The lawsuit involves 52 plaintiffs who were the owners of about 200 U.S. stores in the fast-food chain. The plaintiffs are alleging they had been forced into selling their store locations over the past decade because of actions by McDonald’s. The lawsuit was filed on Tuesday in a Chicago federal court, the city McDonald’s is based in.
McDonald’s directed Black franchisees towards stores in inner-city neighborhoods that had lower sales volumes, but that also had higher security and insurance costs. It’s alleged the company provided them with financial information that was misleading or pushed them into quickly deciding to purchase the stores when they became available, according to the lawsuit.
Once Black franchisees were the store owners, the company would ask them to remodel or rebuild within a shorter time period of time than franchisees who were White, without any of the rent relief or other financial support that White franchisees were given, the lawsuit alleges. Franchise owners who were Black had also been denied the chance to buy stores that were more profitable and in better neighborhoods, the lawsuit says.
“McDonald’s proclaims a commitment to racial equality, profits from its Black customers, yet places Black franchisees in locations that are destined to fail, with low-volume sales and high operating costs, leading to consistent profit shortfalls or losses,” it’s alleged in the lawsuit.
The plaintiffs’ sales were an average of $2 million each year as a result of this. In contrast. the average McDonald’s store in the U.S. brought in $2.7 million annually from 2011 to 2016, and in 2019 stores brought in $2.9 million on average.
McDonald’s denied the allegations in a statement and said, “These allegations fly in the face of everything we stand for as an organization and as a partner to communities and small business owners around the world.”
“Not only do we categorically deny the allegations that these franchisees were unable to succeed because of any form of discrimination by McDonald’s, but we are also confident that the facts will show how committed we are to the diversity and equal opportunity of the McDonald’s System, including across our franchisees, suppliers and employees.”
The lawsuit also alleges a “cash flow gap” between franchise owners who were Black and White.
“Revenue is determined by one thing and one thing only: location,” James Ferraro said, the attorney based in Miami-based who is representing the plaintiffs. “It’s a Big Mac. They’re the same everywhere.”
In addition, Ferraro noted the number of McDonald’s franchisees who are Black has declined by half in the past two decades. In 1998, the fast-food chain had 377 Black franchisees, and now it currently only has 186. The amount of franchised restaurants have also more than doubled to 36,000 at the same time.
The damages McDonald’s is collectively facing could amount to $1 billion, due to the number of involved locations and the compensation the plaintiffs are seeking.
There is a troubled history that McDonald’s has with Black franchisees. Activists boycotted four McDonald’s in Cleveland in 1969 until the company sold the stores to Black owners. A Black franchise owner from Los Angeles sued McDonald’s for discrimination in 1983; and eventually, McDonald’s settled with the man for $4.5 million.
McDonald’s leadership acknowledged Black franchisees weren’t on par financially with their White counterparts in 1996 and agreed that changes needed to be made. McDonald’s first Black president and CEO named Don Thompson served from 2012 to 2015.
However, discrimination charges continued. Two Black McDonald’s executives filed a lawsuit against the company in January. They claimed McDonald’s was shifting advertisements away from customers who were Black, and gave Black-owned stores harsher grades than White-owned establishments, and used business plans that had a discriminatory impact on Black franchisees.
McDonald’s stated it disagreed with the characterization of its actions at the time. The company mentioned that all of its field vice presidents and 45% of its corporate officers are people of color.
Kyle James Lee – The AEGIS Alliance – This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.