The Texas Supreme Court’s per curiam opinion in Massage Heights Franchising, LLC v. Hagman, No. 23-0996, 2025 WL 1978842 (Tex. May 2, 2025), reversed a lower court ruling that had imposed liability on a franchisor for a franchisee’s hiring decision.
The Court reaffirmed a foundational principle in Texas franchise law: “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)
This ruling brought much-needed clarity to the legal boundary between franchisors and franchisees. It confirmed that providing operational guidance or brand standards does not, by itself, create liability, unless the franchisor controls the specific conduct that causes harm.
But while the legal boundary is now clearer, the strategic implications for franchisors are more complex. The decision doesn’t dictate how a brand should operate; it simply defines the legal consequences of how its systems are structured and interpreted.
That leaves franchisors facing a deeper, more nuanced challenge:
How do we preserve brand integrity and operational consistency without crossing into territory that could be interpreted as legal responsibility for franchisee conduct?
This is the gray area where franchise law precedent meets business reality. It’s not about avoiding involvement; it’s about understanding how the language of guidance, the structure of manuals, and the tone of training can shift perception and risk.
The Strategic Dilemma
Franchisors must now confront a fundamental question:
Should we require compliance with specific hiring, training, and management practices, or simply offer best practices?
This is not just a franchise law legal question; it’s a business decision rooted in risk tolerance.
- Requiring compliance may reduce risk at the unit-level, improve consistency, and protect customers, increasing the reputation of the brand, but it can also heighten the franchisor’s legal exposure by contributing to the perception of control, even where there is none–as the Hagman decision reminded us. The Texas Supreme Court made clear that providing operational guidance or brand standards does not, by itself create liability. Nevertheless, mandating operational practices may be misinterpreted by claimants, arguing that the franchisor’s brand standards control the franchisee’s conduct.
- Recommending best practices may reduce legal risk, but it can leave room for inconsistent execution, operational gaps, or brand damage.
There is no universal answer. The right approach depends on the franchisor’s:
- Risk profile
- Operational complexity
- Brand maturity
- Legal infrastructure
Understanding Risk to Make Informed Decisions
Franchisors should work closely with legal counsel, whether in-house or fractional, who understands the nuances of franchise law and can help translate legal precedent into operational clarity for their franchise playbook.
The goal isn’t to avoid risk entirely, but to understand it, own it, and manage it strategically.
Key questions franchisors should be asking:
- What level of guidance and standards do we want to provide on how franchisees hire, train, and manage their teams?
- How do we ensure our brand standards are upheld without overstepping legal boundaries?
- Are our manuals and compliance systems aligned with our risk tolerance and business goals?
- Do our internal teams understand the legal implications of the guidance they provide?
- Are we making these decisions intentionally, or by default?
From Legal Clarity to Operational Intentionality
The Massage Heights decision gives franchisors more room to operate, and with it, the opportunity to be intentional.
- If you choose to require compliance, treat it as a strategic commitment. Ensure your operations are structured to support autonomy while aligning with your brand’s risk tolerance and legal posture.
- If you choose to recommend best practices, make sure franchisees understand the “why” behind the guidance, and that your brand can tolerate variability in execution.
Conclusion: The Real Work Begins Now
The courtroom may have delivered clarity, but the real work is in the boardroom and the field. Franchisors must now revisit their franchise playbooks, not just to comply with the law, but to lead with purpose.The most important takeaway? Make the decision consciously, not by default.
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