In most cases, franchisors and franchisees do not have fiduciary relationships. Franchise agreements are complex documents that set forth, in detail, the relationship between the parties. These agreements create a complex, arms-length business relationship that is not a fiduciary relationship.
What is a fiduciary relationship?
A fiduciary relationship is a very special type of legal relationship where one person puts trust and confidence in another. Fiduciary duties are different from the obligations of people involved in face-to-face business transactions. A fiduciary must have the highest degree of loyalty to the persons protected. In addition, a fiduciary must act in the best interest of the persons protected.
Examples of fiduciaries
Fiduciaries include officers of public corporations who have a fiduciary duty to the shareholders, executors of estates, and attorneys who have a fiduciary duty for clients.
Creating a fiduciary relationship
In most fiduciary relationships, the parties have acknowledged, in writing, that the relationship is one of a fiduciary. Such relationships can also arise by the words and conduct of those involved. For example, if a friend or neighbor persuades you to invest money, the friend or a neighbor becomes a fiduciary.
Rare exceptions to the rule
Few cases hold that franchises are fiduciary relationships. Occasionally, a franchisee or dealer presents facts to a court that justify a finding of a fiduciary relationship. These cases are the exception, not the rule. To prove such a relationship, a franchisee or dealer must show a relationship of trust and confidence in which the fiduciary exercises disproportionate power and control over the weaker party. Furthermore, the weaker party must lack the ability or discretion to act.
Be sure to have a franchise lawyer review your case carefully in order to determine if your case may justify a finding of a fiduciary relationship.