In late 2025, Senators Roger Marshall (R–Kansas) and Angus King (I–Maine) introduced the American Franchise Act for consideration in the Senate. The bill, which serves as a companion to House legislation introduced in September (H.R. 5267), reflects broader bipartisan efforts to clarify how “joint employer” status is defined within the franchise business model. The House bill is currently under review.
Supporters, including legislative sponsors and several industry associations, have cited recent changes in federal labor law interpretations as a source of confusion for franchisees and franchisors. The American Franchise Act would establish a single federal definition of “direct and immediate control” as the standard for determining joint employer status and related liability.
Read the full text of the Senate proposal here.
The legislation would reflect a joint-employer framework consistent with the 2020 National Labor Relations Board (NLRB) standard, under which franchisors are responsible for setting uniform brand standards, while franchisees are responsible for implementing those standards in day-to-day operations.
Key Provisions of the Proposed American Franchise Act
The American Franchise Act would amend the National Labor Relations Act (NLRA) and codify several key aspects of the franchisor-franchisee relationship:
1. Clarified joint employer status: A franchisor would only be considered a joint employer if it exercises substantial, direct and immediate control over essential aspects of employment, including wages, benefits, hours, hiring, discipline and supervision.
2. Distinction between brand standards and employment control: The bill specifies that tasks such as establishing brand standards, providing training materials, or offering operational guidance would not alone create joint-employer liability.
3. Delineation of responsibilities: The bill distinguishes brand oversight from employment decisions made by franchisees, clarifying the respective roles of franchisors and franchise owners in workforce management.
If enacted, these provisions may prompt franchisors and franchisees to reassess how they manage risk, distinguish operational oversight from employment decision-making, and approach compliance with brand standards and labor regulations.
What Franchise Leaders Can Do Now to Prepare
With the legislation under consideration in both Congressional chambers, leaders in the franchise sector may find it helpful to focus on several areas of preparation and review
1. Monitor legislative developments: Track the progress of both the Senate and House bills to understand how proposed changes could affect franchise operations and oversight.
2. Evaluate current practices: Review agreements and policies to identify provisions that could be interpreted as exercising “direct and immediate control” over employment matters.
3. Assess risk management strategies: Consider where potential liability exposure may arise and how oversight and decision-making are currently structured.
4. Educate leadership: Ensure that leadership understands the potential implications of proposed legal changes and is prepared to respond if the regulatory framework evolves.
How Grassi Can Help
Grassi’s Franchise Services team provides comprehensive support to both franchisors and franchisees at every stage of the business lifecycle. Our advisors monitor legislative and regulatory developments affecting the franchise industry and help organizations evaluate how potential changes may intersect with operations, compliance and risk management.
To discuss how the American Franchise Act or other regulatory developments could affect your business, connect with an advisor today.
Frequently Asked Questions
Q: What is the American Franchise Act?
The American Franchise Act is proposed federal legislation introduced in 2025 that seeks to establish a uniform standard for determining when a franchisor may be considered a joint employer of a franchisee’s employees. The legislation is intended to clarify how joint employer status is evaluated within the franchise business model under federal labor law.
Q: How would the American Franchise Act define joint employer status?
Under the proposal, a franchisor would be considered a joint employer only if it exercises “direct and immediate” control over essential terms and conditions of employment. These may include decisions related to wages, hours, hiring, discipline or supervision.
Q: When was the American Franchise Act introduced in Congress?
The American Franchise Act was introduced in the Senate in late 2025, following a companion bill introduced in the House of Representatives in September.
Q: How might franchise businesses evaluate potential implications of the American Franchise Act?
As the legislation moves through the legislative process, franchise businesses may consider monitoring its progress and assessing how proposed changes could affect existing franchise agreements, operational practices, and risk management frameworks. Evaluating the potential interaction between brand oversight, employment decision-making, and compliance requirements may also be part of that review.
