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Franchisors Case Analysis

The questions that Judge Lundsten asks are not answered by the majority opinion, and when such issues arise in the future, the majority opinion sends markedly mixed signals.

Consider the food poisoning hypothetical raised by Lundsten, or the Oregon case, Miller v. McDonald’s Corp., 945 P.2d 1107 (Or.Ct.App.1997).

The majority’s discussion of the case appears to agree with its reasoning, suggesting that, if the negligence caused defects in product quality, an area over which all food franchisors exercise significant control, the franchisor would be liable.

However, even then, Arby’s remedy would be limited to terminating the agreement if the franchisee fails to cure the quality problems. Other portions of the majority’s discussion suggest this is insufficient day-to-day control to permit imposition of vicarious liability.

Other cases the majority cites as persuasive suggest the same. For example, in the Iowa case, Hoffnagle v. Mc-Donald’s Corp, 522 N.W.2d 808 (Iowa 1994), the court held that the franchisor would only be liable if it retained control over day-to-day operations.

Thus, even if the negligence was in the area of food quality, over which the franchisor had considerable authority, the franchisor would still not be liable, because of the lack of actual control over day-to-day operations. The same is true of a Michigan case cited by the court, Little v. Howard Johnson Co., 183 Mich.App. 675 (1990).

The majority also cited an Indiana case as persuasive authority, Helmchen v. White Hen Pantry, Inc., 685 N.E.2d 180 (Ind. App.1997), which suggested that a franchisor is liable only if requires “mandatory procedures” and those procedures caused the injury.

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Wisconsin Court of Appeals

Related Article

Vicarious liability of franchisors limited

Assuming that a sapphire in a Big Mac or food poisoning is the result of a failure on the part of an employee or franchisee to follow the franchisor’s procedures, rather than a result of the procedures themselves, the Indiana case would suggest a finding of no vicarious liability.

In fact, the Indiana case cited by the majority actually bolsters Lundsten’s concurrence rather than the majority opinion. If the franchisor’s mandatory procedures were the cause of the injury, the franchisor’s liability would not hinge on vicarious liability; it would be directly liable.

Thus, although the majority purports to adopt a standard that can handily be applied to future cases, both plaintiffs and defendants can mine this decision for nuggets to support their arguments when those cases do arise.

– David Ziemer

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David Ziemer can be reached by email.

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