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McDonald's Faces Lawsuit for Racial Discrimination by 52 Former Franchisees

By Vandana Kothari      03 September, 2020 03:26 PM      0 Comments
McDonald Faces Lawsuit Racial Discrimination

On Monday ( August 31, 2020) , a lawsuit has been filed against McDonald's in the U.S. District Court for the Northern District of Illinois seeking compensatory damages averaging $4 to $5 million per store with collective damages of more than $1 million. McDonald's is accused of steering Black franchisees to restaurants in undesirable locations in inner cities for years. More than 50 former franchisees are in this lawsuit. It is alleged that it unfairly treated Black owners by selling them subpar stores and failing to support their businesses.

The complainants said that they saw improvements in their businesses in the years soon after a parity agreement was made between the company and franchisees around 1996. But by 2002, the National Black McDonald’s Operators Association went back to the company to negotiate for more, according to a letter included in the suit, and progress further stalled in recent years.

The suit contends that McDonald used to provide misleading financial information to black owners to induce them to purchase the least desirable locations and required them to invest in rebuilds or renovations within short time frames not required of white franchisees.

The complainants also alleged that they were not given the same opportunities as their white counterparts and they faced systematic and covert discrimination. They also claimed it to be a financial suicide mission as Black franchisees were at such a significant disadvantage. They said they have lost more than 200 locations over the past decade because of the misconduct of the company.

The allegations were denied by McDonald's and said that they didn’t reflect the company’s work as a partner in the small-business community.

“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,” said the company in a statement on Tuesday (September 1, 2020)

On Tuesday (September 1, 2020), in a video message, McDonald’s CEO Chris Kempczinski said that he personally takes seriously any allegations that the company hasn’t lived up to its values. He said “Based upon our review, we disagree with the claims in this lawsuit and we intend to strongly defend against it. He added,” When allegations such as these occur, I want them to investigate thoroughly and objectively.”

McDonald's says Black franchisees, including former franchisees in the suit, have operated and currently operate locations in urban, suburban, and rural settings. Franchisees themselves choose to purchase a location; the company says.

“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," 

History of McDonald’s racially discriminatory practices mentioned in the suit

It is alleged in the suit that according to the National Black McDonald’s Operators Association website McDonald’s had its first black owner in December 1968 after the death of Martin Luther King. 

After 1983 racial discrimination suit was filed against McDonald's by a Black franchisee in Los Angeles. In the late 1990s, McDonald’s executives admitted Blank Franchisees had been withheld opportunities. Thomas Dentice, McDonald’s executive vice president who is quoted in the suit as saying, " The company has placed many Black Franchisees in restaurants that have not allowed them to achieve the same level of economic success as their peers."

In 2001, Ken Manning became a franchisee and owned 16 McDonald's locations before selling them in 2017, told Business Insider "significant disparities" between Black franchisees and other franchisees.

He said, "We've made some great strides, but to see the number of African American owners and operators and the rates that they have decreased, that should be very alarming – particularly when, for a lot of folks, this is their livelihood and this is their life.”

Recent charges of racial discrimination

On January, 2 Black McDonald’s executives filed a racial discrimination suit alleging that the company had discriminated against Black Franchisees and as well as Black executives. 

On July, 3 Black employees at a corporate-owned McDonald's in Lakeland, Florida, filed a federal civil rights lawsuit, alleging a racist and toxic work environment. 

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