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The Franchise Memorandum

Missouri Federal Court Grants Summary Judgment on Vicarious Liability Claims Against Franchisor

A federal court in Missouri recently granted summary judgment to the franchisor of the Hardee’s restaurant system, its parent company, and an affiliate on claims that they were vicariously liable for the fatal electrocution of a child on the playground of a franchised restaurant in Amman, Jordan. Hersh v. CKE Rest. Holding’s Inc., 2022 WL 407124 (E.D. Mo. Feb. 10, 2022). The child’s father alleged that the franchisor was liable for the franchisee’s negligence because the franchisee was the agent of the franchisor. The father also alleged that a discrepancy in the address in the franchise agreement showed that the agreement did not apply to the restaurant, and that it was in fact owned by the franchisor.

The court rejected this argument and held that the restaurant was in fact owned by the franchisee. It then held that the franchisor did not have sufficient day-to-day control over the franchisee to establish an agency relationship under Missouri law. The court concluded that, although the franchise agreement's disclaimer of an agency relationship between the franchisor and the franchisee was not dispositive, the franchisee's contractual obligation to comply with Hardee’s system standards was insufficient to establish an agency relationship. In particular, the court found that the franchisor lacked the right to hire, fire, or discipline restaurant employees or to determine their wages or working conditions. Moreover, although the Hardee’s operations manual required a preclosing safety check with respect to restaurant playgrounds, the provision was insufficient to establish the control necessary to find an agency relationship. Thus, the court determined that the father lacked sufficient evidence that the franchisor maintained the level of control over the restaurant necessary to establish vicarious liability, and granted the franchisor’s motion for summary judgment.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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