Risks Remain for Franchise Telephone and Text Advertisement Campaigns

Tyler Hartney September 19th, 2022

Franchisors and franchisees have a shared interest in developing strong advertisement programs. The ubiquitous cell phone is an efficient and effective way to reach consumers directly through automated texts and calls. This type of advertising, however, is regulated by the Federal Telephone Consumer Protection Act (TCPA) as well as state consumer legislation. Last year, franchisors and franchisees breathed a sigh of relief when the Supreme Court narrowed the TCPA’s reach, but another recent decision by a lower court highlights remaining risks under similar state laws.

In Facebook, Inc. v. Duguid, 141 S. Ct. 1163 (2021), the Supreme Court held the TCPA bars automated texts and calls only to randomly or sequentially generated telephone numbers. The Supreme Court reached this conclusion because the TCPA restricts calls and texts from an “automatic telephone dialing system,” which was narrowly defined by Congress as equipment capable of storing or producing numbers to be called using a random or sequential number generator. Thus, advertisers and other businesses contacting consumers by using actual telephone numbers that were acquired by the advertiser could not be liable for communications to consumers under the TCPA.

The Supreme Court’s decision in Facebook, however, is not the end of consumer litigation arising from unwanted texts and calls. While TCPA claims have been drastically limited, plaintiffs are now turning to state legislation, often referred to as “mini-TCPA” legislation, to bring claims for unwanted texts and calls. The state posing the greatest risk is Florida, whose Florida Telephone Solicitation Act (FTSA) was amended in the wake of the Facebook decision. Unlike the TCPA’s restrictions on texts and calls from an “automatic telephone dialing system,” the FTSA prohibits texts and calls placed using an “automated system” without written consent.

In Turizo v. Subway Franchisee Advert. Fund Tr. Ltd., 2022 WL 2919260 at *5 (S.D. Fla. May 18, 2022), a Florida federal court rejected the Subway Franchisee Advertising Fund’s motion to dismiss a putative class action alleging its sales text messages violated of the FTSA, holding the Facebook decision did not bar the claims because the FTSA does not narrowly define an autodialer similar to the TCPA. The Turizo holding leaves room for the FTSA to be interpreted broadly to prohibit all non-consensual consumer text messaging to real telephone numbers acquired by the advertiser. The court also denied the motion under Subway’s arguments that, among other things, the FTSA was preempted by the TCPA and violated the Commerce Clause of the U.S. Constitution.

Franchisors have successfully argued they are not vicariously liable under the TCPA and mini-TCPAs, but their role in advertising campaigns may nevertheless give rise to claims and demands.  Class actions brought under the TCPA and similar state laws can be costly, including statutory damages for each violation. In any sizeable advertisement campaign using automated texts and calls, the number of violations can add up quickly resulting in hefty damages claims. Businesses can be held vicariously liable for third parties with whom they contracted for telemarketing services.

If you are considering an advertisement program using automated texts or calls, you should consult with counsel to ensure your program complies with both the TCPA and the laws of any states where advertisements will be received. Additionally, you should evaluate your advertising vendors carefully and require broad indemnification and defense of claims arising under the TCPA and similar state laws.