How Does Being a Franchisee Change Liability

In American civil law, a franchise is an agreement granting the franchise holder (the franchisee) the use exclusive use of the franchisor’s business infrastructure, proprietary knowledge (“trade secrets”), patents, and trademarks in order for the franchisee to do business under the franchisor’s name. Perhaps the best known franchise operations are the fast-food chain McDonald’s, the 7-Eleven convenience stores, and the Best Western hotels.

In today’s post, the personal injury lawyer at The Doan Law Firm presents an overview of the franchise business model before discussing how liability for an injury at one level of the franchise organization will often “spill over” to involve the entire business chain.

Liability of the franchisee

First of all, the franchisee is usually liable for any injury that 1) occurs at the franchisee’s place of business and 2) the injury was due to the negligence of the franchisee or an employee of the franchisee. By this definition, the franchisor would not be liable for such an injury because it is not reasonable to expect the franchisor to supervise the day to day business operations of each franchise holder. While this is usually the case with purely local injuries (e.g. a “slip and fall” on a wet floor), the courts have tended to hold the franchisor liable if certain business conditions existed prior to the accident in question.

Depending on the business relationship between the franchisor and the franchisee, and other factors, some courts have extended liability to the franchisor for the actions of a franchisee and/or the franchisee’s employees. In general, these courts will usually take a positive answer to the following questions as sufficient to extend liability for an injury to a franchisor:

• Has the franchisee paid the franchisor a fee for the privilege of associating the local business operation with the franchisor?

• Does the franchisor sets standardized training methods for employees?

• Was the construction of the local facility specified and supervised by franchisor?

• Are the rules of operation set by the franchisor?

• Are national or regional advertising campaigns commissioned by the franchisor but are of primarily benefit to the franchisee?

• Does the franchisor have the right to cancel the franchise agreement if the terms of the agreement are violated

• Are there regular inspection of business location and operations by franchisor?

• Are prices are fixed by franchisor rather than locally?

In general, the “tighter” the control exercised by the franchisor over the actions and decisions of the franchisee, the more likely a court will rule the franchisor to be liable for an act of negligence by its franchisee.

Of course, it is unlikely that the answer to a single question will be enough for a court to establish or to deny liability in a given circumstance. However, a skilled personal injury lawyer will have the resources to thoroughly investigate a relationship between a franchisor and franchisee in order to arrive at a conclusion that will be accepted by a court.

Contact a franchise location injury lawyer

If you, or a family member, were injured at a location that is the local arm of a franchise business operation, we invite you to contact the personal injury lawyer at The Doan Law Firm, a national personal injury law practice with offices in major cities across the country.

When you contact out firm to discuss the details of your franchise location personal injury case, you first consultation with us is always free of charge and does not obligate you to hire our firm to manage your personal injury lawsuit. Should you later decide that we should represent you in court, we are usually willing to assume full responsibility for all aspects of preparing your case for trial in exchange for a percentage of the final settlement we will win for you.