June 28, 2011

Franchising Update: the case of the Hose Doctor

Franchisors ongoing health and safety obligations for franchisees

The Defendant, Parker Hannifin (Australia) Pty Ltd operates ‘The Hose Doctors’ franchise.  Franchisees purchase a Hose Doctor Van which is a customised and stocked van with the Franchisors’ logo.  The rear of the van is a mobile service centre, which stores equipment, including hazardous gases.  In 2008, a franchisee’s van exploded with significant damage caused to neighbouring buildings and vehicles.  The Franchisee was also injured in the explosion.  An investigation by Workcover (NSW) determined that the explosion was the result of an open valve on a tank containing acetylene and also that the vehicle did not comply with Australian Standards in relation to ventilation requirements for transportation of gases.

The Court found as follows:

  1. The van constituted a ‘premises’;
  2. Parker Hannifin had control of the ‘premises’ in the course of their trade or business;
  3. The ‘premises’ were used by  franchisees who are not employees of Parker Hannifin; and
  4. Parker Hannifin had failed to ensure that the ‘premises’ were safe with respect to Health and Safety requirements.

The Court determined that the relationship between the Franchisor and Franchisee was no different to a principal/contractor relationship and that as Parker Hannifin had substantial control over their franchisees (i.e. by the supplying of the equipment to allow the franchises to operate) that they were responsible for ensuring that the Vans met Australian safety standards.  Parker Hannifin were fined $110,000.00.

This case demonstrates the need for Franchisors to have formal and up-to-date workplace health and safety processes in place for their franchisees. Further, these processes need to be consistently monitored and updated for best practice and compliance.