(Please note: the names and locations of all parties have been changed to protect the confidentiality of this wrongful death case and its proceedings.)
F. Universal Exercised Complete or Substantial Control Over the Franchisee
Courts focus on the right to control in determining whether a true agency relationship exists between a franchisor and franchisee. [Wickham v. Southland Corp. (1985) 168 Cal.App.3d 49, 59; Nichols v. Arthur Murray, Inc. (1967) 248 Cal.App.2d 610, 613.] If the franchise agreement gives the franchisor the right of complete or substantial control over the franchisee, an agency relationship exists. [I]t is the right to control the means and manner in which the result is achieved that is significant in determining whether a principal-agency relationship exists. [Cislaw v. Southland Corp. (1992) 4 Cal.App.4th 1284, 1288 (emphasis in original).] The inquiry on this point is a factual one that rests on the extent to which the franchisor retained and exercised control of the operational details of the franchisee’s business. [Id. at 1292-1296.]
Universal fails to show with any admissible evidence that the West Facility was a Universal franchise during 1982 and 1983. California case law is clear that an agency relationship does not exist between a franchisor and a franchisee unless the franchise agreement gives the franchisor the right of complete or substantial control over the franchisee. [Cislaw, supra, 4 Cal.App.4th 1284, 1288.] Universal fails to provide a copy of any franchise agreement for the West Facility. This is no small matter because the terms of the agreement determine whether the franchisee acted as an agent of the franchisor. [Id. at 1288, 1294-1295.] Based on the testimony of Linda Snowball, Richard Leevers and Edwin Ferguson, it is questionable whether a West Facility Franchise Agreement even exists.
Instead of presenting a franchise agreement for the West Facility, Universal instead relies on the inadmissible declarations of Richard Stein and David Ferguson, an exemplar of a franchise agreement for the Baldwin Facility and a copy of the West Facility Sublease. Such evidence is insufficient. Without a franchise agreement for the West Facility, this Court is in no position to determine whether: (1) the West Facility was, in fact, a Universal franchise; or (2) the terms of a franchise agreement for the West Facility, if it exists, are substantially the same as the Baldwin Facility Franchise Agreement.
The discovery issues presented here are common to most personal injury cases.)
Even ignoring all of the foregoing (only for purposes of argument, of course), plaintiffs’ additional evidence raises triable factual issues as to whether Universal exercised complete or substantial control over a franchisee-owned West Facility. This is because Universal wanted its franchises to operate in the same way as its Universal-owned stores. First, Universal controlled the use, hours of operation and layout of the West Facility. See Nichols, supra, 248 Cal.App.2d 610, 615 and Porter v. Arthur Murray, Inc. (1967) 249 Cal.App.2d 410, 416-417, 420-421.] Second, Universal controlled all aspects of the franchisee’s advertising, which was required to be submitted to Universal for approval prior to use. [See Nichols, supra, 248 Cal.App.2d at 615.] Third, Universal exercised broad control over the franchisee under a provision requiring the franchisee to conduct the store in accordance with the Universal Manual and directed that failure to maintain such standards would be sufficient cause, in Universal’s sole judgment, for immediate cancellation of a franchise agreement. [See Nichols, supra, 248 Cal.App.2d at 615 and Porter, supra, 249 Cal.App.2d at 416-417, 420-421.] Fourth, Universal required the franchisee to submit to Universal daily sales reports in a form acceptable to Universal. [See Porter, supra, 249 Cal.App.2d at 416-417, 420-421.] Fifth, Universal controlled the type of employees the franchisee hired, employee training, and employee discipline. Sixth, Universal required that its franchisees provide the same products and services as other Universal stores. Finally, Universal dispatched its District Managers, Territory Sales Managers, and Business Counselors to ensure that the franchises operated and appeared like Universal stores.
So Universal’s control over its franchises certainly went beyond what was needed for Universal to protect its trade name and good will. [Cislaw, supra, 4 Cal.App.4th 1284, 1289.] (See Part 13 of 14.)
For more information you are welcome to contact Sacramento personal injury lawyer, Moseley Collins.