Pizza Hut Franchisee Settles Major ADA Complaint

Class action Title III litigation was more common about a decade ago, according to employment litigation attorney Shawna M. Swanson, partner, Fenwick & West (San Francisco). 'At that time, there was a flurry of activity related to movie theaters,' she said. 'But DOJ's involvement has died down. Typically now you see private litigation in Title III, such as an individual seeking access at a particular restaurant or gas station.'

Shared Liability?

Franchisors and franchisees may share liability for violations of Title III of the ADA, Eric W. Holland, a press representative for the Justice Department, told FBLA, but he emphasized that 'DOJ evaluates enforcement in each matter based upon the merits and facts in each situation. Each case presents different considerations … In the Pizza Hut case, a single franchisee owned over 800 locations, and we were able to settle with that entity and get relief at the entire group of restaurants, so settling with the franchisee meant very wide-ranging results and a good use of litigation resources.'

DOJ has filed suit against franchisors in the past, but Holland pointed out that suing the franchisor and franchisee adds to the complexity of the litigation and/or settlement. 'If the Department can get adequate relief and ADA compliance involving fewer parties, in some cases that may be preferable,' Holland said. 'However, even when DOJ does not sue the franchisor, keep in mind that the franchisee could file against the franchisor for indemnification later, or the franchisee could implead the franchisor into a pending action if the franchisor has, or shares, liability for ADA violations.'

Regardless of how or why a case reaches DOJ attention, R. Alan Higbee, a Tampa-based shareholder with Fowler White, said that franchisors and large franchisees have to approach the situation differently than when it is private litigation about a single facility. 'The benefit to all parties of settling in a large case is that a class action type settlement provides a global solution and ends the litigation,' he said. 'For the Pizza Hut franchisee, it is probably better to settle than to fight complaints on a case-by-case basis.'

However, Higbee said he would not counsel a franchisor or franchisee to settle simply to end litigation. 'In my experience, there are folks who have decided that their mission in life is to target big, high-profile companies with ADA complaints,' he said. 'The goal of these individuals or organizations is to pick a target, get DOJ involved, and set a precedent ' but sometimes settling is the right thing to do.'

Zwetsch added that 'if a company feels it can be successful in fighting the complaint, then it should. The company should do its homework: Confirm that it is in compliance with accessibility codes, or if not in compliance, put together a remedial plan that will bring it into compliance. However, if Justice says it is looking at an entire franchise system, then that company has to work with the hand it's been dealt. And in that case, the franchise would need to survey its entire system and see [which outlets] are in compliance.'

The other issue that arises is who is responsible for making the necessary changes to reach compliance with the law. The majority of UFOCs state that the franchisor is not the responsible party, said Zwetsch. 'The franchise agreements state that it's the responsibility of whoever owns or leases the property, or both,' he said. 'The franchisor will not typically assume those obligations, even though it is in its interest to assure that its franchisees comply. Violations create a negative image associated with the franchise, which harms the brand.'

Yet in protecting the brand, a franchisor might exert enough control that it could be deemed liable for an ADA violation, said Swanson. 'ADA prohibits 'discrimination by any person who owns, leases, or operates a place of public accommodation,” she said. 'I've seen many cases in employment discrimination, ADA Title I, in which franchisors have been named because they give guidance on hiring and firing. This is very similar.'

Higbee said that even without direct responsibility for a franchisee's ADA compliance, a franchisor should be aware of the impact its decisions can have on ADA-related issues. 'For example, a finding that some stores that are designed according to the franchisee agreement are out of compliance might be a warning shot that the design itself does not comply with ADA,' he said. 'Exterior packages for franchise locations could run into ADA compliance issues. In these cases, the franchisor needs to take prompt action.'

DOJ's Holland agreed that 'where common problems repeat themselves in the design and construction of franchised locations, especially in new construction cases, that are attributable to the franchisors' control of the design and construction, DOJ may get better compliance across the country by suing the franchisor.'

Compliance issues usually arise when a store is gutted or major renovation of a facility is undertaken for a new franchise. Under ADA Title III, locations that existed before the law was passed are exempt, to some degree, from accessibility regulations. These 'pre-existing' locations are required to install accommodations that are 'readily achievable,' said Zwetsch, such as grab bars in bathrooms and ramps. But 'post-existing' facilities, whether they are new or major rehabs, must comply fully with Title III. 'This is why franchisors need to be aware of ADA accommodation standards,' said Zwetsch.

Large franchisors seem to be well versed in these issues, said Higbee and Zwestch. 'Big franchisors are keenly aware that to protect their brand, they do not want negative publicity such as could be associated with Pizza Hut,' said Higbee. 'Remember that the goal of a franchisor is to make ownership of the store or restaurant transparent to the customer. Consistency of the experience is what franchisors strive for. They do not want it to matter to the customer whether a store is a franchise or company-owned. That's why they provide guidance and training, including in ADA compliance.'

Yet even franchisees with access to support from large franchisors can run afoul of ADA rules. According to Holland, DOJ recently enforced ADA Title III against a large McDonald's franchisee in Tennessee (without suing the parent corporation). For a listing of DOJ settlements, consent decrees, and related information, go to www.ADA.gov.

Pizza Hut's largest U.S. franchisee, NPC International, settled a complaint under the Americans with Disabilities Act ('ADA') on March 28 that will result in extensive remedial work at many of NPC's 775 franchised restaurants. Under the agreement, NPC will ensure proper accessibility of all of its Pizza Hut properties for parking lots, entrances, seating areas, bathrooms, self-service counters, and other spaces and elements. It will also survey and evaluate all NPC-owned facilities that are subject to the ADA's more stringent new construction and alterations standards at the time of their construction or alteration, bring them into full compliance, and incorporate training of personnel and store managers for future compliance.

Accessibility attorneys said that the settlement represents a rare situation in which the U.S. Justice Department ('DOJ') has stepped into an ADA Title III case in recent years. While the attorneys do not expect that the settlement is indicative of a new trend in compliance oversight, they say that it is a timely reminder for franchisors and franchisees that they do have obligations to make their facilities accessible.

'Most ADA Title III complaints are private litigation in which individuals sue for accommodations at a specific site,' said Kevin Zwetsch, a shareholder with Fowler White Boggs Banker (Tampa, FL) and member of its employment law practice group. 'DOJ generally becomes involved in higher-profile cases with a large scope and impact, and the potential for lots of publicity. The Pizza Hut case is a good example.'

Class action Title III litigation was more common about a decade ago, according to employment litigation attorney Shawna M. Swanson, partner, Fenwick & West (San Francisco). 'At that time, there was a flurry of activity related to movie theaters,' she said. 'But DOJ's involvement has died down. Typically now you see private litigation in Title III, such as an individual seeking access at a particular restaurant or gas station.'

Shared Liability?

Franchisors and franchisees may share liability for violations of Title III of the ADA, Eric W. Holland, a press representative for the Justice Department, told FBLA, but he emphasized that 'DOJ evaluates enforcement in each matter based upon the merits and facts in each situation. Each case presents different considerations … In the Pizza Hut case, a single franchisee owned over 800 locations, and we were able to settle with that entity and get relief at the entire group of restaurants, so settling with the franchisee meant very wide-ranging results and a good use of litigation resources.'

DOJ has filed suit against franchisors in the past, but Holland pointed out that suing the franchisor and franchisee adds to the complexity of the litigation and/or settlement. 'If the Department can get adequate relief and ADA compliance involving fewer parties, in some cases that may be preferable,' Holland said. 'However, even when DOJ does not sue the franchisor, keep in mind that the franchisee could file against the franchisor for indemnification later, or the franchisee could implead the franchisor into a pending action if the franchisor has, or shares, liability for ADA violations.'

Regardless of how or why a case reaches DOJ attention, R. Alan Higbee, a Tampa-based shareholder with Fowler White, said that franchisors and large franchisees have to approach the situation differently than when it is private litigation about a single facility. 'The benefit to all parties of settling in a large case is that a class action type settlement provides a global solution and ends the litigation,' he said. 'For the Pizza Hut franchisee, it is probably better to settle than to fight complaints on a case-by-case basis.'

However, Higbee said he would not counsel a franchisor or franchisee to settle simply to end litigation. 'In my experience, there are folks who have decided that their mission in life is to target big, high-profile companies with ADA complaints,' he said. 'The goal of these individuals or organizations is to pick a target, get DOJ involved, and set a precedent ' but sometimes settling is the right thing to do.'

Zwetsch added that 'if a company feels it can be successful in fighting the complaint, then it should. The company should do its homework: Confirm that it is in compliance with accessibility codes, or if not in compliance, put together a remedial plan that will bring it into compliance. However, if Justice says it is looking at an entire franchise system, then that company has to work with the hand it's been dealt. And in that case, the franchise would need to survey its entire system and see [which outlets] are in compliance.'

The other issue that arises is who is responsible for making the necessary changes to reach compliance with the law. The majority of UFOCs state that the franchisor is not the responsible party, said Zwetsch. 'The franchise agreements state that it's the responsibility of whoever owns or leases the property, or both,' he said. 'The franchisor will not typically assume those obligations, even though it is in its interest to assure that its franchisees comply. Violations create a negative image associated with the franchise, which harms the brand.'

Yet in protecting the brand, a franchisor might exert enough control that it could be deemed liable for an ADA violation, said Swanson. 'ADA prohibits 'discrimination by any person who owns, leases, or operates a place of public accommodation,” she said. 'I've seen many cases in employment discrimination, ADA Title I, in which franchisors have been named because they give guidance on hiring and firing. This is very similar.'

Higbee said that even without direct responsibility for a franchisee's ADA compliance, a franchisor should be aware of the impact its decisions can have on ADA-related issues. 'For example, a finding that some stores that are designed according to the franchisee agreement are out of compliance might be a warning shot that the design itself does not comply with ADA,' he said. 'Exterior packages for franchise locations could run into ADA compliance issues. In these cases, the franchisor needs to take prompt action.'

DOJ's Holland agreed that 'where common problems repeat themselves in the design and construction of franchised locations, especially in new construction cases, that are attributable to the franchisors' control of the design and construction, DOJ may get better compliance across the country by suing the franchisor.'

Compliance issues usually arise when a store is gutted or major renovation of a facility is undertaken for a new franchise. Under ADA Title III, locations that existed before the law was passed are exempt, to some degree, from accessibility regulations. These 'pre-existing' locations are required to install accommodations that are 'readily achievable,' said Zwetsch, such as grab bars in bathrooms and ramps. But 'post-existing' facilities, whether they are new or major rehabs, must comply fully with Title III. 'This is why franchisors need to be aware of ADA accommodation standards,' said Zwetsch.

Large franchisors seem to be well versed in these issues, said Higbee and Zwestch. 'Big franchisors are keenly aware that to protect their brand, they do not want negative publicity such as could be associated with Pizza Hut,' said Higbee. 'Remember that the goal of a franchisor is to make ownership of the store or restaurant transparent to the customer. Consistency of the experience is what franchisors strive for. They do not want it to matter to the customer whether a store is a franchise or company-owned. That's why they provide guidance and training, including in ADA compliance.'

Yet even franchisees with access to support from large franchisors can run afoul of ADA rules. According to Holland, DOJ recently enforced ADA Title III against a large McDonald's franchisee in Tennessee (without suing the parent corporation). For a listing of DOJ settlements, consent decrees, and related information, go to www.ADA.gov.