The American Franchise Act: What Everyone in Franchising Needs to Know (in Plain English)

Franchising friends, as you probably already know, there’s a new bill making its way through Congress that could have big implications for our world. It’s called the American Franchise Act, and whether you’re a franchisor, franchisee, HR leader, ops exec, or supplier, we’re going to break down what it is in plain English. 

Wait, What Is the American Franchise Act?

The American Franchise Act (H.R. 5267) was introduced in September 2025 to clarify when a franchisor is considered a “joint employer” of their franchisees’ employees.

Why does that matter? Because for years, franchisors have lived in fear of accidentally crossing the line—getting too involved in franchisee operations and being hit with legal liability for things like wages, hours, hiring, or training.

It’s created confusion, legal battles, and a lot of franchisors saying things like, “We wish we could help our franchisees with hiring or team culture… but our lawyers say we can’t.” This bill is trying to change that and make the change permanent so the rules don’t change every time the party in the White House changes. 

Here’s What the Bill Actually Says (in Non-Legal Speak)

If passed, the American Franchise Act would:

• Limit franchisor liability to only situations where they directly and substantially control the day-to-day work of a franchisee’s employee.
• Say that offering tools, training, or guidance (like a hiring checklist or survey) does not make you a joint employer.
• Apply the same standard across federal employment laws like the Fair Labor Standards Act (wages, hours, etc.).

Translation? Sharing best practices or optional resources doesn’t make you a joint employer.

But Do We Really Have to Wait for This to Pass?

Nope. And here’s the kicker: You don’t need a law to do the right thing for your brand and your franchisees.

You can support your franchisees with hiring, onboarding, culture-building, and employee feedback right now, as long as it’s not a mandate and you’re not managing their people directly. In fact, many of the best franchise brands already do this. They offer:

• Toolkits to help with hiring and retention
• Surveys to help franchisees gather feedback from employees
• Leadership and culture training
• Benchmarks to show where a unit is thriving—or struggling

And guess what? Franchisees love it. And the best brands stand out because of it.

Why This Matters More Than Ever

High employee turnover is killing performance and costing franchisees money they can’t afford to lose.

Most franchisors already ask franchisees to meet brand standards, pass mystery shops, and maintain customer NPS scores. Why aren’t we doing the same for their employee experience?

The frontline employees are the face of your brand. If they’re burned out or disengaged, it shows. This isn’t just HR “nice to have”  fluff. It’s brand protection.

Want to Help Your Franchisees Hire Better and Keep Great People?

We’ve got a free resource that will help you level up your support (without crossing legal lines):

Download the Franchisee Hiring & Retention Toolkit Checklist

It’s packed with a complete list of tools you can create for franchisees to use (if they want), from job posting templates to onboarding ideas to employee pulse surveys.

And if you’re ready to take it further, let’s talk.

Book a 20-minute call with our team to see how other franchise brands are gathering employee feedback (safely) and improving retention systemwide.

Related Resource

The Ultimate Guide to Employee Engagement for Franchises

Employee engagement is critical to the success (or survival) of franchise organizations, but it’s becoming increasingly difficult to foster engagement.

Download your free guide to learn how to:

• Recognize barriers holding employees back from fully engaging
• Create a supportive and engaging workplace culture
• Make engagement a key part of your hiring and retention strategy
• Measure and benchmark your team’s engagement against other franchise employers

DOWNLOAD NOW