McDonald’s Franchise Faces a Racial Discrimination Lawsuit

McDonald’s franchise is faced with a racial discrimination lawsuit by 52 Black franchise operators. On Tuesday, September 1, 2020, the company was sued for racial discrimination.

In 1998, about 377 McDonald’s were owned and operated by Blacks. However, in 2020, there are about 200 owned and operated by Blacks, even though the company has been doubling its global restaurant count.

The franchisees are accusing the fast-food giant of allegedly denying Black owners an equal opportunity to economic success compared to their white peers. In December 2019, Business Insiders reported that the number of Black franchisees has decreased. 

The claim alleges that McDonald’s locates Blacks in neighborhoods with lower sales and higher operating costs. The sales being lower for the owners causes higher scrutiny from the corporate headquarters. Additionally, they dealt with higher operating expenses associated with higher insurance costs, security, and as well as upkeep of stores sold to them in poor conditions.McDonald's

African American fast-food owners were allegedly graded unfairly even though corporate were aware of the differential revenue and operating costs of Black-operated franchises as compared to white operated franchises.

Many of them have spoken out about the higher costs that they are faced with because of the location they were placed at by McDonald’s. A report by Business Insiders showed a major gap between the revenue of Blacks versus others in the McDonald’s system.

The Black owners and operators filed a lawsuit against McDonald’s, accusing them of systematically discriminating against Black franchise operators. They also claim the company offered better financial support to their white counterparts. Although Location is key for fast-food restaurants, they believe they were offered older and underperforming restaurants in areas where they would have to invest more for security.

They further claim that McDonald’s breached their contracts and violated the federal antidiscrimination law. They said the company misled them about how profitable the restaurants could be. McDonald’s is facing a discrimination lawsuit in 2020 because the plaintiffs want to be treated as equals. They claim the franchise is built on the historical racial and barriers system.

Moreover, they were allegedly denied the same opportunities as the white operators and were pushed out of the system for poor sales. Some of the Blacks exited the franchise between 2010 and 2020. The Lawsuit was filed in the Federal court in Illinois. The company headquarters is also located in Illinois. At least a third of the racial discrimination lawsuits filed this year are against McDonald’s.

The lawsuit states the average annual revenue was $2 million, at least $700,000 less than McDonald’s national average for its franchisees between 2011 and 2016. The 2019 national average sales for franchisees were $2.9 million. The plaintiffs say their losses are between $4 million and $5 million per location.

James Ferraro the Attorney for the plaintiffs’ stated that ” Revenue, at McDonald’s, is based on one factor and one factor only: location,” “It has nothing to do with the taste of a Big Mac. You don’t go to a different McDonalds’s because the Big Macs are better, You go to the closest McDonald’s, period.”

The smaller Black-owned locations were inspected more frequently than the bigger locations. The lawsuit says the company tactics denied them growth opportunities and pushed them into debt and bankruptcy.

The lawsuit also states that Black franchise operators were asked to renovate or rebuild their restaurants within a shorter time period than their white counterparts. They were rushed to get the job done in order to stay in good standards with the franchise.

The Black operators who rejected offers to continue running their restaurants in low- income neighborhoods faced retaliation and were denied better locations allegedly based on the lawsuit. Many of the plaintiffs owed the company or vendors money after they left the franchise.

McDonald’s stated that they may recommend locations, but the decision is ultimately up to the purchaser. They also said they’ve sold high-performing franchises to Black operators, in a variety of communities across the country. They claim the Whites owners were given safer restaurants with higher sales and lower security costs.

The company claims the sales are improving at Black-owned locations and said that they are committed to working with Black franchisees to make improvements. McDonald’s filed a motion to dismiss the January suit, which is pending.

Written by Jessica Letcher
Edited by Cathy Milne-Ware

Sources:

CNBC NEWS: 52 former franchisees sue McDonald’s for racial discrimination by Amelia Lucas

CNN Business: Dozens of Black former franchisees sue McDonald’s over alleged discrimination by Danielle Wiener- Bronner

NPR: 52 Black Former Franchisees Sue McDonald’s Alleging Discrimination by Alina Selyukh

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Incent Image Courtesy of Stock Catalog’s Flickr Page – Creative Commons

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