As in a lot of business methods, franchise myths seem to abound. Such myths harm both franchisors and franchisees.
On June 21, 2012, the Superior Court for the District of Montreal, Quebec, Canada entered a judgment for $16.4 Million against the Canadian Dunkin Donuts franchisor in favor of 21 former franchisees. The court held, among other things in a new court decision, that the franchisor breached an express or implied contractual obligation to protect and enhance its brand.
Two new court decisions, in March and in June of this year, out of Massachusetts raise the issue of what is the line between a franchisee and an employee. Acknowledging that Massachusetts has some unique laws regarding classification of employees and that at least one state (Georgia) has given franchisors an exemption, the decisions in those cases are worth some thought by every franchisor–and franchisee.
In a continuing effort to highlight important new court decisions, this time regarding vicarious liability of a franchisor for the actions of its franchisee, you need to be aware of Patterson v. Domino’s Pizza. In the Patterson case, which had been dismissed by the trial court, the California Court of Appeal reversed, saying: “a franchisor’s actions speak louder than words.”
Perhaps it is a response to a growing perception that franchise agreements have been growing increasingly lopsided-just a tiny step above the indentured servitude of the middle ages-or perhaps it is pandering to the franchisees who showed up in Sacramento in droves to testify, but the Assembly of the California legislature today took one step toward passing a state fair franchising law.