Franchisors may be found liable for the wrongful conduct of their franchisees on an apparent authority theory when the conduct of the franchisor creates an appearance of authority.

Question

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Under the apparent authority theory, a third party may reasonably believe that a franchisee is authorized to act on behalf of the franchisor based on the franchisor's conduct, such as advertising or uniformity in operation. As a result, the franchisor may be held liable for the franchisee's actions even if the franchisor did not explicitly authorize or direct the conduct in question.

Franchisors May Be Found Liable for the Wrongful Conduct of Their