predictable rule for the franchise world.

The bill proposes a clear standard: a main company is only considered a “joint employer” if it has and uses “substantial direct and immediate control” over the local store’s employees.

In simple terms, the big brand would only be the boss if it’s directly involved in things like hiring, firing, and daily schedules for the local workers. This idea is supported by major groups like the International Franchise Association (IFA). Now, this is important.

This new law would apply only to franchises, making sure that local owners can operate as independent businesses.

Basically, it would allow the main brands to support their local partners, who are often first-time business owners. And without the fear of breaking a complicated rule. The goal?

To protect the American Dream for thousands of franchise owners by finally bringing some stability to the game.

Bottom Line?

If you’re a franchisee, or want to be one someday, this rule will benefit you tremendously. And finally get rid of the confusion.