American Franchise Act

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5267 Introduced in House (IH)]

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119th CONGRESS
  1st Session
                                H. R. 5267

               To preserve the franchise business model.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                           September 10, 2025

Mr. Hern of Oklahoma (for himself, Mr. Davis of North Carolina, Ms. Van
Duyne, Ms. Scholten, Mr. Edwards, Mr. Costa, Mr. Alford, Mr. Gray, Mr.
  Pfluger, Mr. Cuellar, Mr. Moran, Mr. Bera, Mr. Vicente Gonzalez of
  Texas, and Mr. Mackenzie) introduced the following bill; which was
          referred to the Committee on Education and Workforce

_______________________________________________________________________

                                 A BILL

               To preserve the franchise business model.

    Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``American Franchise Act''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) A franchise is a commercial relationship under which a
        franchisee acquires the right to operate an independent
        business that offers, sells, or distributes goods or services
        using a franchisor's system of operations, which typically
        includes the franchisor's business system and marketing plan,
        and its service mark, trademark, trade dress, or trade name.
            (2) To protect the integrity of its system of operations, a
        franchisor must set and enforce uniform quality, marketing, and
        operational standards that govern its use. Doing so helps
        maintain consistency and uniformity in the nature and quality
        of the goods and services distributed under the franchisor's
        trademarks. That consistency and uniformity, in turn, help
        ensure that consumer expectations are satisfied, increase the
        value of the franchisor's brand, and enhance the recognition
        and profitability of individual franchises.
            (3) Although franchisees must comply with these standards,
        franchisees are independent business owners. It is the
        franchisee who determines how to implement the franchisor's
        standards, controlling on a day-to-day basis the operations of
        its franchise and its labor relations.
            (4) The economic impact of this business model has been
        profound. According to a September 2023 report from Oxford
        Economics, in 2022, the economic output of franchise
        establishments in the United States was approximately
        $825,000,000,000. During that year, franchises employed
        approximately 5 percent of all workers in the United States,
        which was approximately 8,400,000 workers.
            (5) Inconsistent and expansive views of what constitutes a
        ``joint employer'' have impacted the viability of franchising
        by creating joint employer liability based on the franchisor's
        exercise of control that is inherent in franchise
        relationships.

SEC. 3. CLARIFICATION OF JOINT EMPLOYMENT FOR FRANCHISING.

    (a) National Labor Relations Act.--The National Labor Relations Act
(29 U.S.C. 151 et seq.) is amended by adding at the end the following:

``SEC. 20. CLARIFICATION OF JOINT EMPLOYMENT FOR FRANCHISING.

    ``(a) Definitions.--In this section:
            ``(1) Direct and immediate control.--The term `direct and
        immediate control' means the following with respect to each
        respective essential term and condition of employment:
                    ``(A) Wages.--A franchisor exercises direct and
                immediate control over wages if it actually determines
                the wage rates, salary, or other rate of pay that is
                paid to individual employees of a franchisee or job
                classifications of employees of a franchisee.
                    ``(B) Benefits.--A franchisor exercises direct and
                immediate control over benefits if it actually
                determines the fringe benefits to be provided or
                offered to a franchisee's employees. Such direct and
                immediate control--
                            ``(i) includes selecting the benefit plans
                        (such as health insurance plans and pension
                        plans) or level of benefits provided to a
                        franchisee's employees; and
                            ``(ii) does not include permitting a
                        franchisee, under an arm's-length contract, to
                        participate in a benefits plan of the
                        franchisor.
                    ``(C) Hours of work.--A franchisor exercises direct
                and immediate control over hours of work if it actually
                determines work schedules or the work hours, including
                overtime, of a franchisee's employees. Such direct and
                immediate control does not include--
                            ``(i) establishing a franchisee's operating
                        hours; or
                            ``(ii) establishing minimum staffing levels
                        to satisfy the franchise's service standards.
                    ``(D) Hiring.--A franchisor exercises direct and
                immediate control over hiring if it actually determines
                which particular employees will be hired or which
                employees will not be hired. Such direct and immediate
                control does not include--
                            ``(i) encouraging, recommending, or
                        requesting changes in staffing levels to
                        accomplish tasks; or
                            ``(ii) setting minimal recruiting and
                        hiring standards, such as those required by
                        law, for consumer or employee safety, or for
                        brand protection.
                    ``(E) Discharge.--A franchisor exercises direct and
                immediate control over discharge if it actually decides
                to terminate the employment of an employee of a
                franchisee. Such direct and immediate control does not
                include--
                            ``(i) bringing misconduct or poor
                        performance to the attention of a franchisee
                        that makes the actual discharge decision;
                            ``(ii) expressing a negative opinion of a
                        franchisee's employee; or
                            ``(iii) setting minimal standards of
                        performance or conduct, such as those required
                        by law, for consumer or employee safety, or for
                        brand protection.
                    ``(F) Discipline.--A franchisor exercises direct
                and immediate control over discipline if it actually
                decides to suspend or otherwise discipline a
                franchisee's employee. Such direct and immediate
                control does not include--
                            ``(i) bringing misconduct or poor
                        performance to the attention of a franchisee
                        that makes the actual disciplinary decision;
                            ``(ii) expressing a negative opinion of a
                        franchisee's employee;
                            ``(iii) refusing to allow a franchisee's
                        employee to perform work under a franchise
                        offer or contract; or
                            ``(iv) setting minimal standards of
                        performance or conduct, such as those required
                        by law, for consumer or employee safety or for
                        brand protection.
                    ``(G) Supervision.--A franchisor exercises direct
                and immediate control over supervision by consistently
                and directly instructing a franchisee's employees how
                to perform their work or by actually issuing employee
                performance appraisals. Such direct and immediate
                control does not include--
                            ``(i) providing instructions to a
                        franchisee's employees that--
                                    ``(I) are limited and routine; and
                                    ``(II) consist primarily of telling
                                a franchisee's employees what work to
                                perform, or where and when to perform
                                the work, but not how to perform the
                                work;
                            ``(ii) setting brand standards for the
                        performance of the work;
                            ``(iii) offering training materials
                        (including training demonstrations) for a
                        franchisee to use to train the employees of the
                        franchisee; or
                            ``(iv) establishing minimum training
                        requirements for the employees of a franchisee.
                    ``(H) Direction.--A franchisor exercises direct and
                immediate control over direction by assigning
                particular employees of a franchisee their individual
                work schedules, positions, and tasks. Such direct and
                immediate control does not include offering resources
                and tools for a franchisee to consider using to direct
                the work schedules, positions, and tasks of the
                employees of the franchisee.
            ``(2) Essential terms and conditions of employment.--The
        term `essential terms and conditions of employment' means
        wages, benefits, hours of work, hiring, discharge, discipline,
        supervision, and direction.
            ``(3) Franchise; franchisee; franchisor.--The terms
        `franchise', `franchisee', and `franchisor' have the meanings
        given such terms in section 436.1 of title 16, Code of Federal
        Regulations, as in effect on the date of enactment of this
        section.
            ``(4) Substantial direct and immediate control.--The term
        `substantial direct and immediate control'--
                    ``(A) means direct and immediate control that has a
                regular or continuous consequential effect on an
                essential term and condition of employment of a
                franchisee's employees; and
                    ``(B) does not include direct and immediate control
                that is only exercised on a sporadic, isolated, or de
                minimis basis.
    ``(b) Joint Employment.--For the purposes of this Act, 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 and conditions of
employment of the employees of the franchisee.''.
    (b) Fair Labor Standards Act of 1938.--The Fair Labor Standards Act
of 1938 (29 U.S.C. 201 et seq.) is amended by adding at the end of the
following:

``SEC. 20. CLARIFICATION OF JOINT EMPLOYMENT FOR FRANCHISING.

    ``(a) In General.--For purposes of this Act, a franchisor may be
considered a joint employer of the employees of a franchisee only if
the franchisor meets the criteria for a joint employer with a
franchisee under section 20 of the National Labor Relations Act, except
that, for purposes of determining joint-employer status under this Act,
the terms `employee' and `employer' referenced in section 20 of the
National Labor Relations Act shall have the meanings given such terms
in section 3 of this Act.''.
    ``(b) Definitions.--In this section, the terms `franchisor' and
`franchisee' have the meanings given such terms in section 20(a) of the
National Labor Relations Act.''.

SEC. 4. APPLICABILITY.

    This Act, and the amendments made by this Act, shall not apply to
any proceeding that is commenced before the date of enactment of this
Act.
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