A Mississippi federal court granted summary judgment in favor of Leisure Systems, Inc. (“LSI”), a franchisor of Yogi Bear themed children’s parks and campgrounds, on negligence and premises liability claims. The case was brought against LSI and its franchisee after eleven children contracted a dangerous strain of E. coli bacteria from two pools at a franchised camping resort. The court found that LSI did not owe the plaintiffs a duty to make the pools reasonably safe.
The plaintiffs alleged LSI owed them a duty of reasonable care because LSI knew about proper pool maintenance but was willfully blind to whether the franchisee was keeping the water safe. LSI moved for summary judgment on the basis that it was merely the franchisor, and LSI did not operate the pools in question.
Since there was no binding authority in Mississippi for when a franchisor owes third parties a duty of care in negligence cases, the court relied on several pool injury cases against hotel franchisors in holding that a franchisor is not undertaking to protect guests at its hotels merely by providing brand-protecting standards to franchisees. Rather, there must be proof that the franchisor assumed or retained control over water-management operations at the pools before finding that it had a legal duty over water safety.
Accordingly, the court looked at whether there was evidence that LSI assumed or retained actual control over water-management operations at the franchised location.
Pointing to LSI’s manual, the plaintiffs noted 800 pages of extensive guidelines and standards for the operation of the franchise but did not mention water safety. The plaintiffs also claimed that LSI’s audit of the facility specifically and intentionally excluded water safety. They further complained that LSI received complaints and provided notices to the franchisee relating to water quality a few weeks before the outbreak, but LSI had not actually entered the facility to correct the issue after receiving complaints.
The court disagreed with the plaintiffs and found all of these facts supported LSI’s argument that it lacked the required control over the day-to-day operations of the pools to trigger a legal duty to the plaintiffs.
A franchisor’s best defense against a personal injury claim is avoiding affirmative steps to operate or manage a franchised location or being involved in day-to-day business matters of a franchisee. In appropriate cases, franchisors should seek indemnification from franchisees for claims that arise out of the franchisee’s operation of the business. Franchisors should also confirm they are named as additional insureds on their franchisees’ insurance policies if required under the franchise agreement.
