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Miller v. McDonald's Corp. - 150 Or. App. 274, 945 P.2d 1107 (1997)

Rule:

If, in practical effect, a franchise agreement goes beyond the stage of setting standards, and allocates to the franchisor the right to exercise control over the daily operations of the franchise, an agency relationship exists. 

Facts:

A customer sought damages from defendant McDonald's Corporation for injuries that she suffered when she bit into a heart-shaped sapphire stone while eating a Big Mac sandwich that she had purchased at a McDonald's restaurant in Tigard, Oregon. The particular restaurant was not owned by McDonald's Corporation but was a franchise from the corporation. Under a detailed license agreement, the franchisee was required to operate the restaurant in a manner consistent with the corporation's system and was considered an independent contractor. The trial court granted summary judgment to McDonald's Corporation on the ground that it did not own or operate the restaurant. Rather, the owner and operator was a non-party, 3K Restaurants (3K), that held a franchise. The customer appealed claiming that she relied on the corporation's reputation because the restaurant was similar in appearance to other restaurants of the corporation that she had patronized and there was no indication that any entity other than the corporation was involved. 

Issue:

Should McDonald's Corporation, as a franchisor, be held liable for damages?

Answer:

Yes

Conclusion:

The court reversed the grant of summary judgment because there was enough evidence to permit a jury to find that the corporation was vicariously liable for the franchisee's alleged negligence. There was sufficient evidence to raise an issue of actual agency because the corporation had the right to exercise control over the franchisee's daily operations. There was sufficient evidence to raise an issue of apparent agency because the corporation's requirements were imposed to maintain an image of uniformity. The level of the customer's reliance on the corporation's reputation was also not unreasonable as a matter of law.

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