The Basics of Franchisor Vicarious Liability (Part A)

The relationship between a franchisor and franchisee is a delicate balance in which a franchisor must be constantly aware of the degree of control exercised on its franchisees. In matters of profit and business management, a franchisor wants to maintain a high degree of control; but when a personal injury suit is brought against a franchisee, the franchisor will want to prove lesser degree of control. Control in a franchise is a double-edged sword because of the notion of vicarious liability.

Vicarious Liability in Franchise Law

If you are a franchisor and someone is injured on the premises of your franchisee, are you liable for that person's injury? You very well could be. The injured could make a claim against you for vicarious liability.

Vicarious liability is liability imposed on one party for the fault of another. Franchisor vicarious liability usually arises from the respondeat superior doctrine, which states that the superior is responsible for the acts of the subordinate. In other words, as the franchisor you are the master of your franchisees, who can be seen as your "servants" or "agents," and are thus liable for their actions.

Vicarious liability is not the same as contributory liability. Contributory liability is a situation in which one party has directly facilitated, induced or contributed to the unlawful acts of another party. Contributory liability can only arise when you have had a direct hand in the incident; vicarious liability can arise simply because the incident happened under the watch of someone who is connected to you.

Another argument that could come against you for an accident on the premises of your franchisee is known as "ostensible agency." Ostensible agency is a concept in which the franchisee becomes an agent of the franchisor, thus any liability created by the franchisee immediately becomes the liability of the franchisor.

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