McDonald’s $33.5M Franchise Buyout Ends Race Discrimination Lawsuit

McDonald’s Race Bias Buyout Overview:

• Why: The plaintiff accused McDonald’s of racial discrimination in its handling of franchisees.
• Who: A former ​​McDonald’s franchisee sued the fast-food company earlier this year.
• Where: The lawsuit was filed in Ohio federal court.

McDonald’s will spend $33.5 million to buy 13 of its own franchised restaurants from a Black franchisee who sued the fast-food company for racial discrimination.

Herbert Washington, a former Major League Baseball player, first filed suit against McDonald’s back in February of this year. Washington alleged that McDonald’s showed preference to its white franchisees over its Black franchisees. 

The 13 restaurants that Washington owned are located in Pennsylvania and Ohio and are being bought at what McDonald’s says is a fair price.

Both parties submitted a notice of dismissal to Judge Benita Y. Pearson, noting that each party will bear their own costs and fees. 

McDonald’s Favors White Franchisees, Says Complaint

In his lawsuit, Washington claimed McDonald’s pushed him and other Black franchisees into predominantly Black neighborhoods which were considered low value. This required him to invest heavily with minimal corporate support and low return, or at least much less than what his white counterparts were earning. McDonald’s also allegedly took a stricter stance with Black franchisees, routinely denying rent relief and extra time to complete required renovations. 

Washington bought his first franchise in 1980 in Rochester, New York, and quickly expanded. In the 1990s, he sold his five New York locations and purchased several more in Ohio after which McDonald’s raised his rent and cut advertising meant to target Washington’s customer base.

The plaintiff claimed the fast-food company forced him to sell his more profitable stores, all of which were soon under white ownership. Washington claimed he was also allegedly forced to sell other less profitable locations within unreasonable timelines. 

McDonald’s blamed Washington’s mismanagement and concerns around health and sanitation at his franchises. 

The lawsuit brought claims of race discrimination, breach of contract, and unjust enrichment.

McDonald’s Not New to Race Discrimination Settlements

For its part, McDonald’s maintains that it did not violate any laws and that it does not tolerate discrimination.

However, McDonald’s settled a class action lawsuit also alleging race discrimination earlier this month. The company agreed to pay $6.5 million for four Illinois franchises. In return, the Black franchisees dropped their class action lawsuit and left the company. Similar to Washington’s complaint, the class action plaintiffs claimed that McDonald’s offered white franchisees more opportunities to buy more profitable restaurants than Black franchisees. 

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The plaintiff is represented by Joseph C. Peiffer, Ashlie Case Sletvold, David M. Abdullah, Jessica Smith Savoie, and Kevin P. Conway of Peiffer Wolf Carr Kane & Conway.

The McDonald’s Race Bias Buyout Lawsuit is Washington, et al. v. McDonald’s USA LLC, et al., Case No. 4:21-cv-00367-BYP, in the US District Court for the Northern District of Ohio Eastern Division. 

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