Franchisors are in a unique position when it comes to personal injury claims by customers at a franchisee’s property.  Plaintiffs often target franchisors since they are a second deep pocket, but there is also a great deal of case law protecting franchisors from liability.

This two-part post reviews some common claims plaintiffs assert to impose liability on a franchisor.  In this first post, we look at one of the most common types of claims that results in a franchisor being sued – the criminal act of a third party.

CRIMINAL ACTS OF THIRD PARTIES

Typically, a franchisor has no legal duty for damages relating to criminal acts of third parties at a franchisee location because there is no special relationship between the franchisor and the injured party.  Of course, there are exceptions to every rule and the following are the two most often used exceptions that allow plaintiffs to impose liability on franchisors.

Voluntary Undertaking Of Security  

The most common way a franchisor can be found liable for the criminal act of a third party at a franchisee’s location is if the franchisor voluntarily undertook a duty relating to safety and/or security.  This exception is based on section 324A of the Second Restatement of Torts, which states in part:

“One who undertakes … to render services to another which he should recognize as necessary for the protection of the a person … is subject to liability to the third person for physical harm resulting from his failure to exercise reasonable care to protect his undertaking, if

(a) his failure to exercise reasonable care increases the risk of such harm, or

(b) he has undertaken to perform a duty owed by the other to the third person, or

(c) the harm is suffered because of reliance of the other or the third person upon the undertaking.” Restatement (Second) of Torts § 324A (1965).

Under the voluntary undertaking doctrine of liability, the duty of care to be imposed upon the defendant is limited to the extent of the undertaking. Frye v. Medicare-Glaser Corp., 605 N.E.2d 557, 563 (IL 1992).

It is important to note that a voluntary undertaking by a franchisor can lead to liability for not only customers, but also for any franchisee employee who is injured.  Whether a franchisor will be found to have undertaken a voluntary duty tends to depend on whether the franchisor’s security policies and procedures were mandatory or mere recommendations.

The following cases provide very good examples of what courts look at when analyzing whether a voluntary undertaking existed:

In Martin v. McDonald’s Corp., 572 N.E.2d 1073 (1st Dist. 1991), two franchisee employees were assaulted and the parents of another employee were killed during a robbery.  The franchisor argued it had no duty to protect the franchisee employees as there was no special relationship.  The appellate court upheld the jury’s finding in favor of the plaintiffs, reasoning that the franchisor voluntarily assumed a duty to the victims. The court determined that, although the law did not impose a duty on the franchisor to protect franchisee employees, the evidence supported a voluntary undertaking of such a duty.

The basis for the ruling was that the franchisor formed a department to deal with security problems and prepared a “bible” for restaurant security operations. It also employed a regional security manager who served as the franchisee’s security supervisor.  The supervisor testified that he “undertook not only the obligation to check for security problems, but also to communicate to the store management what the security policies were and to ‘follow-up’ to be certain that the problems had been corrected and the ‘recommended’ security procedures ‘followed.’“  The court found that this behavior was sufficient to create a voluntary undertaking.  Years later, this same reasoning was followed in Lawson v. Schmitt Boulder Hill, Inc., 924 N.E.2d 503 (2^nd Dist. 2010), as it involved the same franchisor.

Another example is Decker v. Domino’s Pizza, Inc., 644 N.E.2d 515 (5th Dist. 1994), where a franchisee employee was seriously injured during a robbery.  The appellate court upheld the verdict for the plaintiff under a voluntary undertaking theory of liability.  The reasoning was that the franchisor formed a committee to study security issues, adopted a cash management system involving the use of time-delay safes in franchisees’ stores, produced literature regarding robbery prevention, hired a franchise consultant to ensure compliance with the franchisor’s standards (including robbery prevention) and to make sure management trainees were properly trained in safety and security, and maintained a security hotline.

In contrast, where franchisors issue security recommendations rather than mandates, no duty of care is generally found.  Two examples of this are Castro v. Brown’s Chicken and Pasta, Inc., 732 N.E.2d 37 (1st Dist. 2000) and Chelkova v. Southland Corp., 771 N.E.2d 1100 (1st Dist. 2002).  In those cases, security measures were left to the discretion of individual franchisees, the franchisors did not mandate any security procedures, and security materials were available but not required.  Therefore, summary judgment was granted for the franchisors. 

Duty as Owners/Operators Of Location 

Plaintiffs can also impose liability against a franchisor for criminal acts of third parties where the franchisor owned and/or operated the location and a condition of the property allowed the criminal act to take place.  For example, in Marshall v. Burger King Corp., 856 N.E.2d 1048 (2006), the Estate of a customer brought a negligence action against the franchisor and others after a car crashed through a restaurant, killing the plaintiff’s-decedent.  The plaintiff argued that the franchisor did not exercise due care in designing, constructing and maintaining the restaurant.  The franchisor filed a motion to dismiss, which was granted, but the ruling was overturned on appeal.

The Illinois Supreme Court determined that based on the allegations in the complaint, the duty of care that a business invitor owes to invitees to protect them against the unreasonable risk of physical harm would be applicable. The complaint alleged that while the decedent was a customer at a restaurant owned and operated by the franchisor and franchisee, he was injured by the negligent act of a third person. Therefore, because the restaurant was open to the public, the franchisor and franchisee were both in a special relationship with the customer and there was a sufficient basis for a duty of care to withstand a motion to dismiss.  This case is unique and is arguably very limited in scope, however, it is often used by plaintiffs and judges in Cook County to support a very broad theory of liability.

In contrast, in Lavazzi v. McDonald’s Corp., 606 N.E.2d 845 (2nd Dist. 1992), a meat packing employee was killed.  The plant was solely used by a franchisor and the estate argued the franchisor exercised control over the plant to the extent that a duty was created.  The circuit court and appellate court disagreed.  The evidence showed the franchisor only conducted periodic inspections at the plant so a duty of care was not created.

Check back next week and we will evaluate a few others theories that can impose liability on franchisors for customer injuries at a franchisee location.