How Franchisors Can Guard Against 3rd Party Liability

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Franchisor liability for employment claims has stolen the spot light from another big source of Franchisor liability- liability to customers.  In recent cases of McDonalds and other unfortunate cases, franchisors are being found liable to employees for wages and hours, discrimination and other work related claims.

But there is another big source of the liability that faces franchisors.  It is not new.  It is not uncommon.  And, it is very real.  It rides on the same principals as employee claims.  The source of the liability is customer, third party tort claims.  Customers or other third parties are injured from a slip and fall, bad food, unperformed services, and many other claims.  The customers or other persons sue the franchisee, but they also in the same law suit sue the franchisor.  The basis for the claim lies in the control that franchisors have over franchisee.

In one such case a Florida jury has awarded 10.1 million dollars to a victim of the car accident caused by a Domino driver to be paid by the Franchisor.  Why? How?  The jury said that the franchisor had control and therefore was liable for the accident.  Domino discontinued  its 30 minute delivery guarantee, but continues to offer incentives for speedy deliveries and consumer satisfaction.

3 Way to Prevent 3rd Party Liability

This sends   the historic message that in practice and in the franchise agreement, cautions need to be taken to protect third party liability by limited Franchisor control.  How is that   possible when attempting to create good quality assurances and uniformity?  Here are some suggestions;

 

  1. Give suggestions, choices to meet objectives.
  2. State the goal, not the means to the goal.
  3. Adopt standards and guidance from recognized trade groups, associations, or governmental entities rather than creating your own.

 

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