Section 25 Franchisor?s Liability for Franchisee?s Torts

• Library: Commercial Law 2007

Franchisors may face exposure to liability arising out of acts of franchisees primarily under general principles of agency law. See Herbert B. Chermside, Jr., Annotation, Vicarious Liability of Private Franchisor, 81 A.L.R.3d 764 (1977).

A franchisor may be liable for the acts of its franchisee under either tort or contract theories when the franchisee is found to be the agent of the franchisor. See generally Dierks & Sons Lumber Co. v. Morris, 404 S.W.2d 229, 232 (Mo. App. W.D. 1966); see also MAI 13.07(2) [1996 Revision].

An agency relationship usually exists when the franchisor has direct and continuing control over the day-to-day business operations of the franchisee. In these instances, an agency relationship has been found by some courts even if the franchise documents declare that no agency relationship is created between the franchisee and franchisor. Drexel v. Union Prescription Ctrs., Inc., 582 F.2d 781, 786 (3^rd Cir. 1978). The determination of actual agency depends on the facts relating to the franchisor’s control over the franchisee.

A franchisor also may be liable for acts of its franchisee under the concept of apparent agency. See Jordan v. Robert Half Personnel Agencies of Kansas City, Inc....