A Texas appeals court affirmed a lower court judgment in favor of Pizza Hut and its franchisee for claims of an alleged sexual assault by a delivery driver. The appellate court held Pizza Hut was not liable for the franchisee’s employee since Pizza Hut did not have the right to control the franchisee’s employment practices.

The appellate court rejected plaintiff’s argument that the franchise agreements and operations manual, requiring franchisees to comply with brand standards, established control by Pizza Hut over franchisee employment practices. The court held Pizza Hut’s requirement that its franchisee comply with franchisor procedures was not evidence of control. Plaintiff did not prove Pizza Hut controlled or had the right to control the franchisee’s hiring practices. Under the franchise agreement the franchisee, not Pizza Hut, controlled the means, methods and details of operations standards, including employment practices such as hiring, termination, and other personnel actions.

The appellate court rejected plaintiff’s ostensible agency claim because plaintiff did not provide supporting evidence. Ostensible agency occurs when the principal makes a representation that causes justifiable reliance resulting in harm. The plaintiff focused on conduct of the franchisee, not the franchisor. And use of a national brand in general advertising indicates a franchise, not an agency relationship, even if the franchisee’s local advertising was approved by the franchisor.

Plaintiff’s gross negligence claim failed because there was no evidence that Pizza Hut hired the delivery driver, nor that Pizza Hut knew the franchisee hired the driver. Plaintiff did not show a dispute whether Pizza Hut had actual, subjective awareness of the risk involved, but still proceeded with conscious indifference to the rights, safety, or welfare of others, an element of gross negligence. Franchisors should consult with franchise counsel over existing franchise agreements, policies, manuals and training materials, to try to reduce the risk of actual or apparent control over a franchisee’s employment practices. Such review can assist franchisors in defending against tort claims and ostensible agency theories brought by customers or employees of franchised locations.

Franchisors should consult with franchise counsel over existing franchise agreements, policies, manuals and training materials, to try to reduce the risk of actual or apparent control over a franchisee’s employment practices. Such review can assist franchisors in defending against tort claims and ostensible agency theories brought by customers or employees of franchised locations.

See: Doe v. YUM! Brands, Inc., No. 01-19-00844-CV (Tex. App. Nov. 4, 2021)