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Illinois Federal Court Concludes that Franchisees are not “Consumers” under the Illinois Consumer Fraud and Deceptive Business Practices Act

A federal court in Illinois held that the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA) does not apply to a franchise relationship. Hashmi v. 7-Eleven, Inc., 2020 WL 586822 (N.D. Ill. Feb. 2, 2020). Hashmi became a 7-Eleven franchisee in 1997 and quickly increased his involvement in the system, eventually becoming Vice President of the Franchise Coalition. In response to changes 7-Eleven was making, Hashmi began to publicly criticize 7-Eleven. Not long after Hashmi began his public campaign against it, 7-Eleven refused to renew his lease for one of his locations in Illinois and refused to authorize a transfer. Hashmi initially brought a lawsuit under the Illinois Franchise Act, but because his claim was untimely under the statute of limitations, Hashmi brought a claim under ICFA, alleging that 7-Eleven’s conduct was retaliatory and an unfair business practice.

The court dismissed Hashmi’s complaint on the threshold question of who can sue under the ICFA. The statute permits “any person who suffers actual damage” to bring a lawsuit under the ICFA, and courts have interpreted this to require a plaintiff to make a “showing of consumer injury,” because the law only governs consumer transactions. To qualify as a consumer, a plaintiff must purchase or contract for the purchase of merchandise for his use, and not for resale. Hashmi argued that the purchase of the lease and services from 7-Eleven under the franchise agreement was a consumer purchase under the ICFA. The court was unconvinced and instead held that a business purchaser is not a consumer because the purchases, such as the lease, financing and retail agreements, or franchise agreements, were necessary prerequisites for his business. Because 7-Eleven’s denial of the lease did not make Hashmi a “consumer” under the ICFA, the court granted 7-Eleven’s motion to dismiss.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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