Franchisor Liability for Franchisee Negligence in Georgia

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A franchised business carries a national name, but the company behind the counter can be a separate local operator that licenses the brand. Whether a person hurt there can reach the franchisor as well as the operator depends on what Georgia law asks of any principal: whether the franchisor controlled the work that caused the harm, whether it held the operator out as its own agent in a way the injured person relied on, and whether its own conduct was negligent. The brand name alone settles none of these.

Imputing Negligence Requires Agency

“For the negligence of one person to be properly imputable to another, the one to whom it is imputed must stand in such a relation or privity to the negligent person as to create the relation of principal and agent” (OCGA 51-2-1(a)). “The relation of principal and agent arises wherever one person, expressly or by implication, authorizes another to act for him or subsequently ratifies the acts of another in his behalf” (OCGA 10-6-1).

The opposite rule protects a principal from an independent business. An employer “generally is not responsible” for the torts of one who carries on an independent business and is not subject to the employer’s immediate direction and control (OCGA 51-2-4). A franchisee is a separate company running its own business, so its negligence stays its own unless one of these rules attaches it to the franchisor.

Control Over the Work

An employer is liable for a contractor’s negligence if it keeps the right to direct or control when and how the work is done, or if it steps in and takes control in a way that creates a master and servant relationship or causes an injury traceable to that interference (OCGA 51-2-5(5)). In a franchise, the question is what the franchisor had the right to control, and over which activity. What the franchisor required, what it merely recommended, and what it left to the operator can appear in the franchise agreement, the operations manual, training materials, inspection records, and the parties’ communications.

Apparent Agency

Apparent agency does not depend on actual control. In Richmond County Hospital Authority v. Brown, 257 Ga. 507 (1987), an emergency room case, the Supreme Court of Georgia adopted the Restatement rule: “One who represents that another is his servant or other agent and thereby causes a third person justifiably to rely upon the care or skill of such apparent agent is subject to liability to the third person for harm caused by the lack of care or skill of the one appearing to be a servant or other agent as if he were such.”

The Court explained the limit through the Restatement’s example of a cab company that holds itself out as a safe supplier of transportation while a secret arrangement makes its drivers independent contractors. If a driver injures both a passenger and a pedestrian, “the passenger may successfully pursue a claim against the cab company on apparent agency principles. The pedestrian may not.” The passenger relied on the company’s representation; the pedestrian did not.

The Franchisor’s Own Negligence

A claim for the franchisor’s own conduct does not depend on agency at all. It rests on ordinary negligence, the failure to use the care that ordinarily prudent persons use in the same or similar circumstances (OCGA 51-1-2), and the injured person must prove the franchisor’s own breach and that it caused the harm, as with any defendant.

Frequently Asked Questions

Is it enough that the customer believed the franchisor ran the store?
No. “It is not enough that plaintiff simply believe there is an agency relationship. There is an objective standard. The apparent principal must represent or hold out the apparent agent. Then, too, justifiable reliance must lead to the injury” (Richmond County Hospital Authority v. Brown).

Do “independently owned and operated” signs matter?
Because the test is objective and asks whether reliance was justifiable, what the business told customers about who owned and operated it bears on whether a customer could justifiably rely on the franchisor’s name.

Can a franchisor become responsible by approving what the operator did?
A principal’s ratification “may be express or implied from the acts or silence of the principal” and “shall take effect as if originally authorized” (OCGA 10-6-52), and an employer is liable for a contractor’s negligence if it ratifies the contractor’s unauthorized wrong (OCGA 51-2-5(6)).

Does inherently dangerous work change the rule?
It can. An employer is liable for a contractor’s negligence when, judged by the employer’s own previous knowledge and experience, the work is by its nature dangerous to others even if it is done carefully (OCGA 51-2-5(2)).

  • OCGA 51-2-1(a); OCGA 51-2-4; OCGA 51-2-5(2), (5), (6)
  • OCGA 10-6-1; OCGA 10-6-52
  • Richmond County Hospital Authority v. Brown, 257 Ga. 507 (1987)
  • OCGA 51-1-2

Disclaimer

This article provides general information about franchisor and franchisee liability under Georgia law. It is not legal advice and does not create an attorney-client relationship. Whether a franchisor is answerable depends on the franchise documents, how the parties actually operated, and the specific facts. A person injured at a franchised business should consult a licensed Georgia attorney about the particular situation.

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