When a franchisee makes an operational mistake or faces a lawsuit, you might wonder if that liability can reach your company’s doorstep. The answer to that question usually comes down to one important factor: control. Here is how it usually plays out.
What makes a franchisor responsible for a franchisee’s conduct?
While it is true that you hold greater control over the way a franchisee represents your brand, this is rarely enough to prove vicarious liability. Courts want to see real evidence that proves you controlled the specific action that caused the harm. For example, if you directed or had the contractual right to direct the exact activity that led to the lawsuit, a court may hold you liable.
How do Kentucky courts determine the level of control?
In business law cases, Kentucky courts look at several factors before reaching a conclusion. When evaluating vicarious liability, Kentucky courts may consider:
- How much the franchise agreement gives you authority over daily operations
- Whether you stepped in and made specific operational decisions
- How much the franchisee stayed independent in running the business
- Any real-world actions that suggest control beyond what the contract clearly says
If vicarious liability is proven, you are usually responsible for any damages that follow.
Protecting your franchise business when a liability claim arises
Determining whether you crossed the line from protecting your brand into controlling daily operations could be difficult. It requires careful review of franchise agreements, operational manuals and digital communications. An attorney experienced in business law can analyze these documents and develop a strong defense strategy based on the contractual and operational facts
