FRANCHISOR’S LIABILITY FOR FRANCHISEE ACTIONS

Franchise agreements can serve to establish a mutually beneficial relationship for the franchisor and the franchisee. Under a franchise agreement, the franchisor’s brand is allowed to grow through an independent business, i.e., the franchisee, and the franchisee is able to start a business without having to create a new product or brand. Because franchisees are generally independent businesses, the franchisor will normally not be liable for the franchisee’s actionable conduct. However, the franchise agreement and other factual circumstances could render a franchisor vicariously liable for its franchisees’ actions.

In Parker v. Domino’s Pizza, 629 So. 2d 1026 (Fla. 4th DCA 1993), two plaintiffs were harmed as a result of an accident caused by a delivery driver employed by J&B Enterprises, a Domino’s Pizza (“Domino’s”) franchisee. Under Florida law, an employer can be vicariously liable for his or her employees’ actions. J&B Enterprises, as the employer of the delivery driver, could therefore be liable for the plaintiffs’ injuries. The plaintiffs argued, however, that Domino’s also was vicariously liable for the injuries caused by the delivery driver. The trial court held that Domino’s was not liable to the plaintiffs because the delivery driver was not a Domino’s employee. On appeal, the appellate court disagreed.

The appellate court held that the operating manual that Domino’s provided to J&B Enterprises was “a veritable bible for overseeing a Domino’s operation,” which contained “prescriptions for every conceivable facet of the business.” Parker v. Domino’s Pizza, 629 So. 2d 1026, 1029 (Fla. 4th DCA 1993). Because the manual indicated that Domino’s retained a high degree of control over J&B Enterprises, J&B Enterprises could be considered an agent of Domino’s. Consequently, the appellate court held that Domino’s could be found liable for the delivery driver’s actions.

Several years later, the same appellate court was presented with a similar question. In Madison v. Hollywood Subs, Inc., 997 So. 2d 1270, 1270 (Fla. 4th DCA 2009), an individual was shot and killed outside a Miami Subs restaurant. The restaurant was operated by Hollywood Subs, Inc., a Miami Subs franchisee. The plaintiff argued that the killing was a result of inadequate security and that both Hollywood Subs, Inc., the franchisee, and Miami Subs, the franchisor, were liable.

The appellate court considered the franchise agreement and found that Miami Subs was not liable for the killing. As the appellate court found, the “only control provided by the agreement was to insure uniformity in the standardization of products and services offered by the restaurant.” Madison v. Hollywood Subs, Inc., 997 So. 2d 1270, 1270 (Fla. 4th DCA 2009). Because Hollywood Subs, Inc. had sole control of the day-to-day operations, it was an independent contractor, and not an agent, of Miami Subs.

As the above cases demonstrate, whether a franchisee is an “agent” or “independent contractor” of a franchisor depends on the facts of each case. If the franchisor retains the right to control the day-to-day business operations, it can be held liable for its franchisee’s actions. If, however, the franchisor’s control is limited to maintaining uniformity among its franchisees, then the franchisor would generally not be vicariously liable for its franchisees’ conduct.

Peter T. Mavrick represents businesses in commercial litigation, labor/employment law, and trade secret and non-competition covenant litigation. This article is not a substitute for legal advice tailored to a particular situation. Peter T. Mavrick can be reached at: Website: www.mavricklaw.com; Telephone: 954-564-2246; Address: 1620 West Oakland Park Boulevard, Suite 300, Fort Lauderdale, Florida 33311; Email: peter@mavricklaw.com.