According to the lawsuit, McDonald’s directed black franchisees to stores in downtown neighborhoods with lower sales volumes and higher security and insurance costs. The company would either provide them with misleading financial information or make them decide quickly when a store becomes available, the lawsuit says.Once black franchisees owned a store, they would be required to rebuild or renovate in a shorter timeframe than white franchisees, without the rent relief and other financial support given to white franchisees, according to the complaint. Black franchise owners have also been denied the opportunity to buy more profitable stores in better neighborhoods, he says.
“McDonald’s Proclaims Commitment to Racial Equality, Profits Black Customers, But Puts Black Franchisees in Doomed Places, with Low-Volume Sales and High Operating Costs Driving Losses or constant loss of profits ”, alleges the lawsuit.
As a result, claimants averaged sales of $ 2 million per year. By comparison, the average U.S. McDonald’s store grossed $ 2.7 million per year between 2011 and 2016 and $ 2.9 million in 2019, the lawsuit says.
McDonald’s said it “categorically” denies the allegations, in an emailed statement to CBS News. “We are confident that the facts will show how committed we are to the diversity and equal opportunity of the McDonald’s system, including through our franchisees, suppliers and employees,” the statement said.
A cash “gap”
The lawsuit alleges a “cash flow gap” between black and white franchise owners.
“Income is determined by one thing and one thing: location,” said James Ferraro, the Miami-based attorney representing the plaintiffs. “It’s a Big Mac. They are the same everywhere. ”
Ferraro also noted that the number of franchisees at Black McDonald’s has halved over the past two decades. The chain had 377 black franchisees in 1998; he has 186 now. At the same time, the number of franchised restaurants more than doubled to 36,000.
Collectively, damages for McDonald’s could amount to $ 1 billion, given the number of locations affected and the compensation sought by the plaintiffs.
McDonald’s has a troubled history with black franchisees. In 1969, activists boycotted four McDonald’s in Cleveland until the company sold them to black owners. In 1983, a black franchise owner from Los Angeles sued the company for discrimination; McDonald’s eventually paid him $ 4.5 million.
In 1996, McDonald’s management recognized that black franchisees were not achieving parity with their white counterparts and resolved to make changes. Don Thompson, the company’s first black president and CEO, served from 2012 to 2015.
But accusations of discrimination continued. In January, two Black McDonald executives sued the company. They claimed McDonald’s had kept advertising away from black shoppers, categorized black-owned stores more severely than white-owned ones, and implemented business plans that discriminated against black franchisees.
At the time, McDonald’s said it didn’t agree with the characterization of its actions. It notes that 45% of its corporate officers and all its field vice-presidents are people of color.