A federal judge has denied burger and frozen custard chain Culver’s motion to throw out a case brought by a franchisee, holding that there is sufficient evidence of intentional discrimination that the case should proceed to trial. Michael Wilbern, one of Culver’s first African-American franchisees, alleges in the lawsuit that the chain stopped him from opening stores in majority African-American neighborhoods and impeded his ability to operate the store Culver’s did let him open in a mostly white suburb.
Wilbern contends that from 2003 to 2012 he repeatedly tried to open a Culver’s on Chicago’s predominantly black South Side. Wilbern charges Culver’s “denied those locations every time” even though local officials offered him tax breaks to open there. Instead, Wilbern claims, Culver’s steered him to a site in suburban Franklin Park.
Wilbern charges that the “overwhelming majority” of Culver’s restaurants are located in areas where African Americans are in the minority.
The Chicago Tribune explains:
Wilbern, who previously managed a dozen KFC restaurants in Wisconsin, went along with that offer because he wanted to build a relationship with Culver’s, the suit says.
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Two franchisee groups owning over 160 Hardee’s and Carl’s, Jr. fast-food restaurants have filed for bankruptcy, listing nearly $2.5 million in debt to their franchisors on their court filings.
Three grandchildren of Carl’s Jr. founder Carl Karcher own the bankrupt Arizona-based franchisee entities, Frontier Star LLC and Frontier Star CJ LLC. The 160-plus Frontier Star stores represent over 5 percent of the Hardee’s/Carl’s Jr. U.S. store count. Carl’s Jr. and Hardee’s – burger chains with similar menus owned by franchisor CKE Restaurants – have a combined total of nearly 2,900 U.S. units.
Mandatory major capital investments could have contributed to Frontier Star’s troubles. As the Arizona Republic observed in its coverage of the Frontier Star bankruptcy: “The fast-food restaurant business is highly competitive and … franchisees often are required to undertake expensive remodeling costs that can burden them.” For example, McDonald’s turnaround plan could require franchisees to make up to $125,000 in new investments, and Wendy’s is suing to terminate one of its largest franchisees for allegedly refusing to renovate restaurants.
Has your franchisor demanded expensive investments? Are they eroding your ability to make a profit? Share your story.
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