Restaurant sued franchisor for damaging fire at franchise location
An Ontario company is not responsible for the negligence of a franchisee after a fire at a franchise location damages another business, the Ontario Superior Court of Justice has ruled.
On Dec. 12, 2004, a Coffee Time franchise store owned by Jolin Groups caught fire. Smoke from the fire got into the restaurant next door, owned by Toshi Enterprises, and caused enough damage that the restaurant had to close for three days to repair it. Toshi sued Coffee Time for damages for lost business and repairs.
The trial judge found Coffee Time exerted a number of controls in the franchise agreement with Jolin which characterized an employer-employee relationship. However, the Superior Court of Justice disagreed, finding it was a typical franchise agreement that allowed Jolin to hire and fire its own employees, maintain its own business and tax records, make its own operation decisions and own the store’s assets. As a result, Jolin was an independent contractor and Coffee Time did not exercise control over the franchise’s business.
Because of Jolin’s independence, the Superior Court said, Coffee Time could not be found vicariously liable. Coffee Time had no control over Jolin’s business or the conditions leading to the fire.
“The lack of control exercised by Coffee Time over Jolin vitiates the policy rationale for imposing vicarious liability in the circumstances,” the court said.
The court also found Jolin couldn’t be held responsible for the fire because the cause was unknown and there was no evidence of negligence by Jolin. Toshi’s claim for damages was dismissed. See Toshi Enterprises Ltd. v. Coffee Time Donuts Inc., 2008 CarswellOnt 5954 (Ont. S.C.J. (Div. Ct.)).