The way it usually works is the franchisor grants a franchisee a development area, franchisee selects a site where the franchisee wants the franchise business to be located, and the franchisee submits the proposed site to the franchisor for approval. It is a back and forth process. Franchisors may provide varying levels of support, but at the end of the day, franchisors have the final approval on where a franchise is located. And, not all the time do franchisees and franchisors agree. But, when does site selection process become a matter of discrimination? How?
The Case is MICHAEL ANTHONY G. WILBERN and WILBERN ENTERPRISES, LLC v. CULVER FRANCHISING SYSTEM, INC. Michael Wilbern purchased a Culver franchise, formed Wilbern Enterprises, LLC in hopes of opening a Culver franchise in the south side of Chicago. However, being persuaded by a Culver franchise consultant, Wilbern opened 2 franchises in the west side of Chicago, Franklin Park and Hilliside. Wilbern proposed a site in the south side of the Chicago in Marshfield Plaza, but the Culver franchisor never approved the site. The Culver franchisor never responded to Wilbern’s proposal for a franchise in the south side location.
Wilbern believed that opening a Culver franchise would bring jobs to the lower economic south side of Chicago and that he could receive public funding and extremely favorable rent or purchase opportunities in the south side of Chicago. Instead, Wilbern opened a franchise location in Franklin Park, which later failed, went into bankruptcy, was evicted from the property, and the franchise was terminated.
Wilbern filed suit in the United States District Court, N.D. Illinois, Eastern Division alleging the Culver franchisor engaged in a pattern and practice of racial discrimination in violation of 42 U.S.C. § 1981, Federal Antidiscrimination Statutes. Racial discrimination? Culver franchisor did not discriminate against Michael Wilbern, because he was black, African American. It is alleged that the Culver franchisor violated racial discrimination, because Culver did not approve a Culver franchise in the south side of Chicago and the south side of Chicago has predominately African American residents.
The outcome of the case is yet to be determined, but it provokes a conversation about franchisors’ site selection processes and approval. Most probably, the Culver franchise does not have a policy or site selection criteria, which bars Culver franchises in communities with predominantly Africa American residents. However, even if the franchisor does not intend to prevent franchises in predominately African American [or other racial groups] residential communities, the acts or practices may have ‘disparaging impact’ or practice that inadvertently and unintentionally has a racial impact and can/may be actionable in court.
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