ICHRA for franchises: one model, three tiers.
Last reviewed October 2026
Where each tier sits
The structure is what makes ICHRA work for franchises: the decision and the cost sit with each owner, the choice sits with each employee, and nobody at corporate becomes a benefits administrator.
- Tier 1
Franchisor
Makes the program available across the system
No payroll, no plans, no paperwork at corporate
- Tier 2
Franchise owner
Sets their own monthly contribution
Each location decides independently
- Tier 3
Employee
Picks the plan that fits their family
Their policy and their doctors — theirs to keep, at their own cost, if they leave
Plan documents, the employee notices federal rules require, enrollment support, and tracking who is actually covered — for every location, without corporate administering any of it.
Each franchisee is its own employer
In most franchise systems, a franchisee's employees work for the franchisee — not the brand. That means the ICHRA belongs to the franchisee too: their own plan, their own allowance, their own plan documents, set up under their own business.
That has three practical consequences:
- Owners decide independently. A high-volume location can be generous; a new one can start small. Nobody is held to a system-wide number.
- Corporate stays out of administration. No payroll access, no plan selection, no enrollment questions routed to the brand.
- Independence stays clear. Keeping benefits a franchisee decision is consistent with how most systems separate the brand from day-to-day employment — which matters for joint-employer questions your counsel will care about.
Multi-unit owners
If you own several locations, two questions decide how your ICHRA is set up.
1. Are they one employer or several?
Locations owned through one legal entity can share one ICHRA. If each location is its own LLC, each can sponsor its own — but if you control them, they may be treated as a single employer under the ACA's aggregation rules. That matters most for the 50-full-time-equivalent count that decides whether the employer mandate applies. Your accountant can confirm how your entities are counted.
2. Should different locations get different allowances?
Individual premiums vary a lot by area. If your locations are in different geographic rating areas, you can treat each area as a separate class with its own allowance — so a location in a high-cost metro isn't held to the same number as one where plans cost less.
A worked example: a three-location owner
One owner, three quick-service locations in the same metro area, 24 employees. The owner wants something meaningful for full-time staff and a smaller benefit for part-time.
| Feature | Employees | Monthly allowance | Most it could cost |
|---|---|---|---|
| Full-time class | 14 | $450 | $6,300 |
| Part-time class | 10 | $200 | $2,000 |
| Total | 24 | — | $8,300 / month |
$8,300 is the ceiling, not the bill. Reimbursements only go out for employees who enroll in a plan, and never more than their plan costs. If 18 of the 24 enroll, Rikor's administration fee is $540 a month ($30 per enrolled employee).
Figures are illustrative. Your real numbers depend on your team's ages and locations, and on what you choose to contribute — run them for your own team.
Rolling it out at a location
The timeline is driven by one rule: eligible employees must get written notice at least 90 days before the plan year starts. For a January 1 start, that means notices go out by early October.
- Decide classes and allowances. Full-time and part-time is the most common split; add location-based classes if premiums differ by area.
- Sign the plan documents. Rikor generates the plan document and summary plan description for your business.
- Send the employee notice at least 90 days ahead. Rikor sends it and tracks acknowledgments.
- Employees choose plans. A special enrollment period opens for them, so they don't have to wait for open enrollment.
- Coverage starts and reimbursements begin. You watch enrollment on the dashboard instead of chasing it.
What franchisors do — and don't
A franchisor's role is usually to make a vetted option available and point owners to it. They don't sponsor the plan, fund it, or handle employee questions. That's what lets one benefits answer scale across a system of any size. How Rikor works with franchisors.
ICHRA for franchises: common questions
Can a franchisor pay for its franchisees’ employees’ ICHRA?
Generally the franchisee, as the employer, sponsors and funds its own ICHRA. A franchisor paying for benefits for a franchisee’s employees can raise joint-employer questions, so systems usually make a vetted vendor available and leave the decision and the funding to each owner. Discuss any other arrangement with counsel.
Can different franchisees in the same system choose different amounts?
Yes. Each franchisee is a separate employer with its own ICHRA, so each sets its own allowance. One location might contribute $500 a month and another $200.
I own locations in two different cities. Can I give them different allowances?
If the locations are in different geographic rating areas, yes — employees in different rating areas can be treated as separate classes with different allowances.
Does a franchise location with only a handful of employees qualify?
Yes. An ICHRA has no minimum size and no participation requirement. One W-2 employee who isn’t an owner is enough.
What happens when an employee transfers between my locations?
If both locations are under the same employer and in the same class, nothing changes. If they move into a different class — for example, a different rating area with a different allowance — the new class’s allowance applies.
Sources
- HealthCare.gov — CHOICE Arrangements (for employers)
- 26 CFR 54.9802-4 — Special rule allowing integration of HRAs with individual health insurance
- CMS — Individual Coverage HRA frequently asked questions (PDF)
- U.S. Department of Labor — Individual coverage HRA model notice
General information, not tax, legal or insurance advice. Rules change and individual situations differ — confirm specifics with your tax adviser or benefits counsel.
See what it would cost you.
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