Although Acceler8Success Café is temporarily closed until October 6th, when we’ll be announcing exciting changes to Acceler8Success Group, I felt it important to share timely information about the American Franchise Act. This legislation, in my view, represents a significant step forward in helping entrepreneurs pursue and achieve the American Dream.

In putting this together, I’ve drawn from the work and insights of some of the greatest minds in franchising (and some AI for clarity). The credit is truly theirs for keeping us informed and for tirelessly advancing conversations that affect franchise owners, franchisors, and the communities they serve.

If I’ve overlooked something, or if what I’ve shared is incomplete, inaccurate, or perhaps even outdated, please don’t hesitate to let me know. I’ll gladly revise and update, as my goal is to ensure this information remains accurate, relevant, and useful to all who follow franchising’s evolving story.

Personally, I believe the American Franchise Act is long overdue. By clarifying the rules, reducing unnecessary risk, and fostering stability, it has the potential to positively transform the franchise landscape. More importantly, it can open the doors for countless entrepreneurs to start businesses, create jobs, and build lasting legacies.

At its core, franchising has always been one of the most accessible pathways to business ownership. The American Franchise Act reinforces that pathway, and I believe it will help many more entrepreneurs — including first-time business owners, women, immigrants, and underrepresented groups — realize their own version of the American Dream.

The American Dream and Entrepreneurship

For many Americans, the “American Dream” is the idea that through hard work, persistence, and some opportunity, one can build a business, achieve financial independence, and contribute to one’s community. Business ownership is a key pathway in that vision. Yet starting and scaling an independent business comes with high risk, capital requirements, operational challenges, regulatory burdens, and market risk.

Franchising has long been viewed as a hybrid model: giving entrepreneurs a structure, proven systems, brand recognition, and operational playbooks, while still allowing them to be (relatively) independent owners. It lowers some of the risk of going it completely alone. But uncertainties in the legal environment — especially around employment liability — have constrained that pathway. The American Franchise Act seeks to reduce that uncertainty, thereby strengthening the franchise avenue as a route to economic opportunity.

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What Is the American Franchise Act?

The American Franchise Act (introduced in the U.S. House of Representatives on September 10, 2025) is bipartisan legislation designed to address uncertainty around the so-called “joint employer” standard in the franchise context. Coalition to Save Local Businesses+4International Franchise Association+4National Law Review+4

The Core Issue: Joint Employer Liability

One of the thorniest legal and regulatory questions in franchising is: when can a franchisor (the brand owner) be held responsible for employment-related decisions at a franchisee’s location (e.g. wages, hours, hiring/firing, scheduling)? In other words — when are the franchisor and franchisee “joint employers”?

Over the last decade, that standard has repeatedly changed, depending on shifts in National Labor Relations Board (NLRB) rulings and federal regulation. This regulatory “whiplash” has created significant legal uncertainty. 1851 Franchise+5National Law Review+5franchiselaw.foxrothschild.com+5

Proponents of the American Franchise Act argue that this instability has discouraged investment, increased litigation risk, and made it harder for startups/franchisees to plan and grow.

What the Act Proposes

Under the Act, the law would explicitly define that in the franchise context:

A franchisor may be considered a joint employer of the employees of a franchisee only if the franchisor possesses and exercises substantial, direct, and immediate control over one or more essential terms or conditions of the employees of the franchisee. National Law Review+4International Franchise Association+4franchiselaw.foxrothschild.com+4

In simpler terms, the franchisor would not automatically be deemed jointly liable merely because it sets standards, provides training, or monitors performance. Only where the franchisor steps into direct operational decisions (like hiring, firing, wages, discipline) would it be considered a joint employer. Saxton & Stump+3National Law Review+3franchiselaw.foxrothschild.com+3

The Act would amend two key federal statutes:

• The Fair Labor Standards Act (FLSA)
• The National Labor Relations Act (NLRA) 1851 Franchise+3International Franchise Association+3franchiselaw.foxrothschild.com+3

It would not broadly change joint employer determinations outside of franchising. International Franchise Association+2National Law Review+2

By codifying this standard in statute, the Act aims to remove ambiguity, lock in a consistent rule, and allow franchise systems to better predict and manage liability.

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How It Could Benefit Entrepreneurs & Foster the American Dream

Here’s how, if passed, the American Franchise Act could strengthen the franchise pathway for entrepreneurs and support their pursuit of the American Dream:

1. Reduced Legal & Regulatory Risk

One of the biggest barriers for prospective franchisees is the unpredictability of liability. If franchisors can be held jointly liable for employment practices of local franchisees even when not directly involved, that risk can deter investment, cause franchise systems to pull back support, or push franchisors to micromanage franchisees (reducing their autonomy).

By clarifying and limiting when joint employer liability arises, franchisees can operate with greater confidence that day-to-day staffing and HR decisions reside with them. That legal clarity lowers risk and may reduce litigation costs. International Franchise Association+6Saxton & Stump+6franchiselaw.foxrothschild.com+6

2. Greater Access to Franchise Ownership, Especially for First-Time Owners

Because franchising allows entrepreneurs to “plug into” a tested model, it is often more accessible than creating an entirely new brand from scratch. But high uncertainty can make lenders or investors hesitant to back franchise deals. With legal certainty, more capital may flow, making franchise ownership viable for more people.

Moreover, many prospective franchisees are first-time business owners from diverse backgrounds (women, minorities, immigrants). The Act’s supporters argue that it would preserve this route to business ownership. franchiselaw.foxrothschild.com+3Coalition to Save Local Businesses+3International Franchise Association+3

3. Preservation of Franchise Autonomy & Incentive to Invest Locally

If franchisees can be more confident that they control their staffing, operations, and strategic decisions (within brand standards), they may be more motivated to invest in local innovation, customer service, facility improvements, and community engagement.

This autonomy also helps ensure that franchisees are truly independent small business operators, not micro-managers beholden to the franchisor in every respect. The Act enables a balance: brand consistency + local flexibility. International Franchise Association+3Saxton & Stump+3franchiselaw.foxrothschild.com+3

4. Encouragement of Growth, Jobs, & Economic Activity

With lower risk and more certainty, existing franchisors may be more willing to expand, and new franchise systems may form. That leads to job creation, investment in new locations (especially in underserved communities), and ripple effects in the supply chains.

For example, in the hotel sector, the American Hotel & Lodging Association predicts that the Act would bolster hotel franchising — a key channel for entrepreneurs in hospitality — creating and safeguarding jobs. AHLA+2Hotel Online+2

Also, the International Franchise Association notes there are more than 831,000 franchise small-business establishments in the U.S. whose growth would be supported by this legal clarity. International Franchise Association

5. Stability for Long-Term Planning & Investments

Entrepreneurs need to make investments—capital improvements, hiring, training, marketing, scaling. But regulatory uncertainty makes long-term planning difficult. If the law is stable and predictable, entrepreneurs can confidently take on debt, expand, and innovate.

6. Protecting Entrepreneurs’ Equity & Capital

When liability is unclear, franchisors or regulators might seek to increase oversight, cast wider liability nets, or push for consolidation. That could squeeze franchisees’ margins or reduce their leverage in the relationship. By locking in a fair standard, franchisees’ capital investments are better safeguarded.

7. Boosting Local Economies & Broadening Access to Upward Mobility

Because franchises operate locally, the success of franchisees can seed wealth in local communities, particularly in areas underserved with business opportunities. As more entrepreneurs succeed, they can hire locally, stimulate local supply chains, and contribute to economic revitalization.

This dynamic helps ensure that the benefits of business ownership are not concentrated only in major cities or among already well-resourced individuals.

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Potential Critiques & Challenges

No legislation is without challenges or critiques, and the American Franchise Act will likely face close scrutiny. Some of the potential counterpoints include:

• Labor protections vs. liability shielding — Critics may argue that narrowing joint employer liability could weaken worker protections, because franchisors might evade accountability more easily. The counterargument is that the Act preserves worker rights under NLRA and FLSA; it only limits attribution of liability unless control is direct. Saxton & Stump+4International Franchise Association+4National Law Review+4
• Definition and evidentiary challenges — What constitutes “substantial, direct, and immediate control” may itself be litigated. The Act’s language will need to be precise, and courts may have to interpret borderline cases.
• Scope limitation — The Act applies only to franchise relationships. In non-franchise joint employer contexts (e.g. staffing agencies, subcontracting, gig economy arrangements), existing law or other reforms will be needed.
• Political hurdles — Passage depends on legislative support, negotiations, amendments, and possible opposition over labor policy, federal-state balance, or other ideological lines.
• Unintended consequences — There’s always a risk that franchisors interpret the law in ways that shift burdens to franchisees, or reduce support services, arguing that certain supervisory oversight would trigger liability.

Supporters are already working to build coalitions: the International Franchise Association, hotel and lodging associations, small business groups, and a “Coalition to Save Local Businesses” backing the legislation. International Franchise Association+3Coalition to Save Local Businesses+3International Franchise Association+3

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Conclusion: Reinforcing the Franchise Pathway to the American Dream

The American Franchise Act is an ambitious, narrowly tailored attempt to bring stability and clarity to a legal framework that has been characterized by volatility and confusion for a decade. For entrepreneurs, especially those who see franchising as a viable route to business ownership, that clarity could be transformational.

By reducing liability uncertainty, preserving autonomy, encouraging capital investment, and facilitating expansion, the Act has the potential to make franchising a more robust and widely accessible vehicle for achieving upward mobility, community impact, and generational wealth.

If passed and enforced effectively, the American Franchise Act can help reaffirm franchising as one of the durable ladders of the American Dream — a ladder empowered not just for a few, but for many aspiring business owners across sectors, communities, and backgrounds.

About the Author

Paul Segreto brings more than 40 years of hands-on experience in franchising, restaurants, small business development, and entrepreneurship.

Recognized as one of the Top 100 Global Franchise and Small Business Influencers, Paul is also the voice of Acceler8Success Cafe and Your Entrepreneurial Success, daily platforms where thousands of entrepreneurs turn for insight, strategies, and motivation. A lifelong advocate for ethical growth and brand integrity, he coaches founders, franchise and restaurant executives, and entrepreneurial families, guiding them to find clarity in complexity and achieve lasting success through intentional leadership.

Ready to elevate your business or navigate today’s challenges with confidence? Reach out to Paul directly at paul@acceler8success.com — your next step begins with a conversation.

About Acceler8Success Group

Acceler8Success Group is a comprehensive business advisory firm dedicated to empowering entrepreneurs, small business owners, franchise professionals, restaurant operators, and industry leaders. Through strategic consulting, personalized coaching, and impactful content, we provide the tools and guidance needed to drive growth and long-term success.

With a sharp focus on entrepreneurship, franchising, restaurants, and small business development, Acceler8Success Group delivers practical insights and proven strategies that translate vision into results.

By combining deep industry expertise with a robust content ecosystem, we help build sustainable businesses and cultivate responsible leadership. Our mission is clear: to support today’s innovators and tomorrow’s legacy builders as they pursue—and accelerate—the American Dream.