February 25, 2026|Franchise Frontlines
February 25, 2026 | United States District Court for the Western District of Missouri | Unpublished Opinion
Executive Summary
In an unpublished decision, Judge Gaddy of the Western District of Missouri granted in part and denied in part a motion for summary judgment in a dispute arising from a home construction system described as “franchise-like.” Plaintiffs alleged that the defendant franchisor was liable for misrepresentations, negligent hiring and supervision, and related claims after an authorized builder failed to complete their home. The defendant argued that the builder was an independent contractor and that it could not be held liable. The court rejected that argument at the summary judgment stage, finding that sufficient evidence existed for a jury to conclude that a principal-agent relationship may have existed based on the franchisor’s control, branding, and system requirements, as well as the plaintiffs’ reasonable belief that the builder and franchisor were one and the same.
Relevant Background
The defendant operated a network of home builders that functioned as a “franchise-like system,” under which approved builders were authorized to use the defendant’s trademarks, proprietary software, construction processes, and marketing platforms. Builders were required to attend training, operate branded design studios, use specific materials and systems, and comply with various operational standards imposed by the defendant.
Plaintiffs encountered the system through the defendant’s marketing, including its website, which emphasized that homes would be built “on time,” at a “firm price,” and by “highly qualified” and “carefully selected” builders. The website directed prospective customers to their local builder, who in this case was an authorized operator within the defendant’s system.
Plaintiffs contracted with the local builder using a template provided by the defendant. The contract contained language stating that the builder was an independent contractor and that the defendant was not a party to the agreement. Despite those provisions, the builder failed to complete construction of plaintiffs’ home, resulting in significant damages.
Plaintiffs brought claims against the franchisor, asserting that the defendant’s representations, system structure, and oversight created liability for the builder’s conduct.
Decision
The court denied summary judgment on several key claims, concluding that genuine issues of material fact existed as to whether the defendant could be held liable notwithstanding contractual disclaimers of independence.
Central to the court’s analysis was whether a principal-agent relationship could exist between the franchisor and the builder. While the governing agreement characterized the builder as an independent contractor, the court emphasized that such labels are not dispositive. Instead, the court examined the totality of the relationship, including the franchisor’s control over branding, operations, training, and required business practices.
The court identified multiple factors supporting a potential finding of agency, including the requirement that builders use the franchisor’s materials and systems, operate branded locations, attend training, and follow standardized processes. The court also noted that the franchisor played a role in key aspects of the construction process, including supplying materials and coordinating certain construction activities.
The court further emphasized the significance of customer-facing representations. Plaintiffs presented evidence that they relied on the franchisor’s marketing statements regarding quality, pricing, and timelines, and that they reasonably believed the builder and franchisor were effectively the same entity. The court concluded that a jury could find such reliance reasonable under the circumstances.
In addition, the court allowed claims for negligent hiring and supervision to proceed, citing evidence that the franchisor failed to adequately vet the builder’s qualifications and continued to allow the builder to operate despite known financial and performance issues. The court found that a reasonable jury could conclude that the franchisor failed to exercise reasonable care in selecting and retaining the builder.
The court also denied summary judgment on misrepresentation claims, finding that statements regarding “firm price,” “on time” completion, and “highly qualified” builders could be viewed as more than non-actionable puffery and could support liability if proven false and relied upon by plaintiffs.
At the same time, the court granted summary judgment on certain claims that were not supported by the record, including a nuisance claim, demonstrating a more limited willingness to expand liability beyond the specific theories supported by the evidence.
Looking Forward
This decision underscores a recurring and increasingly important theme in franchise litigation: courts will look beyond contractual labels and evaluate the practical realities of the system when assessing liability. While franchisors have long relied on independent contractor language to delineate responsibility, this case illustrates that such provisions may not be sufficient where operational control, branding, and customer-facing representations suggest a more integrated relationship.
For franchisors, the most immediate takeaway is the importance of alignment between system structure and legal positioning. Retaining control over brand standards, training, and operational consistency remains essential, but the manner in which that control is exercised—and communicated to customers—can influence how courts evaluate agency and liability questions. Courts may place particular weight on whether the system creates the appearance of a unified enterprise in the eyes of consumers.
The decision also highlights the potential risk associated with marketing representations. Statements regarding quality, timing, and pricing, while common in franchise systems, may be scrutinized where they are presented as system-wide guarantees rather than builder-specific commitments. Careful calibration of marketing language and clear delineation of responsibility between franchisor and franchisee may help mitigate this risk.
Additionally, the court’s analysis of negligent hiring and supervision claims reinforces the importance of vetting and ongoing oversight. While franchisors are not expected to eliminate all risk associated with independent operators, knowledge of material issues—such as financial instability or repeated noncompliance—may create exposure if not addressed appropriately.
At a broader level, Temple reflects a practical reality: franchise systems derive value from consistency, branding, and consumer trust, but those same features can be cited in support of liability theories where independence is not clearly maintained. The case does not establish new legal standards, but it illustrates how existing principles may be applied in a fact-intensive manner that places significant weight on how the system operates in practice.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Partner at Buchalter LLP and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
