52 Black Franchisee Owners Accuse McDonald’s of Racial Discrimination

Black franchisee owners seek compensation of around USD 4-5 million per store

52 plaintiffs claim that they were unable to sell their franchises over the last decade and are seeking compensation of USD 4- 5 million per store. Furthermore, this lawsuit filed in the federal court in Chicago alleges that the company steered Black franchisees to stores in inner-city neighborhoods which tend to have lower sales volumes and higher security and insurance costs. The company would either provide them with misleading financial information or force them to take a quick decision when a store in such an area would be available.

Black franchisee owners claim that they have been denied the advantage of a better location

It is alleged that once a Black franchise owns a store, he is usually asked to rebuild or remodel within a comparatively shorter period than the white franchisees without the rent relief and other financial support given to white franchisees. Black franchise owners claim that they have also been denied the opportunity to buy more profitable stores in better neighborhoods. Accordingly, the plaintiffs had sales worth USD 2 million in a year compared to McDonald's average US store brought in USD 2.7 million annually between 2011 and 2016 and USD 2.9 million in 2019.

"Revenue is determined by one thing and one thing only: location," said James Ferraro, the Miami-based attorney representing the plaintiffs. 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 but has 186 now. In the same period of time, the number of franchised restaurants has more than doubled to 36,000 in the country.

Mcdonald’s issues a statement saying that it is committed to providing equal opportunities

95% of McDonald's locations in the United States are owned by franchisees. McDonald's stated that it does recommend locations, the franchisees ultimately decide where to purchase. It also stated that franchisees have access to all information about every location and that Black franchisees operate in a variety of communities.

"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 said in a statement in response to the lawsuit on Tuesday. "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 statement continued.