Congress Must Protect Franchise Entrepreneurs

Walking into a McDonald’s, Subway, Jiffy Lube or Little Caesars, it is easy to forget the importance of franchises in catering to consumers and powering the economy. Each year, 150,000 jobs are created by small business owners given the chance to expand the franchise footprint of a large successful company. Franchised businesses add an astounding $920 billion in total economic output per year, putting nearly $3,000 in the pocket of every man, woman, and child in the U.S.

Yet, some bureaucrats want to bury franchised businesses in an avalanche of regulations, making it next-to-impossible for small business owners to expand operations and hire new workers. Fortunately, lawmakers are poised to consider HR 5267, the American Franchise Act (AFA), which would clarify liability standards by codifying current law on the federal joint employment standard for franchising. For the sake of small businesses and their millions of consumers, Congress must pass this pivotal legislation.

The AFA codifies a straightforward test for determining joint‑employer status: two or more entities would be considered joint employers only if each directly and immediately exercises significant control over essential employment terms such as hiring, firing, pay, benefits, scheduling, daily supervision, and discipline. This clear rule replaces the shifting and ambiguous standard that treats businesses as joint employers based on indirect or even potential influence. That previous approach—pushed by the National Labor Relations Board and subject to legal challenges—saddled small businesses with uncertainty, discouraged investment, and left franchise owners vulnerable to costly litigation.

Restoring a clear and predictable definition of joint employment is critical for protecting America’s franchise model. According to the International Franchise Association, more than 845,000 franchise small businesses operate in the U.S., generating thousands of jobs each year and nearly one trillion dollars in annual economic output. Under the expanded joint‑employer rules, these businesses faced estimated costs of $33 billion per year, 376,000 lost jobs, and a 93 percent increase in lawsuits. Franchisees—many of whom own and operate just a single location—are being treated as if they were subsidiaries of their brand partners, undermining the independence and entrepreneurial spirit that make franchising such a powerful job creator. By returning to a standard based on direct and immediate control, the AFA ensures that small operators can grow without fear of regulatory overreach.

The benefits of the bill extend beyond franchises, benefitting contractors, subcontractors, and local companies that rely on staffing agencies or third‑party vendors. A clear joint‑employer test will reduce legal uncertainty, lower compliance costs, and protect the flexibility that small businesses need to adapt and compete. It will also help preserve taxpayer dollars by reducing frivolous litigation and removing barriers that stifle job creation.