A Texas court of appeals affirmed judgment in favor of a plaintiff who claimed a franchisor was vicariously liable for a franchisee’s employee’s wrongful conduct.
Plaintiff, a customer of a massage salon franchised by Massage Heights Franchising, LLC (“MH Franchising”), alleged she was sexually assaulted by the franchisee’s employee, a massage therapist, during plaintiff’s massage. Plaintiff sued the employee, franchisee and MH Franchising asserting multiple claims, including negligence, premises liability and vicarious liability.
At trial the plaintiff introduced evidence of emails showing that MH Franchising was aware of sexual assaults at its franchises, a copy of the franchise agreement, and the operations manual, and an expert witness who testified regarding franchise operations. MH Franchising did not present any witnesses and moved for a directed verdict on all of plaintiff’s claims, arguing that the employee’s criminal act broke the chain of causation. The trial court denied MH Franchising’s motion and allowed the case to go to the jury. The jury found MH Franchising was 15 percent responsible and awarded plaintiff damages.
MH Franchising appealed, arguing it did not retain control over a franchisee’s hiring, firing, and supervision of employees, among other arguments.
The appellate court concluded there was sufficient control because under the franchise agreement and MH Franchising’s manual, the franchisor controlled the “minutia” of its franchise locations and the work performed by the massage therapists, including how massage therapists were trained; the process to earn customers’ trust and interact with clients before, during, and after sessions; and how the massage therapists were to drape undressed guests. The court also found MH Franchising directed the order in which a franchisee’s massage therapist was to perform the work and overall customer appointment.
The appellate court rejected MH Franchising’s arguments that it could not maintain the requisite control because the franchise agreement provided that the franchisee is an independent contractor and sole operator of its business. Although the franchise agreement says franchisees, not MH Franchising, are to make independent decisions regarding hiring, firing, and training of staff, the court found MH Franchising was not excused from its duty to act reasonably over the areas in which it did retain control—providing massages to customers by massage therapists.
Franchisors are often sued along with franchisees when a franchisee’s employee commits wrongful conduct against a customer. To limit liability, franchisors should consult with franchise counsel to review relevant franchise agreements, manuals, and overall interactions with franchisees to determine where the franchisor’s training responsibilities may cross the line to be deemed excessive control over a franchisee’s operations.
Massage Heights Franchising, LLC v. Hagman, Case No. 14-22-00160-CV, Court of Appeals of Texas, Fourteenth District (Oct. 26, 2023)
