The American Franchise Act: Why Canadian Franchisors Should Be Paying Attention

Several provinces have spent the past year pulling American wine, beer and spirits off liquor store shelves amid the ongoing trade dispute. Yet there’s one thing from south of the border that Canadian franchising should enthusiastically import: the American Franchise Act. To be clear, this isn't a comment on cross-border trade policy or any political stance. It comes down to our belief that certainty around the joint employer standard is good for the franchise model, for franchisors and franchisees alike, and that the US may be building a precedent worth following.

Introduced in the US House of Representatives in September 2025, the American Franchise Act is a bipartisan effort to answer a question that has plagued American franchising for over a decade – when is a franchisor legally the “joint employer” of its franchisees’ employees?

That question matters enormously. If a franchisor is found to be a joint employer, it can be held liable for its franchisees’ wage violations, wrongful terminations and collective bargaining obligations – for workers it never hired, never paid and never supervised. And in the US, the answer has changed multiple times, swinging back and forth depending on which political party controlled the National Labor Relations Board. 

The bill has momentum. It attracted over 140 bipartisan co-sponsors, and in July 2026 it passed the House Committee on Education and Workforce, clearing the way for a full House vote.

The Act would amend federal labour legislation to lock in a single, durable test: a franchisor is a joint employer only if it possesses and exercises substantial direct and immediate control over one or more essential terms and conditions of employment, being wages, benefits, hours of work, hiring, termination, discipline, supervision and direction.

Just as importantly, the bill spells out what does not count. The ordinary tools that every franchisor uses to protect its brand and system would not, on their own, create joint employer liability, including setting brand standards, providing training materials, offering operational guidance, and imposing safety requirements.

For franchisors, the benefit of predictability is obvious. The result of perpetuating a vague joint employer standard is that franchisors are at risk of being penalized for being helpful. Under an expansive test, every training program, every operations manual update, every field visit becomes potential evidence of “control”. Rational franchisors respond by pulling back support, which hurts the very franchisees the expanded standard was supposed to protect.

That is why this bill is good for franchisees, too. Franchisees buy into a system precisely because they want the training, the playbook and the ongoing support. A clear rule that separates brand oversight from employment control means franchisors can deliver that support generously, without their legal counsel advising caution at every turn. It preserves what makes franchising work – the franchisor runs the brand, the franchisee runs the business and employs the staff.

Canada has never had the American joint employer whiplash, but we are hardly immune to the underlying risk. Canada has no unified “joint employer” doctrine and employment law is constitutionally a matter of provincial jurisdiction. Provincial employment statutes do not exempt a franchisor from being a related employer of a franchisee’s employees, and the provisions differ from province to province, leading to further confusion. This is further complicated by the common law “common employer” doctrine, which can produce a similar result where a franchisor exerts too much control. Canadian courts and labour tribunals have shown a willingness to look past the formal independence of the franchise relationship and ask who really controls the work, in some cases stretching these principles further than franchisors (and the legal community) expected. While Canada does not appear to have the same degree of partisanship seen in the United States, Canadian franchisors struggle to understand inconsistent decisions by courts and tribunals. This results in Canadian franchisors facing the same fundamental tension as their American counterparts of exercising enough control to protect the brand, but not so much that they become responsible for their franchisees’ employment liabilities.

If, as expected, the American Franchise Act becomes law, we expect Canadian industry voices, including the Canadian Franchise Association, to take up the same cause here. The US will have drawn a clear line between brand standards and employment control; Canadian franchisors and franchisees deserve that same certainty.

Yes, that means advocating for change in ten provinces – a slower and more complicated process than what's playing out in Washington – but it is a worthy goal. A harmonized, consistent joint employer standard across every province would give Canadian franchisors and franchisees the same certainty their American counterparts are on the verge of winning. That certainty is needed to ensure the franchise business model continues to bring opportunity to Canadians. Franchise legislation itself has spread this way before, province by province, most recently reaching Saskatchewan earlier this year – there's no reason joint employer clarity couldn't follow the same path.

The American Franchise Act is not Canadian law, and it may never be copied here word for word. But it says something franchising needs everywhere: that supporting franchisees shouldn’t bring additional risks and costs to franchisors. We think Canada's franchise industry should be pushing for that same clarity, province by province if that's what it takes. Of all the things crossing the border these days, this is one worth waving through.

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