Civil Rights in Franchising

Racial Discrimination

Carmen D. Caruso Law Firm is a national leader in asserting civil rights claims on behalf of minority franchisees who contend that they did not receive equal treatment by the franchisor or its agents.

The federal civil rights law (42 U.S.C. Section 1981) prohibits racial discrimination in “the making, performance, modification, and termination of contracts” and in the “enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship.” This statute plainly applies to franchise relationships and guarantees equal treatment for all persons of color as well as Muslim Americans, who have been recognized by the federal courts as deserving of protection under this law.

  • Carmen Caruso obtained a significant settlement on the eve of jury trial in a Section 1981 case on behalf of an African American franchisee who was denied the opportunity to purchase a franchise in white suburbs of Chicago, where the franchisor had considered race in assigning different communities (by zip code) into segregated territories. An earlier opinion denying the franchisor’s motion for summary judgment (Home Repair, Inc. vs. Paul W. Davis Systems, Inc., 2000 U.S. Dist. LEXIS 929 (N.D. Ill. 2000), received attention and led Carmen to write an article for Franchise Times (Racial Discrimination in Franchising).
  • We have advised minority franchisees in numerous systems from many areas of the country on strategies for obtaining equal treatment.
  • We recently brought a Section 1981 claim to trial in federal court on behalf of an African American franchisee who claimed he was a victim of racial steering, in being told not to open a franchised restaurant in a black neighborhood of Chicago and to instead open in a white suburb. We made new law that will make it easier for plaintiffs to recover lost profits when denied the opportunity to open new units in successful franchising systems and we earned substantial praise from the presiding federal judge but after a twelve day trial the jury returned a verdict for the defendant.
  • We have asserted pending claims of discrimination on behalf of a Muslim American franchisee in a national restaurant chain contending that his units were subjected to discriminatory inspection standards as the franchisor sought to pave the way for white franchisees to take over his units.
  • We have asserted pending claims of discrimination on behalf of an African American franchisee contending that the franchisor discriminated against him in denying approval for a new unit based on proximity to an existing unit.

In 2016, our trailblazing work in this field brought Carmen D. Caruso into the Leadership of the American Bar Association (Section of Litigation) when he was asked, and accepted the role of co-chair of the Civil Rights Litigation Committee.

Other Discrimination

The federal civil rights law does not provide comparable protection on the basis of gender, orientation or disability etc. However, protection may be found under the human rights ordinances of many municipalities, under the general anti-discrimination provisions of the Illinois Franchise Disclosure Act, and at common law in the doctrine of good faith and fair dealing. We have received relatively few complaints of discrimination in franchising not related to race, and have been able to quickly and quietly resolve those claims.

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