IFA Applauds Introduction of Landmark American Franchise Act

The International Franchise Association (IFA) praised the introduction of the bipartisan American Franchise Act in the U.S. House of Representatives, heralding the first-of-its-kind legislation as a landmark moment for America's more than 831,000 franchise small businesses. IFA will be spearheading a full-scale national and regional advocacy push for the legislation through its membership and as a founding member of the Coalition to Save Local Businesses (CSLB).

"This legislation recognizes that franchisees are small businesses, and their independence must be protected by federal law," said Matt Haller, IFA president and CEO. "The American Franchise Act allows franchisors to properly support their franchisees—who are often first-time business owners from all walks of life—without the fear of an overly broad joint-employer standard undermining the unique benefits of franchise relationship. On behalf of America's 831,000 franchise small businesses, we are grateful that the decade-long uncertainty around joint-employer policy can finally come to an end."

In the U.S. House, the American Franchise Act was introduced by fourteen bipartisan lawmakers, including: Reps. Kevin Hern, R-Okla., and Don Davis, D-N.C., along with Reps. Mark Alford, R-Mo., Ami Bera, D-Calif., Jim Costa, D-Calif., Henry Cuellar, D-Texas, Chuck Edwards, R-N.C., Vicente Gonzalez, D-Texas, Adam Gray, D-Calif., Ryan Mackenzie, R-Pa., Nathaniel Moran, R-Texas, August Pfluger, R-Texas, Hillary Scholten, D-Mich., and Beth Van Duyne, R-Texas.

"Changes to joint-employer rules have caused costly uncertainty in the industry for too long," said Rep. Davis. "The American Franchise Act aims to restore stability by clarifying that franchisors and franchisees operate as independent employers while safeguarding workers through established labor standards."

"As one of the few franchisees in Congress, I understand how damaging an ever-changing joint-employer rule is to the franchise business model," said Rep. Hern. "I'm pleased that we were able to come together in a bipartisan effort to create legislation that safeguards small businesses and individuals working to achieve the American Dream across the country."

"I am proud to join my colleagues in support of this bipartisan bill," said Rep. Scholten. "The franchising industry is an economic powerhouse, and this bill will bring the clarity small business owners need to continue creating jobs and building up our communities. The franchising model is unique; it requires a tailored approach that properly recognizes the relationship between franchisors and franchisees. This bill will do just that. The uncertainty created by shifting regulations is costly to our entrepreneurs. The American Franchise Act provides a clear path forward, so they can focus on running their businesses and creating opportunity in communities across the country."

"Franchises are a cornerstone of the American economy, providing opportunity for small business owners and creating millions of jobs nationwide," said Rep. Van Duyne. "I am excited to join my colleagues in introducing the American Franchise Act to protect the franchise business model and support the entrepreneurs, workers, and communities who rely on it. This legislation will ensure the model remains strong, competitive, and fair so more Americans can achieve their dream of business ownership."

The American Franchise Act provides clarity to the joint employer standard in the franchise relationship that determines when two entities share responsibility for violations of the National Labor Relations Act (NLRA) and Fair Labor Standards Act (FLSA)—a standard that has changed four times over the past decade based on political control of the White House. The American Franchise Act only applies to the franchisor-franchisee relationship and does not affect joint-employer determinations outside of franchising.

The legislation clarifies 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," consistent with the National Labor Relations Board's (NLRB) 2020 joint employer rule which remains in effect today. The legislation preserves the right to organize workers under the National Labor Relations Act.

For more details on the legislation, click here.

In its 2025 Roadmap For Small Business Growth, IFA identified codifying a joint-employer standard that preserves franchisee independence as its top priority.

This legislation comes after a decade of changing joint employer rules. Most recently, the NLRB’s 2023 joint employer rule sought to expand the definition of joint employer to an ambiguous and overly broad standard that threatened the viability of the entire franchise model. In December 2023, Haller warned of the looming danger of an expanded joint employer standard before the U.S. House Subcommittee on Health, Employment, Labor, and Pensions. IFA advocacy also resulted in a federal court striking down the rule in the March 2024. Below is a timeline of the changes that franchised businesses have had to face since 2015:

• 1980s-2015: NLRB joint employer standard is based on “direct and immediate control of essential terms and conditions of employment”
• 2015-2017: Browning-Ferris decision expanded the joint employer standard to the detriment of franchise businesses, leading to a loss of 376,000 jobs, cost small businesses $33.3 billion, and led to a 93% spike in lawsuits in the franchise sector alone.
• 2017: Hy-Brand decision reverted to pre-2015 standard, then decision is nullified
• 2018: NLRB proposed joint employer rule based on “direct and immediate control,” which becomes effective as the 2020 joint-employer rule
• 2021: SEIU challenges the 2020 joint employer rule in D.C. District Court
• 2023: NLRB proposed new, expansive joint employer rule; SEIU challenge is stayed
• 2024: Expansive joint employer rule struck down in federal court
• 2025: SEIU revived its challenge of the 2020 rule before D.C. Circuit of Appeals

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.