Currently, five states prevent franchisors from discriminating between franchisees. Four states do this by statute, while one uses a rule.
How have courts ruled in franchise discrimination cases?
Here are some key franchise discrimination court rulings:
English language proficiency tests
One court found it reasonable for a franchisor to require franchisees to pass an English language proficiency test. In this case, the franchise agreement required franchisees to be able to write and speak English. The court rejected the franchisee’s contention that the test was arbitrary. The franchisor presented substantial evidence that it was reasonable to require franchisees to be proficient in English.
Enforcing non-compete clauses
A franchisor raised counterclaims after a former franchisee brought suit against it. The counterclaims included an attempt to enforce a non-compete clause. A court found this to be a rational business decision that did not discriminate against the franchisee, even though the franchisor didn’t sue other former franchisees for violating non-compete clauses. In the end, the court wrote, the possible costs outweighed the potential recoveries of bringing suits against other franchisees.
Lending policies
Under the Washington Franchise Act, a franchisee claimed that the difference in a franchisor’s lending policies discriminated against franchisees. A court allowed the franchisee to pursue discovery.
Contact a franchise attorney
If you have any questions about antidiscrimination provisions that may affect your rights as a franchisee, be sure to contact a franchise attorney.