Do franchisors have an obligation to their franchisees to act competently?
In theory, it’s possible that a franchise attorney could prove that a franchisor violated a franchise agreement by poorly managing the franchise system. Inadequately capitalizing the franchise system or poorly managing advertising campaigns could potentially violate a franchise agreement. However, there are few if any recent case findings in which a franchisor has violated the terms of a franchise agreement. And if the franchise agreement hasn’t been violated, the courts almost never support a free-standing claim of negligence against the franchisor. In other words, courts have held that franchisors do not owe a duty of competence to their franchisees. It’s interesting to note, however, that many franchise law firms stay busy addressing the flip side of this issue–whether the franchisee has acted negligently in operating his or her franchise.
