Black former franchise owners sue McDonald’s for discrimination

U.S.

CHICAGO (NewsNation) — More than 50 Black former McDonald’s franchise owners are suing the burger chain, saying the company steered them to less-profitable restaurants and didn’t give them the same support and opportunities as white franchisees.

The 52 plaintiffs, who owned around 200 U.S. stores before being forced to sell them over the last decade, are seeking compensation of $4 million to $5 million per store, according to the lawsuit. The suit was filed Tuesday in federal court in Chicago, where McDonald’s is based.

According to the lawsuit, McDonald’s steered Black franchisees to stores in inner-city neighborhoods with lower sales volumes and higher security and insurance costs. The company would provide them with misleading financial information or push them to decide quickly when a store became available, 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,” claimed the lawsuit.

Once Black franchisees owned a store, they would be asked to rebuild or remodel within a shorter period of time than white franchisees without the rent relief and other financial support given to white franchisees, the lawsuit said. Adding, that Black franchise owners were also denied the chance to buy more profitable stores in better neighborhoods.

As a result, the plaintiffs averaged sales of $2 million per year. By comparison, McDonald’s average U.S. store brought in $2.7 million annually between 2011 and 2016 and $2.9 million in 2019, detailed the lawsuit.

“Revenue is determined by one thing and one thing only: location,” said James Ferraro, the Miami-based attorney representing the plaintiffs. “It’s a Big Mac. They’re the same everywhere.”

Ferraro also noted that the number of Black McDonald’s franchisees has fallen by half over the last two decades. The chain had 377 Black franchisees in 1998; it has 186 now. At the same time, the number of franchised restaurants has more than doubled to 36,000.

“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,” McDonald’s Corporation said in a statement in response to the lawsuit. “Not only do we categorically deny the allegations that these franchisees were unable to succeed because of any form of discrimination by McDonald’s, we are 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.”

In 1969, activists boycotted four McDonald’s in Cleveland until the company sold them to Black owners. In 1983, a Black franchise owner from Los Angeles sued the company for discrimination; McDonald’s eventually paid him $4.5 million.

In 1996, McDonald’s leadership acknowledged that Black franchisees weren’t achieving parity with their white counterparts and resolved to make changes. Don Thompson, the company’s first Black president and CEO, served from 2012 to 2015.

In January, two Black McDonald’s executives sued the company. They claimed McDonald’s shifted advertising away from Black customers, graded Black-owned stores more harshly than white ones and implemented business plans that had a discriminatory impact on Black franchisees.

At the time, McDonald’s said it disagreed with the characterization of its actions. It noted that 45% of its corporate officers and all of its field vice presidents are people of color.

McDonald’s President and CEO Chris Kempczinski addressed the lawsuit in a video to company employees and suppliers.

“My priority is always to seek the truth,” Kempczinski said. “When allegations such as these occur, I want them investigated thoroughly and objectively. That’s been our approach to this situation. Based upon our review, we disagree with the claims in this lawsuit and we intend to strongly defend against it.”

Read full video transcript:

As you may have seen, a group of our former franchisees filed a lawsuit alleging that McDonald’s limited their ability to succeed and grow within our system.

You should know I take seriously and personally any suggestion that our organization has not lived up to our values.

My priority is always to seek the truth.

When allegations such as these occur, I want them investigated thoroughly and objectively. That’s been our approach to this situation.

Based upon our review, we disagree with the claims in this lawsuit and we intend to strongly defend against it.

But I think it’s important in moments like this to remind ourselves what we do stand for.

And as CEO, that’s a tone I intend to continuously set from the top.

McDonald’s stands for diversity, equity, and inclusion.

I’m proud of the work we’ve done as a company to foster entrepreneurship, economic growth and mobility.

I want this company to continue to be a place where everyone is given opportunities to excel and where that is part of the lived experience for each member of the system.

That said, I know we can go further.

It’s my belief that our franchisee ranks should and must more closely reflect the increasingly diverse composition of this country and the world.

At Worldwide Connection, we discussed an even more ambitious approach to attract diverse franchisees and to increase spend with diverse suppliers.

These actions are important demonstrations of where we’re going and we will not shy away from the bold commitments or tough conversations.

Guided by our values, we are committed to being better allies, better sponsors and better leaders.

Thank you for your on-going efforts to ensure we remain a positive force for change here at McDonald’s.

McDonald’s PRESIDENT AND CEO Chris Kempczinski IN VIDEO STATEMENT TO EMPLOYEES, SUPPLIERS

The Associated Press contributed to this report.

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