When Does Mandating A POS System Imply Franchisor Vicarious Liability?

Author:Mr Robb Harvey
Profession:Waller Lansden Dortch & Davis

Originally published in The International Association of Franchisees and Dealers

Vicarious Liability in General

Nearly every franchisor has suffered threats of litigation based upon the actions of its franchisees. These threats are not necessarily limited to claims stemming from the franchisees' delivery of services (from mold remediation to serving tasty food which does not result in gastro-intestinal distress), but may extend to those arising from the franchisees' employment decisions.

Generally, the franchisor defends on the basis that it does not direct the day-to-day actions of its franchisees, and the franchise relationship by definition is an independent contractor relationship, rather than an agent-servant relationship.

A recent case out of Washington recognizes this principle, but with a current technological and statutory gloss.

Robo Calling by Franchisee using Franchisor Mandated POS

In this case, a sizable Domino's Pizza franchisee (Four Our Families, Inc.) hired a telemarketing firm (Call-Em-All LLC) to help increase sales, and that firm engaged in "robo-calling" to offer pizza delivery specials.

A class action lawsuit was filed claiming violations of the federal Telephone Consumer Protection Act (47 U.S.C. Section 227 et seq.) and a Washington statute (Revised Code of Washington Section 80.36.400, "WADAD," governing "automatic dialing and announcing devices"). The putative class action plaintiffs claimed that they had received unsolicited auto-calls offering pizza deals from Domino's, and those calls were made without their prior consent.

The plaintiffs claimed that the franchisor was liable for the franchisee's actions under the general contract provision granting the franchisor the right to control advertising and marketing decisions. The franchisor denied that it was involved in the robo-call efforts.

In support of their claim against the franchisor, the plaintiffs pointed out that the...

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