Florida Franchise Law: Does a Franchisor-Franchisee Relationship Carry a Fiduciary Duty?

To form a successful commercial relationship, franchisors and franchisees must work together. By the very nature of the business, they share some important common interests. At the same time, franchisors and franchisees are distinct companies—their business interests are certainly not fully aligned.

The Florida Franchise Act (FFA) establishes some basic standards for how these relationships work. You may be wondering: Does state law put fiduciary obligations on either party? The short answer is ‘no’—neither franchisors or franchisees have an automatic duty to act in the best interest of the other party. Here, our West Palm Beach franchise law attorneys explain the most important things that franchisors and franchisees need to know about fiduciary duties.

Florida Case Law: No Automatic Fiduciary Duty 

The Florida Franchise Act does not impose a statutory fiduciary duty on either franchisors or franchisees. Further, no such duty automatically arises due to the inherent nature of the commercial relationship. In 2000, a Florida court dealt directly with this issue in the case of Amoco Oil Co. v. Gomez. Amoco (franchisor) sued Gomez (franchisee) for failure to pay certain commissions. In return, Gomez filed a counterclaim against the franchisor for alleged fraudulent inducement.

A key part of the argument raised by Gomez was that the company breached its fiduciary duty. The argument stated that the company provided training, instructions, and advice to Gomez. However, it did not disclose certain environmental issues related to the gas station. In deciding the case, the Florida court was very clear: A franchisee can sue a franchisor for fraud, but there is no inherent  fiduciary duty created by the existence of a franchise relationship.     

The Franchise Agreement May Give Rise to Heightened Obligations  

While neither franchisors or franchisees are necessarily required to act in the best interests of the other party, it is important to note that the specific obligations will depend on the unique circumstances of the case. Remember, the relationship is governed, primarily, by the franchise agreement. This is an incredibly important legal document—and it could require parties to live up to heightened obligations.

For example, in some cases, the franchise agreement may declare either party to be a fiduciary. Alternatively, it may otherwise impose additional duties on one or both of the parties. Further, the specific conduct of either party could theoretically give rise to a fiduciary-like relationship.

Still, it is important to make clear that there is no statutory fiduciary duty created simply because the parties entered a franchisor-franchisee relationship. Whether you are a franchisor or franchisee, it is imperative that your company takes a proactive approach in looking out for its own interests. 

Call Our Florida Franchise Law Attorney Right Away

At Pike & Lustig, LLP, our Florida franchise lawyers are skilled, experienced advocates for clients. If you are locked in a franchise dispute or you have questions about fiduciary obligations, we are here to help. To set up a strictly confidential initial consultation, please contact us today. With offices in West Palm Beach, Wellington and Miami, we represent franchisors and franchisees throughout South Florida.

Resource:

casetext.com/case/amoco-oil-company-v-gomez-2

https://www.turnpikelaw.com/8-things-to-consider-when-negotiating-a-franchise-agreement/