March 27, 2026|Franchise Frontlines
March 27, 2026 | United States District Court, Northern District of Illinois | Unpublished Opinion
Executive Summary
In an unpublished decision, Judge Steven C. Seeger of the Northern District of Illinois granted in part and denied in part a motion to dismiss brought by McDonald’s USA, LLC and McDonald’s Corporation in a lawsuit filed by a former franchisee alleging racial discrimination. The plaintiff asserted claims under 42 U.S.C. §§ 1981 and 1982, along with state-law claims for breach of contract and tortious interference. McDonald’s argued that the claims were time-barred and failed to state a claim. The court dismissed the plaintiff’s pattern-or-practice claims and significantly limited the actionable time period, but allowed certain targeted discrimination claims—focused on more recent conduct—to proceed. The court also permitted a narrow breach of contract theory to survive, while dismissing other contractual and tort-based claims.
Relevant Background
The plaintiff, a longtime franchisee who operated multiple McDonald’s locations over several decades, alleged that the franchisor engaged in discriminatory practices affecting store allocation, operational oversight, and economic opportunities. According to the complaint, the plaintiff was directed toward operating restaurants in lower-performing locations and was denied opportunities allegedly made available to other franchisees.
The opinion provides a detailed overview of the McDonald’s franchise system, including its centralized control over real estate, franchise approvals, operational standards, and inspections. Franchisees operate individual locations but must comply with system-wide requirements, including payment of rent and fees, adherence to quality and operational standards, and approval processes for transfers and expansion.
The dispute focused on a wide range of alleged conduct spanning decades, including decisions regarding store acquisitions and sales, inspections, rent relief, and other aspects of the franchisor-franchisee relationship. The plaintiff filed suit in 2023, asserting both individual discrimination claims and broader allegations of systemic conduct.
McDonald’s moved to dismiss, arguing that most of the claims were untimely and that the remaining allegations were insufficient to state a claim under federal and state law.
Decision
The court’s decision centered on three primary issues: the viability of pattern-or-practice claims, the application of statutes of limitation, and whether the remaining allegations plausibly stated claims for relief.
As an initial matter, the court dismissed the plaintiff’s pattern-or-practice claims under both §§ 1981 and 1982. The court explained that such claims are generally reserved for class actions or government enforcement actions and are not available as standalone claims by individual plaintiffs. While evidence of broader patterns may serve as background context, the court emphasized that an individual plaintiff must still establish specific instances of discrimination tied to his own experience.
The court then conducted an extensive statute-of-limitations analysis, which significantly narrowed the scope of the case. For claims under § 1981, the court distinguished between pre-contract and post-contract conduct, applying a two-year or four-year limitations period depending on the nature of the claim. For § 1982 claims, the court applied a two-year limitations period. As a result, many of the plaintiff’s allegations—particularly those relating to earlier franchise acquisition and development decisions—were deemed time-barred.
The court rejected the plaintiff’s attempt to rely on the continuing violation doctrine to revive older claims. It held that the alleged acts, such as decisions regarding store purchases or approvals, constituted discrete events that were independently actionable at the time they occurred. The court also declined to apply equitable tolling, finding no basis to extend the limitations period.
Despite these limitations, the court concluded that certain allegations involving more recent conduct were sufficient to survive dismissal. Specifically, the court found that the plaintiff plausibly alleged discrimination in connection with more recent inspections, rent-related decisions, and the sale of franchise locations within the applicable limitations period. The court emphasized that, at the pleading stage, the plaintiff needed only to allege sufficient facts to support a plausible inference of discriminatory intent and causation.
The court also addressed the breach of contract claim. It allowed the claim to proceed solely under a provision requiring the franchisor to make certain services and benefits “generally available” to franchisees. The court reasoned that allegations of differential treatment—if proven—could support a claim that such benefits were not made available on a consistent basis. However, the court rejected other contractual theories, including claims based on inspection rights and transfer approval provisions, finding that those provisions did not impose the obligations alleged by the plaintiff.
Finally, the court dismissed the tortious interference claim in its entirety, concluding that the plaintiff failed to allege the necessary elements, including the existence of a viable business expectancy or interference within the applicable limitations period.
Looking Forward
This decision offers several important takeaways for franchisors, particularly in how courts may approach discrimination claims arising from long-term franchise relationships.
First, the opinion reinforces that courts will carefully scrutinize attempts to expand individual claims into broader system-wide challenges. The rejection of pattern-or-practice claims in the individual context provides meaningful clarity and may limit the ability of plaintiffs to rely on generalized allegations of systemic conduct as independent causes of action. At the same time, courts may still consider broader allegations as background when evaluating specific, timely claims.
Second, the court’s statute-of-limitations analysis underscores the importance of treating franchise decisions—such as approvals, transfers, and development opportunities—as discrete events. Courts may view these decisions as independently actionable at the time they occur, rather than as part of a continuing course of conduct. This framework may significantly limit the scope of potential exposure in cases involving long-term franchise relationships.
Third, the survival of a narrow breach of contract theory highlights the need for careful drafting and consistent application of provisions addressing system-wide benefits and services. Where agreements reference benefits made “generally available” to franchisees, courts may examine whether those benefits are applied in a consistent and non-arbitrary manner across the system.
Finally, the decision illustrates that discrimination claims in the franchise context often turn on fact-specific allegations tied to particular operational decisions. While the court allowed certain claims to proceed past the pleading stage, those claims remain subject to further factual development and proof. Franchisors should view this case as reinforcing the importance of maintaining clear, objective, and consistently applied standards in areas such as inspections, financial accommodations, and transfer approvals.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Partner at Buchalter LLP and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
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