How the American Franchise Act Can Secure the Future of the Franchise Model

For too long, the essential business model of franchising, a bedrock of the American economy and the engine of growth for a wide range of industries across the country, has been held hostage by regulatory uncertainty. The constant swings in the joint employer standard have created an environment of legal whiplash, making it nearly impossible for franchisors and franchisees to accurately assess risk and plan for the future.

I speak with franchise system executives and the country's largest franchise operators regularly, and their message is unanimous: This clarity is desperately needed to sustain growth and stability. The American Franchise Act (H.R. 5267) offers the clear, consistent ground rules the service industry absolutely needs to thrive.

The true cost of uncertainty

Franchising works because it’s a symbiotic relationship. The franchisor provides the brand, operational blueprint, and support, while the franchisee acts as the independent employer and operator.

However, when the legal definition of who is the employer is overly broad and constantly changing, the core values of that relationship for each party are eroded. Uncertainty resulting from an expansive joint employer liability standard causes franchisors to pull back valuable resources and guidance. This is a lose-lose situation. Franchisors risk massive, unforeseen liability for a franchisee’s isolated employment misstep. Franchisees lose out on the operational support and hospitality compliance tools that they rely on to streamline work and manage labor costs legally.

The current uncertainty primarily benefits plaintiff attorneys, who can leverage regulatory gaps to pursue settlements from franchisors for issues not of their making. The American Franchise Act is the necessary guidance to end this cycle of instability.

Defining control: The path to stability

The American Franchise Act addresses uncertainty by embedding a clear, consistent, and common-sense standard into federal law.

The bill defines a franchisor as a joint employer only if it possesses and exercises “substantial direct and immediate control” over one or more essential terms and conditions of employment.

Crucially, the Act makes two things abundantly clear:

1. Brand standards are safe. It explicitly states that setting and enforcing uniform quality, marketing, and operational standards — the very reason a customer chooses one brand over another — does not create joint employer status.
2. Franchisor support is encouraged. The Act expressly states that a franchisor is not a joint employer based on its operational support, guidance, and assistance to its franchisees to promote and protect the brand’s goodwill and the quality of products and services provided to consumers. For example, the Act ensures that offering technology, tools, and resources for the franchisee to use for restaurant workforce management, franchise scheduling, or applicant tracking does not constitute the type of control that triggers liability.

Given the current environment where technology strategy is integrated into operations across industries, this clarity is everything. When the legal ground is shaky, franchisors hesitate to require or even recommend powerful, compliance-focused technology that supports their workforce. The Act gives them the confidence to deploy these best-in-class solutions, knowing they are protecting the brand, not exposing themselves to unnecessary risk.

The future of franchising is clear

The American Franchise Act is not a radical change; it is a restoration of certainty. It protects the franchisee’s status as an independent small business owner while allowing franchisors to provide the robust support that ensures brand consistency and operational excellence.

Agentic AI and other new technologies offer an incredible opportunity for franchisors and franchisees to optimize their operations and improve guest and employee experiences. Under the Act, brands can freely leverage these innovations to protect the brand without exposing themselves to unnecessary risk.

For an industry built on partnership, predictability matters. When roles and responsibilities are clearly defined, franchisors and franchisees can collaborate with confidence and focus on sustainable growth. The American Franchise Act helps restore that balance and provides a stable framework for the future of franchising.

Luke Fryer is the founder and CEO of Harri, a leading technology platform transforming workforce management in the hospitality industry.