I 
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 fol-
lowing bill; which was referred to the Committee on Education and Work-
force 
A BILL 
To preserve the franchise business model. 
Be it enacted by the Senate and House of Representa-
tives 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 oper-
ate an independent business that offers, sells, or dis-
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tributes goods or services using a franchisor’s sys-
tem 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 op-
erations, 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 busi-
ness 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 eco-
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nomic 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 vi-
ability of franchising by creating joint employer li-
ability 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 Na-
tional 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 fol-
lowing with respect to each respective essential term 
and condition of employment: 
‘‘(A) WAGES.—A franchisor exercises di-
rect and immediate control over wages if it ac-
tually determines the wage rates, salary, or 
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other rate of pay that is paid to individual em-
ployees 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 ex-
ercises 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 imme-
diate control does not include— 
‘‘(i) establishing a franchisee’s oper-
ating hours; or 
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‘‘(ii) establishing minimum staffing 
levels to satisfy the franchise’s service 
standards. 
‘‘(D) HIRING.—A franchisor exercises di-
rect and immediate control over hiring if it ac-
tually 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 ac-
complish 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 per-
formance to the attention of a franchisee 
that makes the actual discharge decision; 
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‘‘(ii) expressing a negative opinion of 
a franchisee’s employee; or 
‘‘(iii) setting minimal standards of 
performance or conduct, such as those re-
quired 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 dis-
cipline a franchisee’s employee. Such direct and 
immediate control does not include— 
‘‘(i) bringing misconduct or poor per-
formance 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 fran-
chise offer or contract; or 
‘‘(iv) setting minimal standards of 
performance or conduct, such as those re-
quired by law, for consumer or employee 
safety or for brand protection. 
‘‘(G) SUPERVISION.—A franchisor exer-
cises direct and immediate control over super-
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vision by consistently and directly instructing a 
franchisee’s employees how to perform their 
work or by actually issuing employee perform-
ance 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 per-
form the work, but not how to per-
form the work; 
‘‘(ii) setting brand standards for the 
performance of the work; 
‘‘(iii) offering training materials (in-
cluding 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 
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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 con-
ditions 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 imme-
diate control’— 
‘‘(A) means direct and immediate control 
that has a regular or continuous consequential 
effect on an essential term and condition of em-
ployment of a franchisee’s employees; and 
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‘‘(B) does not include direct and imme-
diate control that is only exercised on a spo-
radic, 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 pos-
sesses and exercises substantial direct and immediate con-
trol 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 em-
ployees of a franchisee only if the franchisor meets the 
criteria for a joint employer with a franchisee under sec-
tion 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.’’. 
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‘‘(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 be-
fore the date of enactment of this Act. 
Æ 
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