HR 5267: American Franchise Act

HR 5267 in plain English: The American Franchise Act would establish federal rules governing the relationship between franchisors and franchisees in the United States, where franchise establishments generate approximately $825 billion in output and employ approximately 5 percent of all U.S. workers.

Stated purpose

The American Franchise Act aims to preserve the franchise business model by clarifying that franchisors are not considered 'joint employers' of their franchisees' workers simply because they set brand standards and operational requirements.

Key points

• Establishes federal rules for franchisor-franchisee relationships
• Addresses a sector generating approximately $825 billion in annual output
• Covers businesses employing approximately 5 percent of all U.S. workers

Arguments supporters make

• Franchisors setting brand and quality standards should not be punished as employers just for protecting their trademark — that control is a normal and necessary part of franchising, not a sign they run the franchisee's workforce.
• The franchise model supports about 8.4 million U.S. jobs and $825 billion in economic output; legal uncertainty about joint employer liability threatens that model and could discourage people from opening franchise businesses.
• Franchisees are independent small business owners who choose how to manage and pay their employees — holding the parent brand liable for those choices undermines local ownership and personal accountability.

Arguments opponents make

• When a national brand dictates scheduling systems, hiring criteria, or wage structures, workers at those locations may have no real recourse against the entity with the most power over their working conditions — this bill could leave them with less protection.
• Narrowing joint employer liability could make it harder for workers to organize or bargain effectively, since the franchisor — which often has the most leverage over workplace conditions — would be shielded from the negotiating table.
• Critics argue the bill tips the balance toward large franchise corporations at workers' expense, letting brands profit from a unified system while avoiding the legal responsibilities that come with controlling how that system operates.

Tradeoffs

Providing franchisors clearer protection from joint employer liability makes the franchise business model more predictable and easier to operate, but it may reduce the legal options available to franchise workers who believe the parent brand's standards or systems contributed to violations of their rights.

Current status in Congress: In committee.

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