In a closely watched decision for the franchise industry, the Texas Supreme Court issued a per curiam opinion without oral argument in Massage Heights Franchising, LLC v. Hagman, 2025 WL 1978842 (Tex. May 2, 2025) (per curiam), reversing a lower court ruling that had imposed liability on a franchisor for a franchisee’s hiring decision. The Court’s swift and unanimous action, without the need for oral argument, signaled that the legal error was clear and the precedent well-established. At the heart of the ruling was a reaffirmation of a foundational principle in Texas franchise law:
A franchisor is not liable unless it controls the specific conduct that causes harm.
Trial Outcome: Franchisor Held Liable Despite Jury’s Finding It Had No Control
At trial, the jury awarded both compensatory and punitive damages to the plaintiff, assigning fault as follows: 50% to franchisee’s employee; 35% to the franchisee; and 15% to Massage Heights Franchising, LLC. But, here’s the twist–when asked specifically about control, the jury found that Massage Heights Franchising did not have actual control over its franchisee’s conduct. Despite that finding, the trial court entered judgement against the franchisor.
The Legal Turning Point: What Counts as Control?
In Massage Heights Franchising v. Hagman, 679 S.W.3d 298 (Tex. App.—Houston [14th Dist.] 2023, pet. granted, rev’d), the appellate court reversed punitive damages but affirmed the trial court’s final judgment as to the franchisor’s liability and the compensatory damages award. The appellate court focused on the “minutiae” of operational standards in the franchisor’s manual, suggesting that detailed brand guidance created a duty of care.
The Texas Supreme Court disagreed. Citing long-standing franchise law precedent, the Texas Supreme Court emphasized: “It is not enough to show that the defendant controlled one aspect of the activities if the injury arose from another.” Gen. Elec. Co. v. Moritz, 257 S.W.3d 211, 214 (Tex. 2008). In this case, the franchisor did not control the hiring process, which was explicitly assigned to the franchisee in the franchise agreement. The Texas Supreme Court found that:
- Providing operational guidance or safety protocols does not create liability.
- Control must relate directly to the injury-causing conduct.
- There was no evidence that the franchisor’s guidance increased risk; in fact, it was designed to reduce it.
This distinction is critical for franchisors who aim to maintain brand standards while respecting the independence of their franchisees.
Industry Implications: A Broader Signal
The International Franchise Association (IFA) filed an amicus brief urging the Court to review the case, warning that the appellate ruling could destabilize the franchise model in Texas. The IFA emphasized:
- The importance of freedom of contract in allocating risk between franchisors and franchisees.
- The risk of forcing franchisors to exert more day-to-day control ironically increases liability while undermining the independence of franchisees.
As General Counsel of Massage Heights, Endereza Law had the opportunity to help guide the company through this appellate process and work with the IFA to elevate the broader significance of the case. Endereza also had the privilege of collaborating with appellate counsel Rachel Stinson and Jessica Barger of Close, Barger, Wright, and trial counsel Forrest Wynn and Pamela of Davis, Hicks, Wynn, whose work was instrumental in achieving this outcome.
Looking Ahead: The Strategic Dilemma
While the boundary written in franchise law is clear, the strategic question remains:
Should franchisors require compliance with hiring and training practices, or simply recommend best practices?
✅ Requiring compliance may improve consistency, but could increase legal exposure
✅ Recommending best practices may reduce liability, but could leave room for operational risk
This is the tension franchisors must navigate: guidance vs. autonomy, consistency vs. liability.
Next in the Series
In Part 2 of this Edereza blog series, Legal Strategy in Action, I’ll explore how franchisors can navigate this balance in a way that protects both the brand and the business model, while aligning with evolving legal frameworks.
