Reference no: EM131473342

Question: FACTS Wendy Hong Wu was an employee of a 24-hour donut store owned by Turnway Donuts, Inc., under a franchise agreement with Dunkin' Donuts, Inc. Early one morning, when Wu was working alone at the store, two teenagers entered the store, gained access to the employee area behind the counter, and brutally attacked and raped Wu. Wu filed suit against Dunkin' Donuts, arguing that the attack resulted in part from the vicarious negligence of Dunkin' Donuts. In particular, she argued that Dunkin' Donuts was vicariously liable for the franchisee's negligent provision of security. DECISION According to the trial court, the issue presented was whether a franchisor's making of recommendations regarding security matters to its franchisees renders the franchisor legally responsible for ensuring the safety of its franchisees' employees. The court identified the applicable legal rule as follows: "In deciding whether a franchisor may be held vicariously liable for acts of its franchisees, courts determine whether the franchisor controls the day-to-day operations of the franchisee, and more specifically, whether the franchisor exercises a considerable degree of control over the instrumentality at issue in a given case."

The cases from this and other jurisdictions indicate that the franchisor must exercise very specific control over the franchisee and its operations before vicarious liability will attach. For example, a franchisor who retains the right to terminate the relationship for failure to meet standards or to reenter premises and inspect generally does not exercise sufficient control over the franchisee's security practices so as to give rise to a legal duty on the part of the franchisor. The trial court concluded that "absent a showing of actual control over the security measures employed by the franchisee, franchisors have no legal duty in such cases." Wu pointed to three particular practices that she argued showed that Dunkin' Donuts retained actual control over security measures. She argued that Dunkin' Donuts:

(1) required that the franchisee remain open 24 hours a day;

(2) controlled the purchase of security equipment and required a functioning alarm system; and

(3) required a site plan that revealed to passersby that Wu was alone.

The court quickly dismissed the first argument, stating that while the requirement that the franchisee stay open 24 hours a day may have heightened the need for adequate security, Dunkin' Donuts did not mandate specific security measures or otherwise control or limit the franchisee's response to this increased risk. Thus, Dunkin' Donuts could not be held vicariously liable on these grounds. Nor did the evidence support Wu's second argument. While Dunkin' Donuts made security equipment available for purchase and suggested that alarms and other burglary prevention techniques were important, Dunkin' Donuts did not mandate or otherwise exercise control over the purchase of security equipment. Indeed, the franchisee here had unilaterally hired a security consultant and had installed its own security system, including a clear partition, alarm system, and video camera. Finally, the evidence also did not support Wu's claim that Dunkin' Donuts had required a site plan that revealed to persons outside the store that Wu was working alone. While Dunkin' Donuts did provide a standard site plan to its franchisees, the franchise agreement did not require franchisees to conform to this standard plan and, in fact, the franchisee in this instance had made significant interior alterations to the store without seeking or receiving Dunkin' Donuts' prior approval.

The court concluded by noting a public policy concern raised by Wu's arguments: "The possibility that the recommended security measures might have helped protect Wu highlights a public policy concern that the court also believes counsels against imposing liability on Dunkin' Donuts under the circumstances of this case. Dunkin' Donuts expressed a laudable desire to assist its franchisees in protecting their employees and customers, Imposing liability on the basis of such advice could discourage franchisors such as Dunkin' Donuts from taking steps to promote an awareness of security issues among franchisees." Because "there [was] no evidence that Dunkin' Donuts actually mandated specific security equipment, or otherwise controlled the steps taken by its franchisees in general, and [this franchisee) in particular, to protect employees," the court held that Dunkin' Donuts was not vicariously liable for Wu's injuries. The court granted summary judgment to Dunkin' Donuts.