IFA Applauds Committee Passage of American Franchise Act
Legislation advances to provide joint employer certainty for the franchise model.
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The U.S. House Education and Workforce Committee has passed the American Franchise Act, aiming to establish a stable joint employer standard for franchisors and franchisees. With bipartisan support and 142 cosponsors, this legislation seeks to reduce regulatory uncertainty affecting America's 832,000 franchised businesses and their 8.8 million employees. The Act is viewed as crucial for safeguarding the franchise model amid frequent regulatory changes.
Why It Matters
This legislation may provide much-needed stability for franchisees, potentially affecting their operational decision-making and long-term strategies amid previous regulatory volatility.
The U.S. House Education and Workforce Committee has passed the American Franchise Act (H.R. 5267), a significant legislative priority for the franchise industry aimed at establishing long-term certainty regarding the joint employer standard. The bill now progresses to the House floor for further consideration. The International Franchise Association (IFA) heralded this passage as a crucial step towards providing stability for the approximately 832,000 franchised businesses in the U.S., which employ around 8.8 million individuals and contribute $907.3 billion to the economy.
Michael Layman, IFA Chief Advocacy Officer, emphasized the necessity for consistency in regulations, stating, "America’s local franchise owners deserve certainty, and today Congress is one step closer to providing it." He highlighted the detrimental impact that fluctuating joint employer standards over the last decade have had on the franchise model, putting jobs and business growth at risk.
The American Franchise Act seeks to clarify that a franchisor can only be considered a joint employer of a franchisee’s employees if it exercises substantial direct control over essential terms and conditions of those employees. This bill aims to limit the joint employer determinations exclusively to the franchisor-franchisee relationship. The standards have shifted multiple times in recent years, influenced by changes in presidential administrations. The act has garnered strong bipartisan support, with 142 cosponsors in the House and companion legislation introduced in the Senate, along with endorsements from major franchise and business groups, as well as over 100 state and local entities.
