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Can an Applicant With a Criminal History Buy a Franchise?

By Craig R. Tractenberg
February 29, 2016

The character of a franchise prospect seems relevant. Franchisors want trustworthy participants in the franchise system. A credit report and a criminal history search seem reasonable to screen out undesirables. Roughly one in four adults has some criminal history that would show up on a search, and some of these crimes have since been decriminalized. Using searches of criminal histories and credit reports can also be racially discriminatory.

Racial minorities are protected from discrimination in franchising by 42 U.S.C. Section 1981, which provides that “all persons” shall have the same right as “white persons” to “make and enforce contracts.” The protected rights include the “making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship.” This civil rights law applies when African-Americans claim that they were denied the right to purchase a franchise, or were treated differently in the sales process, or after their purchase, in any way. (See Home Repair v. Paul W. Davis Systems, No. 98 C 4074, 2000 U.S. Dist. LEXIS 929 (N.D. Ill. Jan. 31, 2000).)

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