Tag Archives: franchise law

Power to the People?

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Lawmakers in Maine, California, Pennsylvania and Massachusetts have introduced bills that would give franchise owners a lot more leverage. These new rights and options would offer new opportunities to franchisees, including allowing them to join and support franchisee associations, as well as make renew agreements with their franchiser under the current terms much easier. While there are mixed opinions on the legislation, it seems many are in favor of the new bill giving franchisees more power in their businesses. Others have issues with the bills, feeling that giving franchises more freedom could potentially “tarnish the brand.”

Maine’s new legislation bill is perhaps the most far-reaching. LD 1458, which includes a series of big stipulations, if passed, could do the following:

  1. Allow franchisees to close their stores between 10 p.m. and 6 a.m.
  2. Let franchisees renew their licenses without an increase in royalties or new fees
  3. Give franchisees the power to set their own prices on products and services

The new laws had me question what might be empowering this recent movement. Perhaps, at least in part, the desire for more flexibility for individual franchisees may be fueled by the fairly recent local movement in most communities. Locality is becoming highly valued, in terms of sourcing (ex: food) and workers. People want Joe down the road running his frozen yogurt restaurant, not the frozen yogurt’s corporate headquarters. Secondly, I think that the internet may play an influential role. Today, franchisees are able to communicate more effectively than they were a decade ago because of the rise of social media. Accessibility to one another thoughts and ideas are bringing people closer, and therefore strengthening their case.

How do you feel about the proposed legislation? Leave your comments below!

Franchises & The Law: How Liable is a Franchise for Actions of Franchisees’ Employees?

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Patterson v. Domino’s Pizza, LLC, the California case that involves a sexual harassment claim by a franchisee’s employee once again raises the question whether a franchisor can be deemed a franchisee’s “employer” for certain purposes. Patterson, a Domino’s employee claimed that her assistant manager both sexually harassed and sexually assaulted her. When filing suit, Patterson listed both the franchisee and Domino’s liable for her sexual harassment. The reasoning behind this was that both the franchisee AND Domino’s were the supervisor’s “employers”, and therefore made them vicariously liable for his actions.

The appellate court was faced with a challenge: how liable is a franchise for the actions of individual franchisees’ employees? The appellate court stated that the “franchisors interest in the reputation of its entire system allows it to exercise certain controls over the enterprise without running the risk of transforming its independent contractor franchisee into an agent.” However, the court went on to explain that although this is generally true, because of this substantial control over franchisee’s local operation as well as management-employee, the franchisor can be subject to vicarious liability. The franchisee’s testimony stressed this issue of control, as he said that he had to abide by the hiring and firing rules given by the Domino’s area representative. California’s court decided that Domino’s actually can be liable for sexual harassment of a franchisee’s employee. (2012 Cal. App. LEXIS 753)

What does this mean for franchisees? Franchisees can certainly have a specific disclaimer for employment relationships to help protect them from liability. It could also be a reminder for franchisors everywhere to review their operations manuals and determine standards for what a franchisor actually has control, and therefore potential liability, over. I can only imagine that this case, along with several others in the past few years in Massachusetts, Connecticut, Oregon, Pennsylvania, and Florida, has made franchises more cognizant about sexual harassment laws and regulations.

What do you think about the ruling of this case? How much liability should a franchisor hold? Does a franchisor’s right to set standards for franchisees’ employees’ appearance and its involvement in hiring and firing decisions make them reliable for sexual harassment cases? Leave your opinions below!