Title: Robert Kerl v. Dennis Rasmussen, Inc.
Citation: 2004 WI 86
Docket Number: 2002AP001273
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: June 29, 2004

2004 WI 86 
 
 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
02-1273 
COMPLETE TITLE: 
 
 
Robert Kerl, General Guardian of Robin  
Kerl, The Estate of David Jones, Benjamin  
Jones and Donna Roberts,  
          Plaintiffs-Appellants-Cross- 
          Respondents-Petitioners, 
 
Attorney General, Wisconsin Department of  
Health and Family Services, and Wal-Mart  
Personal Choice,  
          Involuntary-Plaintiffs, 
 
     v. 
 
Dennis Rasmussen, Inc. and Continental  
Western Insurance, Unidentified Defendant  
ABC (Arby's Inc.'s Insurer),  
          Defendants, 
 
Arby's Inc. d/b/a Triarc Restaurant  
Group,  
          Defendant-Respondent-Cross-Appellant. 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2003 WI App 226 
Reported at: 267  Wis. 2d 827, 672 N.W.2d 71 
(Ct. App. 2003-Published) 
 
 
OPINION FILED: 
June 29, 2004   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
April 6, 2004 
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Dane   
 
JUDGE: 
Richard J. Callaway   
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
DISSENTED: 
        
 
NOT PARTICIPATING: WILCOX, J., did not participate.   
 
 
 
ATTORNEYS: 
 
For the plaintiffs-appellants-cross-respondents-petitioners 
there were briefs by Daniel W. Hildebrand and DeWitt Ross & 
 
 
2
Stevens, S.C., Madison; Douglas B. Keberle and Keberle & 
Patrykus, LLP, West Bend; and Donald J. Murphy and Murphy 
Vaughan & Pressentin, LLC, Monona, and oral argument by Daniel 
W. Hildebrand. 
 
For the defendant-respondent-cross-appellant, Arby’s Inc., 
d/b/a Triarc Restaurant Group there was a brief by Emile H. 
Banks, Jr., Vicki L. Arrowood and Emile Banks & Associates, LLC, 
Milwaukee, and oral argument by Emile Banks. 
 
 
2004 WI 86 
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  02-1273  
(L.C. No. 
00 CV 1674) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Robert Kerl, General Guardian of Robin  
Kerl, The Estate of David Jones, Benjamin  
Jones and Donna Roberts,  
 
          Plaintiffs-Appellants-Cross- 
          Respondents-Petitioners, 
 
Attorney General, Wisconsin Department of  
Health and Family Services, and Wal-Mart  
Personal Choice,  
 
          Involuntary-Plaintiffs, 
 
     v. 
 
Dennis Rasmussen, Inc. and Continental  
Western Insurance, Unidentified Defendant  
ABC (Arby's Inc.'s Insurer),  
 
          Defendants, 
 
Arby's Inc. d/b/a Triarc Restaurant  
Group,  
 
          Defendant-Respondent-Cross- 
          Appellant. 
 
FILED 
 
JUN 29,2004 
 
Cornelia G. Clark 
Clerk of Supreme Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed. 
 
No. 
02-1273   
 
2 
 
¶1 
DIANE S. SYKES, J.  This case involves a claim of 
franchisor vicarious liability under the doctrine of respondeat 
superior.  At issue is whether and under what circumstances a 
franchisor may be vicariously liable for the negligence of its 
franchisee.   
¶2 
The issue arises in the context of a damages lawsuit 
stemming from a horrific crime.  Harvey Pierce ambushed and shot 
Robin Kerl and her fiancé David Jones in the parking lot of a 
Madison Wal-Mart where Kerl and Jones worked.  Kerl was 
seriously injured in the shooting, and Jones was killed.  
Pierce, who was Kerl's former boyfriend, then shot and killed 
himself.  At the time of the shooting, Pierce was a work-release 
inmate at the Dane County jail who was employed at a nearby 
Arby's restaurant operated by Dennis Rasmussen, Inc. ("DRI").  
Pierce had left work without permission at the time of the 
attempted murder and murder/suicide. 
¶3  Kerl and Jones' estate sued DRI and Arby's, Inc.  As is 
pertinent to this appeal, the plaintiffs alleged that Arby's is 
vicariously liable, as DRI's franchisor, for DRI's negligent 
supervision of Pierce.  The circuit court granted summary 
judgment in favor of Arby's, concluding that there was no basis 
for vicarious liability.  The court of appeals affirmed.  
¶4  Vicarious liability under the doctrine of respondeat 
superior depends upon the existence of a master/servant agency 
relationship.  Vicarious liability under respondeat superior is 
a form of liability without fault——the imposition of liability 
on an innocent party for the tortious conduct of another based 
No. 
02-1273   
 
3 
 
upon the existence of a particularized agency relationship.  As 
such, it is an exception to our fault-based liability system, 
and is imposed only where the principal has control or the right 
to control the physical conduct of the agent such that a 
master/servant relationship can be said to exist. 
¶5 A franchise is a business format typically characterized 
by the franchisee's operation of an independent business 
pursuant to a license to use the franchisor's trademark or trade 
name.  A franchise is ordinarily operated in accordance with a 
detailed franchise or license agreement designed to protect the 
integrity 
of 
the 
trademark 
by 
setting 
uniform 
quality, 
marketing, 
and 
operational 
standards 
applicable 
to 
the 
franchise. 
¶6 The rationale for vicarious liability becomes somewhat 
attenuated when applied to the franchise relationship, and 
vicarious 
liability 
premised 
upon 
the 
existence 
of 
a 
master/servant relationship is conceptually difficult to adapt 
to the franchising context.  If the operational standards 
included in the typical franchise agreement for the protection 
of the franchisor's trademark were broadly construed as capable 
of meeting the "control or right to control" test that is 
generally used to determine respondeat superior liability, then 
franchisors 
would 
almost 
always 
be 
exposed 
to 
vicarious 
liability for the torts of their franchisees.  We see no 
justification for such a broad rule of franchisor vicarious 
liability.  If vicarious liability is to be imposed against 
franchisors, a more precisely focused test is required. 
No. 
02-1273   
 
4 
 
¶7 We conclude that the marketing, quality, and operational 
standards 
commonly 
found 
in 
franchise 
agreements 
are 
insufficient to establish the close supervisory control or right 
of 
control 
necessary 
to 
demonstrate 
the 
existence 
of 
a 
master/servant relationship for all purposes or as a general 
matter.  We hold, therefore, that a franchisor may be held 
vicariously liable for the tortious conduct of its franchisee 
only if the franchisor has control or a right of control over 
the daily operation of the specific aspect of the franchisee's 
business that is alleged to have caused the harm. 
¶8  Here, although the license agreement between Arby's and 
DRI imposed many quality and operational standards on the 
franchise, Arby's did not have control or the right to control 
DRI's supervision of its employees.  Summary judgment dismissing 
the plaintiffs' vicarious liability claims against Arby's was 
properly granted.   
I.  FACTS AND PROCEDURAL HISTORY 
¶9 
This is a review of a grant of summary judgment; the 
facts are taken from the pleadings and other documents on file 
in connection with the motion for summary judgment.  Arby's is a 
national franchisor of fast-food restaurants.  DRI operates an 
Arby's restaurant on the west side of Madison as an Arby's 
franchisee. 
¶10  The relationship between Arby's and DRI is governed by 
a 1985 licensing agreement pursuant to which DRI is authorized 
to use Arby's trade name in the operation of a restaurant 
franchise.  Article 1 of the licensing agreement grants DRI a 
No. 
02-1273   
 
5 
 
license to use Arby's trademarks, service marks, and trade names 
in 
accordance 
with 
Arby's 
Operating 
Standards 
Manual.  
Subsequent 
provisions 
in 
the 
agreement 
contain 
specific 
requirements governing, among other things, building design, 
construction, and remodeling; purchasing; food service and 
packaging; signage and advertising.  The agreement specifies an 
up-front license fee of $32,500 and monthly royalty payments of 
3.5 percent of DRI's gross sales.  The agreement requires DRI to 
comply 
with 
all 
applicable 
state 
and 
federal 
laws 
and 
regulations, and to carry at least $1 million of liability 
insurance naming Arby's as an additional insured. 
¶11  Article 6 of the license agreement addresses the issue 
of personnel.  As to management personnel, the agreement 
requires a designated officer or shareholder of the licensee to 
attend an Arby's management training seminar.  As to personnel 
generally, the agreement provides: "LICENSEE shall hire, train, 
maintain 
and 
properly 
supervise sufficient, 
qualified and 
courteous personnel for the efficient operations of the Licensed 
Business."    
¶12 In February 1999, DRI hired Harvey Pierce to work at 
its restaurant.  At the time, Pierce was a work-release inmate 
at the Dane County Jail.  In the mid-afternoon of June 11, 1999, 
Pierce walked off the job without permission.  He then crossed 
the street to the Wal-Mart store parking lot, where he lay in 
wait for Robin Kerl, his former girlfriend, and David Jones, her 
fiancé, both Wal-Mart employees.  When Kerl and Jones emerged 
from the building, Pierce shot them both in the head.  He then 
No. 
02-1273   
 
6 
 
shot himself.  Jones and Pierce died of their injuries.  Kerl 
survived but sustained serious injuries and is permanently 
disabled.     
¶13 Kerl and Jones' estate sued Arby's and DRI, among 
others.  The complaint alleged several causes of action against 
DRI:  (1) negligent supervision; (2) negligent hiring; (3) 
negligent retention; (4) nuisance; and (5) breach of third-party 
beneficiary contract.  The plaintiffs alleged that Arby's was 
liable on the negligent supervision, hiring, and retention 
claims under theories of "actual or constructive agency," 
respondeat 
superior 
and/or 
"active 
negligence," 
which 
we 
interpret to mean direct negligence.     
¶14 Arby's and DRI moved for summary judgment.  The 
Circuit Court for Dane County, the Honorable Richard J. 
Callaway, granted summary judgment dismissing all claims against 
Arby's and dismissing the negligent hiring, nuisance, and breach 
of third-party beneficiary contract claims against DRI.  After 
the plaintiffs filed a notice of appeal, the circuit court, at 
Arby's request, entered a further order denying that part of 
Arby's motion for summary judgment that sought dismissal on 
public policy grounds, enabling Arby's to cross-appeal on that 
issue.   
¶15 The plaintiffs' appeal encompassed only the issue of 
Arby's vicarious liability, as franchisor, for DRI's alleged 
negligent supervision of Pierce.1  The court of appeals affirmed 
                                                 
 
1  The dismissal of the plaintiffs' direct negligence claim 
against Arby's is not before this court.  The circuit court 
No. 
02-1273   
 
7 
 
the circuit court.  Noting that the issue had not previously 
been addressed in this state, the court of appeals surveyed case 
law from other jurisdictions and concluded that the prevailing 
standard for franchisor vicarious liability focuses on whether 
the franchisor controls the "specific instrumentality" which 
allegedly caused the harm, or whether the franchisor has a right 
of control over the alleged negligent activity. Kerl v. 
Rasmussen, 2003 WI App 226, ¶16, 267 Wis. 2d 827, 672 N.W.2d 71.  
Accordingly, the court held that "the standard for imposing 
vicarious liability on a franchisor for the negligent acts of a 
franchisee requires that the franchisor have a right of control 
or actual control over the alleged negligent activity."  Id. at 
¶30.  Because neither the franchise agreement nor the franchise 
operating manual gave Arby's control or the right to control 
DRI's employees, the court of appeals affirmed the summary 
judgment in favor of Arby's.  Id. at ¶¶26-29.  This conclusion 
disposed of the appeal; the court of appeals therefore did not 
reach the public policy argument raised in Arby's cross-appeal.         
II.  STANDARD OF REVIEW 
¶16 We review summary judgments de novo, applying the same 
methodology as the circuit court.  Green Spring Farms v. 
Kersten, 136 Wis. 2d 304, 315-17, 401 N.W.2d 816 (1987).  We 
will affirm the grant of summary judgment when "the pleadings, 
depositions, answers and interrogatories, and admissions on 
                                                                                                                                                             
orders dismissing the negligent hiring, nuisance, and breach of 
third-party beneficiary contract claims against DRI are also not 
at issue here.   
  
No. 
02-1273   
 
8 
 
file, together with the affidavits, if any, show that there is 
no genuine issue of material fact and that the moving party is 
entitled 
to 
judgment 
as 
a 
matter 
of 
law."  
Wis. Stat. § 802.08(2) (2001-02).       
III.  DISCUSSION 
A.  Vicarious Liability 
¶17 A person is generally only liable for his or her own 
torts.  Lewis v. Physicians Ins. Co. of Wis., 2001 WI 60, ¶11, 
243 Wis. 2d 648, 627 N.W.2d 484.  Under certain circumstances, 
however, the law will impose vicarious liability on a person who 
did not commit the tortious conduct but nevertheless is deemed 
responsible by virtue of the close relationship between that 
person and the tortfeasor.  The doctrine of respondeat superior 
("let the master answer"), less frequently referred to as the 
master/servant rule, has been well-settled in the law of agency 
for perhaps as long as 250 years.  See Floyd R. Mechem, Outlines 
of the Law of Agency § 349, at 237 (4th ed. 1952).  Vicarious 
liability under respondeat superior is "liability that a 
supervisory party (such as an employer) bears for the actionable 
conduct of a subordinate or associate (such as an employee) 
because of the relationship between the two parties."  Black's 
Law Dictionary 927 (7th ed. 1999).   
¶18 "Under the doctrine of respondeat superior, a master 
is subject to liability for the tortious acts of his or her 
servant."  Pamperin v. Trinity Mem'l Hosp., 144 Wis. 2d 188, 
198, 423 N.W.2d 848 (1988); see also Arsand v. City of Franklin, 
83 Wis. 2d 40, 45, 264 N.W.2d 579 (1978).  A prerequisite to 
No. 
02-1273   
 
9 
 
vicarious liability under respondeat superior is the existence 
of a master/servant relationship.  Arsand, 83 Wis. 2d at 48; see 
also Restatement (Second) of Agency, § 219 (1958). 
¶19  In Heims v. Hanke, this court adopted the definition 
of "servant" in § 220 of the Restatement (Second) of Agency: 
"[a] servant is one employed to perform service for another in 
his affairs and who, with respect to his physical conduct in the 
performance of the service, is subject to the other's control or 
right to control."  Heims v. Hanke, 5 Wis. 2d 465, 468, 93 
N.W.2d 455 
(1958)(citing 
Restatement 
(Second) 
of 
Agency 
§ 220)(partially overruled on other grounds by Butzow v. Wausau 
Mem'l Hosp., 51 Wis. 2d 281, 290, 187 N.W.2d 349 (1971)); see 
also Wis——JI Civil 4030.  Conversely, a "master" is "a principal 
who employs an agent to perform service in his affairs and who 
controls or has the right to control the physical conduct of the 
other in the performance of the service."  Restatement (Second) 
of Agency, § 2(1).   
¶20 The 
master/servant 
relationship is 
a 
species of 
agency; all servants are agents but not every agent is a 
servant.  Arsand, 83 Wis. 2d at 48; Giese v. Montgomery Ward, 
Inc., 111 Wis. 2d 392, 414-15, 331 N.W.2d 585 (1983).  Unless an 
agent is also a servant, his principal will not be vicariously 
No. 
02-1273   
 
10 
 
liable for his tortious conduct except under certain limited 
circumstances.2 
¶21  Vicarious liability is a form of strict liability 
without fault.  A master may be held liable for a servant's 
torts regardless of whether the master's own conduct is 
tortious.  Although a plaintiff who suffers a single injury may 
plead both vicarious and direct liability claims against a party 
who is asserted to be a master (as was done here), vicarious 
liability is a separate and distinct theory of liability, and 
should not be confused with any direct liability that may flow 
from the master's own fault in bringing about the plaintiff's 
harm.  Vicarious liability is imputed liability.  It is imposed 
upon an innocent party for the torts of another because the 
nature of the agency relationship——specifically the element of 
control or right of control——justifies it.3 
                                                 
2 Under the nondelegable duty exception to respondeat 
superior, a principal may be held liable for a non-servant's 
tortious acts if the agent was performing responsibilities of 
the principal that are so important that the principal should 
not be permitted to bargain away the risks of performance.  See 
Arsand v. City of Franklin, 83 Wis. 2d 40, 54 n.8, 264 
N.W.2d 579 (1978). 
 
3  We note that several of the cases cited by the parties 
and relied upon by the court of appeals involved direct (not 
vicarious) liability claims against franchisors, and focus on 
the existence of a duty on the part of a franchisor regarding 
occurrences on the franchisee's premises.  Chelkova v. Southland 
Corp., 771 N.E.2d 1100 (Ill. Ct. App. 2002); Helmchen v. White 
Hen Pantry, Inc., 685 N.E.2d 180 (Ind. Ct. App. 1997); Hoffnagle 
v. McDonald's Corp., 522 N.W.2d 808 (Iowa 1994); Folsom v. 
Burger King, 958 P.2d 301 (Wash. 1998).  These direct liability 
cases look to the franchisor's actual control or retained right 
of control to determine the presence of a duty for purposes of 
evaluating whether the franchisor was itself negligent.  This is 
No. 
02-1273   
 
11 
 
¶22 Vicarious 
liability 
under 
respondeat 
superior 
typically arises in employer/employee relationships but is not 
confined to this type of agency.  A servant need not be under 
formal contract to perform work for a master, nor is it 
necessary for a person to be paid in order to occupy the 
position of servant.  See Restatement (Second) Agency, § 225 
(1958); Wis JI——Civil 4025.  For example, in Giese, 111 
Wis. 2d at 414, this court held that a child was the servant of 
his father for purposes of vicarious liability analysis when the 
child operated a lawn mower at his father's express direction 
but out of his immediate physical presence.  Consistent with the 
general rule that the master's "business" need not be a 
"business" as that term is understood in the commercial arena, 
we emphasized in Giese that "the [master's] business need not be 
an undertaking for profit."  Id. at 416.  
¶23 While a servant need not be paid in order to expose 
the master to liability for the servant's torts, it is well-
settled that except under certain limited circumstances, a 
master will only be liable for torts of the servant committed 
within the scope of the servant's employment.  Scott v. Min-Aqua 
Bats 
Water 
Ski 
Club, 
Inc., 
79 
Wis. 2d 316, 
320-21, 
255 
N.W.2d 536 (1977); Restatement (Second) of Agency § 219(1).  A 
deviation or stepping away from the master's business——a "frolic 
                                                                                                                                                             
distinct from a claim of vicarious liability under respondeat 
superior, which imputes the servant's negligence against the 
master without any requirement of fault on the part of the 
master. 
  
No. 
02-1273   
 
12 
 
and detour" in the language of the early common law——may 
preclude vicarious liability.  The question whether a tortfeasor 
was acting within the scope of employment at the time the injury 
was inflicted is normally for the jury to determine.4  This 
"scope of employment" question is often the main point of 
contention in a suit for damages predicated on a theory of 
vicarious liability. 
¶24 A person who contracts to perform services for another 
but is not a servant is an independent contractor.  Arsand, 83 
Wis. 2d at 51-52; Restatement (Second) of Agency, § 2(3), cmt. 
b.; Harold Gill Reuschlein and William A. Gregory, The Law of 
Agency & Partnership § 51, at 102 (2d ed. 1990).  An independent 
contractor is "a person who contracts with another to do 
something for him but who is not controlled by the other nor 
subject to the other's right to control with respect to his 
physical conduct in the performance of the undertaking."  
Restatement (Second) of Agency, § 2(3); see also Wagner v. 
Cont'l Cas. Co., 143 Wis. 2d 379, 421 N.W.2d 835 (1988);  Wis 
JI——Civil 4060.  The use of the label "independent contractor" 
in 
the 
contract 
between 
the 
parties 
is 
not 
by 
itself 
dispositive; the test looks beyond labels to factual indicia of 
control or right to control.  Pamperin, 144 Wis. 2d at 201.             
                                                 
4 However, it is a rule of law that a master generally will 
not be vicariously liable for tortious acts committed by a 
servant traveling to or from the place of employment, unless the 
servant is traveling in a vehicle provided by the employer for 
that purpose.  Krause v. W. Cas. & Surety Co., 3 Wis. 2d 61, 70, 
87 N.W.2d 875 (1958); Wis JI——Civil 4040. 
No. 
02-1273   
 
13 
 
¶25 The 
doctrine of 
respondeat 
superior 
retains the 
attributes of its origin as a status-based form of liability.  
The requirement of control or the right to control derives from 
the earliest manifestations of the doctrine and survives today 
as a justification for vicarious liability.  "In early times the 
servant was a member of the family or of the mercantile 
household, and intimacy of relation is still the basic idea 
which today distinguishes the servant from the non-servant."  
Restatement (Second) of Agency § 219, cmt. a.  Persons subject 
to vicarious liability under the early common law——keepers of 
servants, fathers of families——were, in fact, endowed with 
powers of control and as such, able to take responsibility for 
the conduct of others.  Id.  Describing the rationale for 
vicarious liability, the Restatement's commentary observes that 
"a servant is an agent standing in such close relation to the 
principal that it is just to make the latter respond for some of 
his physical acts resulting from the performance of the 
principal's business."  Id.  More specifically: 
The conception of the master's liability to third 
persons appears to be an outgrowth of the idea that 
within the time of service, the master can exercise 
control over the physical activities of the servant.  
From this, the idea of responsibility for the harm 
done by the servant's activities followed naturally.  
The assumption of control is a usual basis for 
imposing tort liability when the thing controlled 
causes harm.  It is true that normally one in control 
of tangible things is not liable without fault.  But 
in the law of master and servant the use of the 
fiction that "the act of the servant is the act of the 
master" has made it seem fair to subject the non-
faulty employer to liability for the negligent and 
other faulty conduct of his servants. 
No. 
02-1273   
 
14 
 
Id. 
¶26 The modern consensus is that vicarious liability is 
also justified on common law policy grounds as a device for 
spreading risk and encouraging safety and the exercise of due 
care by employees/servants.  See Mecham, supra, §§ 352-363, at 
239—45; Reuschlein & Gregory, supra, § 52, at 104-07; Alan O. 
Sykes, The Boundaries of Vicarious Liability: An Economic 
Analysis of the Scope of Employment Rule and Related Legal 
Doctrines, 101 Harv. L. Rev. 563 (1987-88); William O. Douglas, 
Vicarious Liability and Administration of Risk I, 38 Yale L. J. 
584 (1928-29).  Exposure to vicarious liability creates an 
incentive for masters who control or have the right to control 
the conduct of their servants to take steps to ensure that their 
servants exercise due care in carrying out the master's 
business.  Employees (the most frequent kind of servant) are 
usually less able to satisfy a judgment for damages, and are 
therefore less responsive to the threat of tort liability than 
their employers.  Employers (the most frequent kind of master) 
are usually better able financially to absorb the resulting 
costs of increased supervision and safety measures or to insure 
against the risk. 
¶27  Although the rationale for vicarious liability has 
expanded and the circumstances of its application have become 
more diverse, the basic formula for respondeat superior has 
remained the same: only a "master" who has the requisite degree 
of control or right of control over the physical conduct of a 
"servant" in the performance of the master's business will be 
No. 
02-1273   
 
15 
 
held vicariously liable.  To impose vicarious liability where 
the requisite degree of control is lacking would not serve the 
original or more recent justifications for the rule.  If a 
principal does not control or have the right to control the day-
to-day physical conduct of the agent, then the opportunity and 
incentive to promote safety and the exercise of due care are not 
present, and imposing liability without fault becomes difficult 
to justify on fairness grounds.      
B.  Franchising and Franchisor Vicarious Liability 
 
¶28 Franchising is a business arrangement that takes a 
variety of forms, including product franchises, "business format 
franchises," and certain kinds of dealerships.  1 W. Michael 
Garner, Franchise and Distribution Law and Practice § 1:11-1:19 
(2003).  The franchise in this case is an example of business 
format franchising, characterized by the sale of a product or 
service under the franchisor's trademark pursuant to specified 
quality, marketing, and operational standards.  Id. § 1:14, at 
1-29.  A franchise relationship is a marriage of convenience.  
It enables franchisors to spread the capital cost of enlarging 
the market for their goods and services by transferring most of 
those costs to local franchisees.  The franchise arrangement 
enables the franchisor to reach new, far-flung markets without 
having to directly manage a vast network of individual outlets.  
For the franchisee, the arrangement mitigates the risks of 
starting a new business by enabling it to capitalize on the good 
will and established market associated with the franchisor's 
trademark or trade name.  The burdens of starting and operating 
No. 
02-1273   
 
16 
 
a business are eased considerably by the franchisor, which 
provides quality and operational methods and standards, and may 
offer management training programs to the franchisee.  See 1 
Garner, supra, § 1:3-1:4.   
¶29 Use of franchise models has mushroomed in recent 
years.  See 1 Garner, supra, § 1:8-1:9.  Once confined almost 
exclusively to automobile dealerships and gasoline stations, 
franchising has proliferated in this country, accounting for 
approximately $1 trillion in annual U.S. retail sales in 2000, 
representing 
over 
40 
percent 
of 
all 
U.S. 
retail 
sales.  
International 
Franchise 
Association, 
ABC's 
of 
Franchising, 
http://www.franchise.org/resourcectr/faq/q4.asp; 
see 
also IFA 
Educational Foundation, The Profile of Franchising, (Feb. 2000), 
http://www.franchise.org/edufound/profile/profile.asp; 
Michael 
R. Flynn, [Note], The Law of Franchisor Vicarious Liability: A 
Critique, 1993 Colum. Bus. L. Rev. 89, 90; 1 Garner, supra 
§ 1:1, at 1-4. 
¶30  The expansive growth in franchising has produced 
changes in the law governing these business relationships.  See, 
e.g., Wis. Stat. § 135.01 et seq. (2001-02), the Wisconsin Fair 
Dealership Law.  Although the issue of franchisor vicarious 
liability 
is 
one 
of 
first 
impression 
in 
Wisconsin, 
the 
adaptation of the law of agency to the franchise context has 
been the subject of case law in other jurisdictions. 
 
¶31   Most courts that have addressed the issue of 
franchisor vicarious liability have assumed that respondeat 
superior applies in the franchising context and have adapted the 
No. 
02-1273   
 
17 
 
traditional master/servant "control or right to control" test to 
determine whether the relationship between the franchisor and 
franchisee should give rise to vicarious liability.  As a 
general matter, however, the usual justifications for vicarious 
liability lose some force in the franchising context, and the 
"control or right to control" test for determining the presence 
of a master/servant agency is not easily transferable to the 
franchise relationship. 
¶32 As we have noted, a franchise is a commercial 
arrangement 
between 
two 
businesses 
which 
authorizes 
the 
franchisee to use the franchisor's intellectual property and 
brand identity, marketing experience, and operational methods.  
It is quite different from a contract of employment.  For one 
thing, it is the franchisee that pays, not the franchisor.  
Furthermore, although franchise agreements typically impose 
detailed requirements on the franchisee's operations (more on 
that later), the existence of these contractual requirements 
does not mean that franchisors have a role in managing the day-
to-day operations of their franchisees.  To the contrary, the 
imposition of quality and operational requirements by contract 
suggests that the franchisor does not intervene in the daily 
operation and management of the independent business of the 
franchisee. 
¶33 In addition, because many franchise relationships 
include a license to use the franchisor's trade or service mark, 
the detailed quality and operational standards and inspection 
rights specified in the franchise agreement are integral to the 
No. 
02-1273   
 
18 
 
protection of the franchisor's trade or service mark under the 
Lanham Act.  15 U.S.C. § 1051 et seq.; see also Flynn, supra; 
Randall K. Hanson, The Franchising Dilemma Continues: Update on 
Franchisor Liability for Wrongful Acts by Local Franchisee, 20 
Campbell L. Rev 91 (Winter 1997); Randall K. Hanson, The 
Franchising Dilemma: Franchisor Liability for Actions of a Local 
Franchisee, 19 N.C. Cent. L.J. 190.  "The purpose of the Lanham 
Act, 
however, 
is 
to 
ensure 
the 
integrity 
of 
registered 
trademarks, not to create a federal law of agency . . . [or to] 
automatically saddle the licensor with the responsibilities 
under state law of a principal for his agent."  Oberlin v. The 
Marlin Am. Corp., 596 F.2d 1322, 1327 (7th Cir. 1979). 
¶34 Accordingly, 
the 
premises 
of 
vicarious 
liability 
weaken when applied to a claim that a franchisor should be held 
strictly liable for the torts of its franchisee.  The "control" 
of a franchisor does not consist of routine, daily supervision 
and management of the franchisee's business, but, rather, is 
contained in contractual quality and operational requirements 
necessary to the integrity of the franchisor's trade or service 
mark.  The perceived fairness of requiring a principal who 
closely controls the physical conduct of an agent to answer for 
the harm caused by the agent is diminished in this context. 
¶35 Similarly, while the rationale of encouraging safety 
and the exercise of due care is present in the domain of 
franchising, 
as 
elsewhere, 
it 
has 
less 
strength 
as 
a 
justification for imposing no-fault liability on a franchisor.  
The 
typical 
franchisee 
is 
an 
independent 
business 
or 
No. 
02-1273   
 
19 
 
entrepreneur, often distant from the franchisor and not subject 
to day-to-day managerial supervision by the franchisor.  The 
imposition of vicarious liability has less effectiveness as an 
incentive for enhancing safety and the exercise of care in the 
absence of the sort of daily managerial supervision and control 
of the franchise that could actually bring about improvements in 
safety and the exercise of care. 
 ¶36  In light of these considerations, the clear trend in 
the case law in other jurisdictions is that the quality and 
operational standards and inspection rights contained in a 
franchise agreement do not establish a franchisor's control or 
right of control over the franchisee sufficient to ground a 
claim for vicarious liability as a general matter or for all 
No. 
02-1273   
 
20 
 
purposes.5  See Wendy Hong Wu v. Dunkin' Donuts, Inc., 105 
F.Supp.2d 83, 87-94 (E.D.N.Y. 2000)(restaurant franchisor not 
vicariously liable for security lapses associated with rape of 
franchisee employee because franchise agreement did not give 
franchisor "considerable control . . . over the specific 
instrumentality 
at 
issue," 
i.e., 
security 
at 
franchised 
restaurant); Pizza K., Inc. v. Santagata, 547 S.E.2d 405, 406-07 
(Ga. Ct. App. 2001)(pizza franchisor not vicariously liable for 
auto accident caused by franchisee delivery driver because, 
although franchise agreement "contains specific and even strict 
                                                 
5   A few older cases were willing to treat general quality 
and operational requirements in franchise agreements as indicia 
of control sufficient to get the plaintiff past summary judgment 
on that issue.  Drexel v. Union Prescription Centers, 582 F.2d 
781, 788 (3rd Cir. 1978)(grant of summary judgment to drug store 
reversed because general provisions in franchise agreement were 
"so broadly drawn as to render uncertain the precise nature and 
scope of [franchisor's] rights vis-à-vis its franchisee"); 
Raasch 
v. 
Dulany, 
273 
F.Supp. 
1015, 
1018-19 
(E.D. 
Wis. 
1967)(provisions 
in 
automobile 
rental 
franchise 
agreement 
imposing quality control requirements on franchisee create issue 
of fact as to whether franchisor had right of control, 
precluding summary judgment); Billops v. Magness Const. Co., 391 
A. 2d 196, 198 (Del. Sup. Ct. 1978)(provisions in hotel 
franchise agreement "reveal a triable issue on the question of 
actual agency," precluding summary judgment on a claim that the 
franchisor should be held vicariously liable for franchisee's 
harassment of hotel customer); Singleton v. Int'l Dairy Queen, 
Inc., 332 A.2d 160, 161-2 (Del. Super. Ct. 1975)(provisions of 
restaurant franchise agreement suggest "excessive" control by 
franchisor over franchisee, precluding summary judgment on claim 
of franchisor vicarious liability for injury to restaurant 
customer caused by defective glass door).  The more recent cases 
reject the general proposition that the contractual quality and 
operational standards in a franchise agreement give rise to a 
basis for franchisor vicarious liability, opting instead for a 
more precisely focused test, as discussed infra, ¶¶36-43.  
  
No. 
02-1273   
 
21 
 
requirements concerning operation of franchise," franchisor was 
"not authorized under the agreement to exercise supervisory 
control over the daily activities of [franchisee's] employees"); 
Viches v. MLT, Inc., 127 F. Supp. 2d 828, 832 (E.D. Mich. 
2000)(hotel franchisor not vicariously liable for franchisee's 
negligent use of pesticides where franchise agreement does no 
more than insure "uniformity and standardization . . . of 
services"). 
¶37  See also Perry v. Burger King Corp., 924 F.Supp. 548, 
554 (S.D.N.Y. 1996)(restaurant franchisor entitled to summary 
judgment 
on 
claim 
of 
vicarious 
liability 
for 
racial 
discrimination by franchisee because franchise agreement did not 
provide that franchisor had control over employment matters at 
franchisee); Schlotzsky's, Inc. v. Hyde, 538 S.E.2d 561, 563 
(Ga. Ct. App. 2000)(where patron of franchise restaurant 
contracted Hepatitis A from tainted food, franchise agreement 
establishing mandatory 
standards for 
food 
preparation and 
service quality did not mean that franchisor could "direct or 
control manner and method of performance of the daily operations 
of the franchise," affirming summary judgment in favor of 
franchisor); Holiday Inns, Inc. v. Newton, 278 S.E.2d 85, 86 
(Ga. Ct. App. 1981)(where motel patron was assaulted by third 
party 
on 
premises 
of 
franchised 
motel, 
franchisor 
not 
vicariously liable because agreement "gave no control, or right 
to control, the methods or details of doing the work of the 
franchisee"); Little v. Howard Johnson Co., 455 N.W.2d 390, 393-
94 (Mich. Ct. App. 1990)(restaurant franchisor not vicariously 
No. 
02-1273   
 
22 
 
liable for injuries of patron who slipped on ice at franchisee's 
restaurant, since "uniformity and standardization of products" 
provisions in franchise agreement "do not affect the control of 
daily operations"). 
¶38  See also Hart v. Marriott International, Inc., 758 
N.Y.S.2d 435, 438 (2003)(hotel franchisor not vicariously liable 
for slip-and-fall injury sustained by hotel patron where 
franchise agreement did not give franchisor control over "the 
manner of performing the very work in the course of which the 
accident occurred"); Hayman v. Ramada Inn, Inc., 357 S.E.2d 394, 
397 (N.C. Ct. App. 1987)(motel franchisor not vicariously liable 
for injuries resulting from franchisee's negligent security 
because there was "no evidence that [franchisor] retained or 
exercised . . . detailed control over the daily operation of the 
[franchisee]"); Smith v. Foodmaker, Inc., 928 S.W.2d 683, 687-88 
(Tex. App. 1996)(restaurant franchisor not vicariously liable 
for murder of franchisee's employee by a fellow employee because 
franchisor had "no right of control over the hiring practices, 
terms or conditions of [franchisee's] employees"). 
¶39 
These 
courts 
have 
adapted 
the 
traditional 
master/servant "control or right to control" test to the 
franchise context by narrowing its focus: the franchisor must 
control or have the right to control the daily conduct or 
operation of the particular "instrumentality" or aspect of the 
franchisee's business that is alleged to have caused the harm 
before vicarious liability may be imposed on the franchisor for 
the franchisee's tortious conduct.  The quality and operational 
No. 
02-1273   
 
23 
 
standards typically found in franchise agreements do not 
establish the sort of close supervisory control or right to 
control necessary to support imposing vicarious liability on a 
franchisor for the torts of the franchisee for all or general 
purposes. 
¶40  For example, in Pizza K., the Georgia Court of Appeals 
held that a pizza franchisor was not vicariously liable for an 
auto accident caused by one of its franchisee's delivery 
drivers, because neither the franchise agreement nor any record 
evidence 
demonstrated 
that 
the 
franchisor 
controlled 
the 
franchisee's day-to-day hiring, firing, 
or 
supervision of 
delivery drivers.  Pizza K., 547 S.E.2d at 407.  Although the 
franchise agreement in Pizza K. contained many operational and 
quality-control standards and a right to inspect and terminate 
for noncompliance with those standards, the court concluded that 
these contractual provisions did not amount to "day-to-day 
supervisory control" over the franchisee, but, rather, "simply 
served as a means of achieving a desired level of uniformity and 
quality within the system of Pizza K. franchises."  Id.  
¶41  In Wu v. Dunkin' Donuts, the United States District 
Court for the Eastern District of New York refused to impose 
vicarious liability on a franchisor for a rape that occurred on 
the franchisee's premises because there was no evidence that the 
franchisor had "day-to-day control" or "a considerable degree of 
control over the instrumentality at issue," there, the security 
operations of the franchisee.  Wu v. Dunkin' Donuts, 105 F. 
Supp.2d at 87.  The court noted that  
No. 
02-1273   
 
24 
 
[a]lthough the control that DD exercises under the 
franchise agreement is considerable, it is primarily 
designed to maintain uniform appearance among its 
franchisees and uniform quality among their products 
and services to protect and enhance the value of the 
Dunkin' Donuts trademark.  [The franchisee] remains 
solely responsible for hiring, firing, and training 
its employees and for making all day-to-day decisions 
necessary to run the business.  
Id. at 90-91.  The contractual control consisting of the 
imposition of quality and operational standards was insufficient 
to support the claim of vicarious liability.  Id. at 94. 
¶42  On the other hand, in Miller v. McDonald's Corp., 945 
P.2d 1107 (Or. Ct. App. 1997), the Oregon Supreme Court reversed 
a grant of summary judgment on a claim of franchisor vicarious 
liability where the plaintiff was injured when she bit into a 
sapphire stone while eating a Big Mac sandwich at a McDonald's 
franchise.  The franchise agreement and an operations manual 
incorporated into 
the 
agreement established 
that "precise 
methods" of food handling and preparation were imposed by the 
franchisor, McDonald's.  Id. at 1111.  Because the plaintiff 
alleged that the franchisee's "deficiencies in those functions 
resulted in the sapphire being in the Big Mac," the court 
concluded that there was an issue of fact for trial on whether 
the franchisor had the right to control the franchisee "in the 
precise part of its business that allegedly resulted in 
plaintiff's injuries."  Id.  Miller appears to run contrary to 
the prevailing rule that quality and operational standards 
contained in a franchise agreement are generally insufficient to 
support franchisor vicarious liability.  Miller is, however, 
No. 
02-1273   
 
25 
 
consistent with the current consensus to the extent that it 
focused on the particular aspect of the franchisee's business 
that was alleged to have caused the harm.    
¶43  Consistent with the majority approach in other 
jurisdictions, we conclude that the standardized provisions 
commonly included in franchise agreements specifying uniform 
quality, marketing, and operational requirements and a right of 
inspection do not establish a franchisor's control or right to 
control the daily operations of the franchisee sufficient to 
give rise to vicarious liability for all purposes or as a 
general matter.  We hold that a franchisor may be held 
vicariously liable for the tortious conduct of its franchisee 
only if the franchisor has control or a right of control over 
the daily operation of the specific aspect of the franchisee's 
business that is alleged to have caused the harm.       
C.  The Arby's-DRI Relationship 
 
¶44 Applying these principles here, we conclude that 
Arby's did not have control or the right to control the day-to-
day operation of the specific aspect of DRI's business that is 
alleged to have caused the plaintiffs' harm, that is, DRI's 
supervision of its employees.  We note first that the license 
agreement between Arby's and DRI contains a provision that 
disclaims any agency relationship.  Section 11:1 provides: 
[DRI] shall at all times be deemed to be a separate 
and independent businessman, and neither [DRI] nor any 
of its employees, agents or representatives shall 
expressly or by implication be deemed to be an 
employee, 
agent, 
joint 
venturer, 
partner 
or 
representative of, or in a fiduciary relationship 
No. 
02-1273   
 
26 
 
with, Arby's, or be authorized or empowered to create 
any claim, debt or obligation on behalf of Arby's or 
in any way bind Arby's thereto.   
The 
label 
the 
parties 
attach 
to 
their 
relationship 
is 
informative but not dispositive, however.  
¶45 The license agreement contains a plethora of general 
controls on the operation of DRI's restaurant, the most sweeping 
of which is Article 4, which covers "Operating Standards and 
Guidelines."  The centerpiece of this clause in the agreement is 
a requirement that DRI must operate the business "strictly in 
conformity with the Manual provided by Arby's."  The agreement 
also provides that DRI must comply with all laws and regulations 
pertaining to the operation of the business.  The agreement 
requires DRI to maintain records of its business operations in a 
manner satisfactory to Arby's.  It requires that DRI's building 
and equipment must meet specifications designated and approved 
by Arby's.  DRI must obtain its supplies from a list of approved 
suppliers provided by Arby's.  The agreement specifies standards 
regarding containers, uniforms, paper goods, and other packaging 
supplies. 
¶46  DRI is required under the agreement to carry at least 
$1 
million 
of 
liability 
insurance, 
naming 
Arby's 
as 
an 
additional insured.  Arby's retains the right under the 
agreement to inspect DRI's premises and to test the products.  
The agreement specifies that if DRI fails to comply with the 
agreement or fails to operate the business in accordance with 
the then-current operating manual, Arby's may demand that DRI 
No. 
02-1273   
 
27 
 
cure its failure, and may unilaterally terminate the license if 
DRI has not done so within ten days.   
 
¶47 These 
provisions 
in 
the 
license 
agreement 
are 
consistent with the quality and operational standards commonly 
contained in franchise agreements to achieve product and 
marketing uniformity and to protect the franchisor's trademark.  
They 
are 
insufficient 
to 
establish 
a 
master/servant 
relationship.  More particularly, they do not establish that 
Arby's controlled or had the right to control DRI's hiring and 
supervision of employees, which is the aspect of DRI's business 
that is alleged to have caused the plaintiffs' harm. 
¶48  The agreement's provisions regarding the specific 
issue of personnel are broad and general.  Section 6:1 of the 
agreement provides that DRI is required "to hire, train, 
maintain 
and 
properly 
supervise sufficient, 
qualified and 
courteous personnel for the efficient operation of the Licensed 
Business."  Section 6:2 states that someone in charge at the 
restaurant is required to complete a management training seminar 
conducted by Arby's.  The operating manual provides guidelines 
for hiring, training, and supervising employees in accordance 
with applicable labor laws and to achieve an efficient, 
courteous, and satisfied work force. 
¶49  By the terms of this agreement, DRI has sole control 
over the hiring and supervision of its employees.  Arby's could 
not step in and take over the management of DRI's employees.  
Arby's right to terminate the relationship because of an uncured 
violation of the agreement is not the equivalent of a right to 
No. 
02-1273   
 
28 
 
control the daily operation of the restaurant or actively manage 
DRI's work force.  Accordingly, we agree with the court of 
appeals and the circuit court that there is no genuine issue of 
material fact as to whether DRI is Arby's servant for purposes 
of the plaintiffs' respondeat superior claim against Arby's: 
clearly it is not.  Arby's cannot be held vicariously liable for 
DRI's alleged negligent supervision of Pierce.       
IV.  CONCLUSION 
¶50  We 
conclude 
that 
the 
quality, 
marketing, 
and 
operational standards and inspection and termination rights 
commonly included in franchise agreements do not establish the 
close supervisory control or right of control over a franchisee 
necessary to support imposing vicarious liability against the 
franchisor for all purposes or as a general matter.  We hold 
that a franchisor may be subject to vicarious liability for the 
tortious conduct of its franchisee only if the franchisor had 
control or a right of control over the daily operation of the 
specific aspect of the franchisee's business that is alleged to 
have caused the harm.  Because Arby's did not have control or a 
right of control over DRI's supervision of its employees, there 
was no master/servant relationship between Arby's and DRI for 
purposes of the plaintiffs' respondeat superior claim against 
Arby's.  Arby's cannot be held vicariously liable for DRI's 
negligent supervision of Pierce. 
By the Court.-The decision of the court of appeals is 
affirmed.      
¶51 Justice JON P. WILCOX did not participate.   
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No. 
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