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McDonald’s is facing a racial discrimination lawsuit over claims that the company sold Black franchise owners subpar locations and otherwise failed to support their business.
Fifty-two former McDonald’s franchise owners filed the complaint in federal court in Illinois, saying the fast-food giant’s “systematic and covert racial discrimination” cost them money and denied them equal opportunities for economic success.
The plaintiffs say they bought McDonald’s franchises expecting to have the opportunity to develop thriving businesses that could be passed on to their children.
However, they say, while the company claims it is committed to racial equality, it profits from Black customers while placing its Black franchise owners in locations “destined to fail,” impeding franchisee’s efforts to grow and acquire other stores.
The lawsuit says racial discrimination on the part of McDonald’s has resulted in a “cash flow gap” between its white and Black franchisees.
According to National Black McDonald’s Operators Association data presented in the lawsuit, that gap more than tripled between 2010 and 2019. The plaintiffs’ average annual sales was $2 million between 2011 and 2017, nearly $700,000 less than the McDonald’s national average.
This has resulted in fewer Black McDonald’s franchise owners, the plaintiffs claim: In 1998, there were about 400 Black franchisees, while today there are fewer than 200. However, the total number of franchises has doubled since 1998.
The discrimination has taken many forms, according to the McDonald’s franchise owners.
They claim the company steered them toward locations with low-volume sales and higher operating costs, such as security costs associated with high crime rates, higher insurance rates and higher employee turnover.
In addition, the company supposedly gave the plaintiffs misleading financial information in order to persuade them to purchase the least desirable franchises.
McDonald’s allegedly excluded the plaintiffs from being able to purchase restaurants “in the open market” because of their race and required them to rebuild or renovate within short time periods; white franchisees were not expected to meet the same deadlines.
The plaintiffs claim they also were excluded from opportunities to grow into higher-volume, lower-cost stores offered to white McDonald’s franchise owners and were not provided with legitimate reasons for repeated denials of franchise opportunities.
McDonald’s allegedly denied Black franchisees the support they needed in order to overcome financial hardships, such as the rent relief and “impact funding” granted to white franchisees.
The defendants also allegedly deprived the Black McDonald’s franchise owners of the “legacy opportunities” offered to white franchisees through the company’s Next Generation program.
While many of the allegations focus on McDonald’s failing to act in some way, several also point to discriminatory actions on the company’s part.
The plaintiffs say they were retaliated against if they rejected offers to continue operating in “crime-ridden neighborhoods.”
This retaliation allegedly took the form of “targeted, increased, and unreasonable inspections.”
The lawsuit says the plaintiffs were subject to “disparate treatment with respect to inspections and grading of Plaintiffs’ restaurants as part of a scheme to generate bad business reviews to force Plaintiffs out of the McDonald’s system because of their race.”
McDonald’s also allegedly arbitrarily denied the plaintiffs’ growth eligibility and agreement renewals so they had no choice but to leave the business, taking a loss.
“Through these series of repeated and interrelated events, McDonald’s intentionally and covertly deprived Plaintiffs of the same rights enjoyed by White franchisees to the creation, performance, enjoyment, and all benefits of their contractual relationships with Defendants,” the lawsuit says. “But for Plaintiffs’ race, McDonald’s would have offered Plaintiffs profitable restaurant locations, opportunities for growth and expansion, on equal terms as White franchisees, rather than forcing them out after decades of sweat and tears dedicated to the franchise.”
According to a Wall Street Journal report, McDonald’s chief executive Chris Kempczinski released a video message to U.S. employees, franchisees and suppliers in which he says he takes the allegations seriously.
“Based upon our review, we disagree with the claims in this lawsuit and we intend to strongly defend against it,” Kempczinski said in the video.
In a statement to Forbes, the company denied the allegations made in the former McDonald’s franchise owners’ 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.”
The plaintiffs are seeking a directive that McDonald’s “make Plaintiffs whole for all earnings and benefits they would have received but for Defendant’s discriminatory treatment;” general, compensatory and consequential damages, including lost business opportunities, excessive expenses “due to substandard franchise location,” emotional and physical suffering, among others; punitive damages “sufficient to deter” similar conduct in the future; attorneys’ and expert fees; pre- and post-judgment interest; and any other relief the Court deems proper.
They also demand a jury trial.
Are you a Black franchise owner? Do you believe you have been treated unfairly? Let us know in the comments.
The plaintiffs are represented by James L. Ferraro, Janpaul Portal and Natalia Salas of The Ferraro Law Firm PA, and William R. Fahey of Cooney & Conway.
The McDonald’s Franchise Owners Racial Discrimination Lawsuit is Christine Crawford, et al. v. McDonald’s USA LLC, et al., Case No. 1:20-cv-05132, in the U.S. District Court for the Northern District of Illinois, Eastern Division.
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Yeah! My name is Kenyota Amos!! I was involved in a employment discrimination claim dat was file serval years ago!! & Unfortunately I had to represent myself pro’se…….& I still have not received any relief & I was wondering what d next step dat I need to take to move forward!!!