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Appeals Court Says Daycare Franchise Not Responsible for Child’s Injuries

In any personal injury lawsuit against a business—say, a slip-and-fall or similar premises liability case—the defendant may have a franchise relationship with another company. Does that mean the franchisor can be held liable for the local business’ negligence? A recent Georgia Court of Appeals decision provides a useful illustration of the law in this area.

Kids R Us International, Inc. v. Cope

The plaintiff in this case is the mother of a three-year-old child. The child was enrolled at a daycare center. One day, the child suffered injuries to his face when he collided with a metal gate located in the daycare’s play area. The mother argued the daycare center was negligent in failing to supervise her child and keeping the overall premises safe.

The daycare center itself was a franchise for a national brand. The mother’s personal injury suit named both the owner of the daycare center and the franchisor as defendants. Before the trial court, the franchisor moved for summary judgment, arguing it could not be held liable for the negligence of the franchisee; that is, the owner of the particular daycare center in question. The judge denied summary judgment but immediately certified the decision for review by the Court of Appeals.

In its opinion, the Court of Appeals reversed the trial judge, holding the franchisor was entitled to summary judgment. Under Georgia law, a company is “vicariously liable” for any negligent act committed by one of its agents. Here, the plaintiff argued the daycare center was an agent of the franchisor. The Court of Appeals disagreed.

There were two possible theories of agency here. The first was “actual agency,” or a contractual duty to act as an agent. Here, the Court of Appeals found the agreement between the franchisor and the daycare center created no actual agency. In exchange for the use of the franchisor’s name and brand, the daycare center agreed to uphold certain standards—decor, hours of operation, etc.–but the franchisor had no role in the center’s day-to-day operations. More importantly, the appeals court noted, the franchisor assumed no responsibility for oversight. That meant no actual agency existed.

But a franchisor might also be held liable under the theory of “apparent agency.” This theory applies when three conditions are met. First, the principal holds out another person (or entity) as its agent. Second, the plaintiff “justifiably relied” on the agent’s skill based on the principal’s representations. Finally, such reliance led to the plaintiff’s injury.

Here, the Court of Appeals said the plaintiff could not prove the second element, justifiable reliance. The plaintiff argued the franchisor held the daycare center out as its agent because “all signage and documentation” contained the franchisor’s trademarks. But the Court of Appeals noted that alone does not prove apparent agency. And in this case, the plaintiff further defeated her own argument when she initially signed an enrollment form for her son which clearly stated the daycare center “is independently owned and operated,” and the franchisor was not responsible for any of its operations. In other words, the court said, the franchisor never held the daycare center out as its agent.

The appeals court’s decision only extends to the franchisor. The lawsuit against the daycare center may continue. The Court of Appeals did not address the merits of the underlying negligence claim.