Injuries to children are among the most terrifying images for any parent. When a terrible injury becomes a reality, parents will understandably look to hold all seemingly accountable parties responsible. However, the efforts of many of these parents are stymied by the legal limitations. Indeed, many sites attractive to children are franchise establishments, and a common issue that arises when one is injured at a franchise site is whether liability extends to not only the franchisee but also the franchisor.
Franchisors are typically larger corporations that are more well-equipped to satisfy a plaintiff’s judgment than many insolvent small franchise owners. Although franchisors typically have deeper pockets, they are often inclined to fight liability in even small cases, since an adverse ruling on liability can influence subsequent courts’ decisions on the issue of vicarious liability. This commonplace struggle was at the center of a recent decision from the Georgia Court of Appeals, Kids R Kids International, Inc. v. Cope, which arose from the unfortunate injury of a child at a franchise daycare facility. Construed favorably to the plaintiff, the evidence showed that the plaintiff’s son, on whose behalf the case was brought, was injured when he collided with a metal pole located in the play area of the daycare center.
The collision caused injuries to the child’s face, and the plaintiff brought a negligence action against Gonzales Foods, Inc., the franchisee that owns the specific daycare, and Kids International, Inc., which franchised the daycare. Following discovery, Kids International moved for summary judgment, arguing that, since it did not own or operate the facility, have involvement in the daily operation of the facility, or have a financial interest in the facility, it could not be held vicariously liable for any negligence at the franchise site. The trial court denied the motion, concluding simply that there were genuine issues of material fact.
Kids International filed for an immediate interlocutory appeal with the Georgia Court of Appeals, which granted the request. On appeal, the Georgia Court of Appeal determined that the trial court’s denial was in error. In order to establish a franchisor’s vicarious liability, a plaintiff will establish that an agency relationship exists between the franchisor and franchisee. Two possible types of agency were at issue in this case: actual agency and apparent agency. Generally, actual agency requires that one is “give[n], or . . . assumes, the right to control the time and manner of executing the work.” Pizza K, Inc. v. Santagata, 249 Ga. App. 36, 37 (2001).
The Court of Appeal has instructed lower courts to be mindful of considerations of control in the franchise context because a franchisor will always want to maintain some control to protect its identity and professional reputation but not necessarily have enough control to be held liable for a franchisee’s torts. Id. Accordingly, the Court of Appeals has found that a franchisor may establish strict standards for a “franchisee’s operations” and retain the right to periodically inspect a franchisee without being deemed to have so much control that it is vicariously liable for the franchisee’s negligence. See DaimlerChrysler Motors Co., LLC v. Clemente, 294 Ga. App. 38, 45 (1) (a) (2008).
In this case, the court concluded that, even though the franchise agreement set detailed standards for advertising, hours of operation, decor, employee training, employment eligibility, and employee record retention, the contract disavowed Kids International’s control over the day-to-day management and operation of the site, including supervision of the personnel. Thus, the Court concluded that there was no actual agency relationship. The Court of Appeals reached a similar conclusion with respect to apparent agency. For apparent agency to exist, a plaintiff must demonstrate “(1) that the [principal] held out another as its agent; (2) that the plaintiff justifiably relied on the care or skill of the [agent] based upon the [principal’s] representation; and (3) that [the] justifiable reliance led to the injury.” Bright v. Sandstone Hospitality, LLC, 327 Ga. App. 157, 158 (1) (a) (2014). Although the plaintiff, in this case, argued that Kids International’s mandated signage was sufficient to establish a showing of apparent agency, the Court of Appeals noted that the enrollment agreement signed by the plaintiff specifically noted that the daycare was independently owned and operated by a franchisee and that Kids International was not responsible for the franchisee’s actions or obligations.
Furthermore, evidence showed that the plaque at the front desk of the establishment stated that Gonzales Foods, not Kids International, was the owner and operator of the daycare. Therefore, the Court of Appeals concluded that justifiable reliance could not be established. As this case aptly demonstrates, Georgia law regarding the vicarious liability of franchisors is incredibly unfavorable to those harmed. Indeed, one could reasonably argue that an entity that derives profit from a franchise relationship and maintains control over such factors as the franchisee’s employment of workers could reasonably be held liable for injuries arising at a franchisee facility. The fairness of the balance struck by existing law notwithstanding, someone injured as a result of the negligence of a franchisee should consider enlisting the aid of competent counsel before bringing suit. Indeed, many harmed are often unaware of the existence of a franchise relationship or of the identity of the franchisee entity.
The Atlanta premises liability attorneys at Christopher Simon Attorney at Law have ample experience dealing with litigation involving franchises and are prepared to help you navigate the hurdles to recovery. Feel free to contact us for a free case consultation if you have recently been injured and believe you have possible claims.