Franchising is a business arrangement in which an individual (the franchisee) is granted the right to operate under the name and system of an established brand (the franchisor) for a certain period of time. In exchange for getting access to the franchisor’s established brand, know-how and good will, the franchisee pays a franchisee fee and agrees not to dilute the brand they had purchased. This commitment to maintain the brand’s standards protects the franchisee’s investment, the investments of other franchisees, and customers.

The joint employer standard is a legal rule that determines when two businesses, like a franchisor and franchisee, should both be held responsible for the same employees. This legal standard applies to all businesses but directly impacts franchise systems differently.

Franchising pairs partnership on branding with independent business ownership. For decades, the joint employer standard recognized this important difference. This allowed franchisees to run their own businesses, while receiving support from franchisors on branding, training, and systems. More recent fights over the joint employer standard blur this line. When the joint employer standard is unclear or too broad, franchisors step back from providing support to franchisees, or they elect to end some franchise agreements entirely.

Over the last decade, the definition of the joint employer rule has changed four times, depending on which political party holds the White House. This legal instability has created confusion, limited support for franchisees, and discouraged new business ownership.

The uncertainty is having real-world consequences:

• Franchisors are hesitant to provide guidance or emergency support.

• Franchisees get less training, weakening service quality.

• New and minority entrepreneurs are less likely to enter franchising.

• Franchise business values have declined.

• Employee development, customer service, and safety suffer.

• Aspiring business owners, especially first-time and minority entrepreneurs, face fewer opportunities.

• Franchisees lose support from franchisors and struggle to grow.

• Employees miss out on advancement, pay increases, and skill-building.

• Customers experience inconsistent service and quality.

Congress can pass the American Franchise Act, legislation that will create a permanent, clear, and bipartisan joint employer standard reflecting the reality that franchisees are independent business owners.

• Strengthen franchisor-franchisee partnerships.

• Boost small business growth and job creation.

• Provide legal clarity that encourages operational excellence.

• Expand opportunities for new and underserved entrepreneurs.

• Improve employee pay, benefits, and training.

• Ensure consistent, reliable service for customers.

• Protect the rights of workers to collectively bargain, should they wish to do so.