Part 1 of a 3-part Series
Texas Supreme Court Clarifies Franchisor Liability
- Massage Heights Franchising, LLC v. Hagman (Tex. May 2, 2025)
- Court issued a unanimous per curiam opinion with no oral argument.
- Reversed lower court ruling that imposed liability on a franchisor for a franchisee’s hiring decision.
- Reaffirmed core principle: 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 based on a Texas statute 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.
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 Endereza 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.
In Part 3 of this series—From Courtroom to Playbook—I’ll explore how this ruling informs the way franchisors can structure operations manuals, compliance frameworks, and internal policies to align with both legal precedent and business goals. I’ll also share how Endereza helps put this framework into action.
Elena Sullivan, founding and principal attorney to Endereza Law, PLLC, served as in-house General Counsel for Massage Heights from June 2022 – May 2024, and Endereza has served as fractional GC to Massage Heights since June 2024. During this time, Elena collaborated with this case’s appellate counsel (Rachel Stinson and Jessica Barger of Close, Barger, Wright) and trial counsel (Forrest Wynn and Pamela Hicks of Davis, Hicks, Wynn).
The information provided in this article is for general informational and educational purposes only. It does not constitute legal advice and is not intended to be a substitute for legal advice from a qualified attorney in your state. Your use of this information does not create an attorney-client relationship between you and Endereza Law, PLLC or Elena Villasenor Sullivan.
