A franchisor may be vicariously liable for the acts or omissions of a franchisee, or on occasion, for damages caused by someone else. Vicarious liability has a long history in our legal system and the cases are often fact specific and otherwise inconsistent and unpredictable. This article explores the limits of vicarious liability, such as where an employee of a franchisee can be held to be the franchisor’s employee as well. The article will also suggest an action plan to avoid exposure to vicarious liability.
Franchisors are exposed to vicarious liability claims because they license a trademark and need to impose quality controls and system standards to protect the goodwill associated with the trademark. Vicarious liability claims depend on demonstrating that the franchisor has control over the conduct that causes the harm. Franchisors must walk a fine line between asserting control over quality and standards requirements and eliminating unnecessary dominance and controls.
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