S. 3525

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 3525 Introduced in Senate (IS)]

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119th CONGRESS
1st Session
S. 3525

To preserve the franchise business model.

_______________________________________________________________________

IN THE SENATE OF THE UNITED STATES

December 17, 2025

Mr. Marshall (for himself, Mr. King, Mr. Lankford, Mr. Sheehy, and Ms. 
Collins) introduced the following bill; which was read twice and 
referred to the Committee on Health, Education, Labor, and Pensions

_______________________________________________________________________

A BILL

To preserve the franchise business model.

Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``American Franchise Act''.

SEC. 2. FINDINGS.

Congress finds the following:
(1) A franchise is a commercial relationship under which a 
franchisee acquires the right to operate an independent 
business that offers, sells, or distributes goods or services 
using a franchisor's system of operations, which typically 
includes the franchisor's business system and marketing plan, 
and its service mark, trademark, trade dress, or trade name.
(2) To protect the integrity of its system of operations, a 
franchisor must set and enforce uniform quality, marketing, and 
operational standards that govern its use. Doing so helps 
maintain consistency and uniformity in the nature and quality 
of the goods and services distributed under the franchisor's 
trademarks. That consistency and uniformity, in turn, help 
ensure that consumer expectations are satisfied, increase the 
value of the franchisor's brand, and enhance the recognition 
and profitability of individual franchises.
(3) Although franchisees must comply with these standards, 
franchisees are independent business owners. It is the 
franchisee who determines how to implement the franchisor's 
standards, controlling on a day-to-day basis the operations of 
its franchise and its labor relations.
(4) The economic impact of this business model has been 
profound. According to a September 2023 report from Oxford 
Economics, in 2022, the economic output of franchise 
establishments in the United States was approximately 
$825,000,000,000. During that year, franchises employed 
approximately 5 percent of all workers in the United States, 
which was approximately 8,400,000 workers.
(5) Inconsistent views of what constitutes a ``joint 
employer'' have impacted the viability of franchising by 
creating joint employer liability based on the franchisor's 
exercise of appropriate levels of control that is inherent in 
franchise relationships.

SEC. 3. CLARIFICATION OF JOINT EMPLOYMENT FOR FRANCHISING.

(a) National Labor Relations Act.--The National Labor Relations Act 
(29 U.S.C. 151 et seq.) is amended by adding at the end the following:

``SEC. 20. CLARIFICATION OF JOINT EMPLOYMENT FOR FRANCHISING.

``(a) Definitions.--In this section:
``(1) Direct and immediate control.--The term `direct and 
immediate control' means the following with respect to each 
respective essential term and condition of employment:
``(A) Wages.--A franchisor exercises direct and 
immediate control over wages if it actually determines 
the wage rates, salary, or other rate of pay that is 
paid to individual employees of a franchisee or job 
classifications of employees of a franchisee.
``(B) Benefits.--A franchisor exercises direct and 
immediate control over benefits if it actually 
determines the fringe benefits to be provided or 
offered to a franchisee's employees. Such direct and 
immediate control does not include permitting a 
franchisee, under an arm's-length contract, to 
participate in a benefits plan of the franchisor (such 
as a health insurance plan, pension plan, or tuition 
assistance).
``(C) Hours of work.--A franchisor exercises direct 
and immediate control over hours of work if it actually 
determines work schedules or the work hours, including 
overtime, of a franchisee's employees. Such direct and 
immediate control does not include--
``(i) establishing a franchisee's operating 
hours; or
``(ii) establishing minimum staffing levels 
to satisfy the franchise's service standards.
``(D) Hiring.--A franchisor exercises direct and 
immediate control over hiring if it actually determines 
which particular employees will be hired or which 
employees will not be hired. Such direct and immediate 
control does not include--
``(i) encouraging or recommending changes 
in staffing levels; or
``(ii) setting minimal recruiting and 
hiring standards, such as those required by 
law, for consumer or employee safety, or for 
brand protection.
``(E) Discharge.--A franchisor exercises direct and 
immediate control over discharge if it actually decides 
to terminate the employment of an employee of a 
franchisee. Such direct and immediate control does not 
include--
``(i) bringing misconduct or poor 
performance to the attention of a franchisee 
that makes the actual discharge decision;
``(ii) expressing a negative opinion of a 
franchisee's employee; or
``(iii) setting minimal standards of 
performance or conduct, such as those required 
by law, for consumer or employee safety, or for 
brand protection.
``(F) Discipline.--A franchisor exercises direct 
and immediate control over discipline if it actually 
decides to suspend or otherwise discipline a 
franchisee's employee. Such direct and immediate 
control does not include--
``(i) bringing misconduct or poor 
performance to the attention of a franchisee 
that makes the actual disciplinary decision;
``(ii) expressing a negative opinion of a 
franchisee's employee; or
``(iii) setting minimal standards of 
performance or conduct, such as those required 
by law, for consumer or employee safety or for 
brand protection.
``(G) Supervision.--A franchisor exercises direct 
and immediate control over supervision by consistently 
and directly instructing a franchisee's employees how 
to perform their work or by actually issuing employee 
performance appraisals. Such direct and immediate 
control does not include--
``(i) providing instructions to a 
franchisee's employees that are limited and 
routine;
``(ii) setting brand standards for the 
performance of the work;
``(iii) offering training materials 
(including training demonstrations) for a 
franchisee to use to train the employees of the 
franchisee;
``(iv) establishing minimum training 
requirements for the employees of a franchisee; 
or
``(v) providing operational support, 
guidance, and assistance to the franchisee to 
promote and protect the brand's goodwill and 
quality of products and services provided to 
the consumer.
``(H) Direction.--A franchisor exercises direct and 
immediate control over direction by assigning 
particular employees of a franchisee their individual 
work schedules, positions, and tasks. Such direct and 
immediate control does not include offering resources 
and tools for a franchisee to consider using to direct 
the work schedules, positions, and tasks of the 
employees of the franchisee.
``(2) Essential terms and conditions of employment.--The 
term `essential terms and conditions of employment' means 
wages, benefits, hours of work, hiring, discharge, discipline, 
supervision, and direction.
``(3) Franchise; franchisee; franchisor.--The terms 
`franchise', `franchisee', and `franchisor'--
``(A) have the meanings given such terms in section 
436.1 of title 16, Code of Federal Regulations, as in 
effect on the date of enactment of this section; and
``(B) notwithstanding subparagraph (A), include a 
franchise, franchisee, and franchisor, respectively, as 
defined in section 101 of the Petroleum Marketing 
Practices Act (15 U.S.C. 2801).
``(4) Substantial direct and immediate control.--The term 
`substantial direct and immediate control'--
``(A) means direct and immediate control that has a 
regular or continuous consequential effect on an 
essential term and condition of employment of a 
franchisee's employees; and
``(B) does not include direct and immediate control 
that is only exercised on a sporadic, isolated, or de 
minimis basis.
``(b) Joint Employment.--For the purposes of this Act, 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 and conditions of 
employment of the employees of the franchisee.''.
(b) Fair Labor Standards Act of 1938.--The Fair Labor Standards Act 
of 1938 (29 U.S.C. 201 et seq.) is amended by adding at the end of the 
following:

``SEC. 20. CLARIFICATION OF JOINT EMPLOYMENT FOR FRANCHISING.

``(a) In General.--For purposes of this Act, a franchisor may be 
considered a joint employer of the employees of a franchisee only if 
the franchisor meets the criteria for a joint employer with a 
franchisee under section 20 of the National Labor Relations Act, except 
that, for purposes of determining joint-employer status under this Act, 
the terms `employee' and `employer' referenced in section 20 of the 
National Labor Relations Act shall have the meanings given such terms 
in section 3 of this Act.
``(b) Definitions.--In this section, the terms `franchisor' and 
`franchisee' have the meanings given such terms in section 20(a) of the 
National Labor Relations Act.''.

SEC. 4. APPLICABILITY.

This Act, and the amendments made by this Act, shall not apply to 
any proceeding that is commenced before the date of enactment of this 
Act.
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