A federal ruling that broadens the definition of "employer" to include subcontractors has huge implications for franchise operations.
The National Labor Relations Board last week concluded that a sanitation company, Browning-Ferris Industries, and a subcontractor are joint employers of workers.
Read MoreNLRB ruling redefining 'employer' could have big impact
"Without any congressional or court action [this decision] could significantly alter the face of American business as we know it," Steve Caldeira, president of the International Franchise Association, said in a statement. The association supports an industry with some 780,000 franchise establishments and some 8.5 million workers.
"If allowed to go into effect, the impact of this new joint-employer rule would be sweeping and widespread … and ultimately, would inflict serious damage to our nation's economy," Caldeira said.
Entrepreneur Mara Fortin, who owns seven locations of the Nothing Bundt Cakes bakery chain in California, says the broadened definition of employer could upend her business model. Her franchised businesses could now be held to a broader set of regulations and costs under her parent company.
"It creates another level of overhead and administrative costs," Fortin said. "I wanted to own my own business and live out the American dream," she said. "This will take away my ability to run my own business here in California."
The franchise association says the wage board's 3-2 vote could "create havoc" on the industry.