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The Franchise Memorandum

New Jersey Federal Court Concludes Franchisor Lacked Sufficient Control over Franchisee to Establish Duty of Care to Franchisee’s Employees

A federal Court in New Jersey granted summary judgment after finding that the franchisor did not owe a duty of care to the plaintiff, who was shot in an armed robbery at a 7-Eleven store operated by a franchisee. Boutahli v. 7-Eleven, Inc., 2020 WL 3287127 (D.N.J. June 18, 2020). On January 10, 2014, Boutahli was the only employee working at a 7-Eleven store in Pennsauken, New Jersey. Just after midnight, two men walked into the store, demanded the contents of the cash register, and pistol-whipped and shot Boutahli four times before fleeing the scene. While Boutahli survived the attack, he suffered permanent injuries for which he was seeking compensation from various parties, including 7-Eleven. Boutahli argued that 7-Eleven had acted negligently when it failed to protect him adequately from the attack. 7-Eleven moved for summary judgment, arguing that it did not owe any duty of care to Boutahli.

While New Jersey law usually relies on the Restatement (Second) of Torts for determining the duty of care, the court acknowledged that prior decisions regarding this issue in the franchising context had instead relied on a theory of agency and control to determine if the franchisor should be held liable for tortious acts that occurred on the franchised premises. The court reviewed three cases where the franchisor was found not liable for such acts because the franchisor did not exert day-to-day control of the franchisee, the franchisees retained control over personnel decisions, each location was independently owned and operated, and the language in the franchise agreements clearly stated the parties were not agents of the other. In reviewing the facts at issue, the court found that while 7-Eleven did have certain controls over the store (for example, maintaining certain bookkeeping records, required training, and the right to convert the store into a gas station and to require the store to carry certain products), those controls did not amount to the day-to-day control that would result in 7-Eleven’s control over the store. Additionally, the franchise agreement clearly stated the parties were not agents of the other. Therefore, the court held that 7-Eleven did not exert such control over that franchised premises such that it should be held liable for the injuries Boutahli sustained at the franchisee-operated premises. The court thus granted 7-Eleven’s motion for summary judgement.

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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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