in Newswire Published on September 2, 2020

Black Former McDonald’s Franchisees Allege ‘Systematic and Covert’ Racial Discrimination

by Corrado Rizzi

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Crawford et al. v. McDonald’s USA, LLC et al.

Filed: August 31, 2020 ◆§ 1:20-cv-05132

• Read Complaint

Fifty two plaintiffs allege McDonald's has for years systematically discriminated against Black franchisees.

Defendant(s)

McDonald's Corporation McDonald's USA, LLC

Law(s)

Constitution of the United States of America

State(s)

Illinois

Categories

Food Civil Rights Discrimination

Fifty-two Black former McDonald’s franchisees have filed a lawsuit in which they allege they were subject to “systematic and covert” racial discrimination by the fast food titan.

The plaintiffs say in the 51-page complaint that while they took the plunge into the McDonald’s franchise system with the expectation that they’d encounter opportunities to develop a thriving business to pass onto future generations, they were instead steered by the defendants toward older, under-performing locations in “crime-ridden neighborhoods” that were “destined to fail.”

The case, filed in Illinois federal court, describes a pattern in which Black franchisees’ efforts to grow their businesses, including acquiring other stores, were regularly impeded by McDonald’s, broadening “an increasing cash flow gap” between Black and White franchisees. Given what the lawsuit describes as the heavily one-sided bargaining power within the relationship between McDonald’s and franchisees, the plaintiffs categorize the costs of operating a Black McDonald’s franchise as “a financial suicide mission.”

In all, the plaintiffs charge McDonald’s public face as a socially conscious company committed to racial equality is a far cry from reality.

McDonald’s recent statements with regard to its commitment to corporate equality amid America’s climate of racial unrest are, the lawsuit says, “patently false and highlight the dichotomy between McDonald’s corporate ethos as a recruiter and developer of Black entrepreneurs and its record on race: McDonald’s has a decades-long history of racial discrimination against its own Black franchisees.”

From the complaint:

“McDonald’s proclaims a commitment to racial equality, profits from its Black customers, yet places Black franchisees in locations that are destined to fail, with low-volume sales and high operating costs, leading to consistent profit shortfalls or losses, impeding Black franchisees’ efforts to grow as they acquire other stores, necessary for success under McDonald’s own franchise model, to force Black franchisees out, repeating this pattern of misconduct over and over again.”

The suit, citing data from the National Black McDonald’s Operators Association (NBMO), says the cash flow gap between Black and White McDonald’s franchisees more than tripled from 2010 to 2019. The plaintiffs’ $2 million in annual sales, according to the case, was more than $700,000 below McDonald’s national average of $2.7 million between 2011 and 2016, and $2.9 million in 2019.

As a result of the disparity in annual sales, the once historically high number of Black McDonald’s franchisees in 1998—roughly 400—has been more than cut in half, the lawsuit says. Today, there are fewer than 200 Black McDonald’s franchisees nationwide despite the fact that the total number of franchised McDonald’s restaurants has more than doubled since 1998, according to the complaint.

The suit emphasizes the stark statistical differences between Black- and White-owned franchises within the McDonald’s system “are the result of McDonald’s racial bias and barriers” effectuated through at least 11 discriminatory, “repeated and interrelated events,” including, but not limited to:

Steering the plaintiffs to locations with low-volume sales; higher operating costs, including for security expenses linked to crime; higher insurance rates and higher employee turnover;

Excluding the plaintiffs from the purchase of restaurants in the open market;

Providing the plaintiffs with “misleading financial information” to induce them into buying the defendants’ “least desirable” franchises;

Requiring the plaintiffs to invest in rebuilds and/or renovations within short time frames while not subjecting White owners to the same obligation;

Excluding the plaintiffs from the same growth opportunities to higher-volume, lower-cost stores available to White franchisees;

Failing to provide “any legitimate business reasons” for repeatedly denying franchise opportunities to the plaintiffs over many years;

Denying the plaintiffs “meaningful support” with regard to overcoming financial hardships while White franchisees were “routinely provided with such assistance”;

Depriving the plaintiffs of the same “legacy opportunities” offered to White franchisees through the McDonald’s Next Generation program;

Retaliating against the plaintiffs for rejecting offers to continue operations in “crime-ridden neighborhoods with low-volume sales,” including through “targeted, increased, and unreasonable inspections”;

Disparately treating the plaintiffs with regard to inspections, grading such within a scheme to “generate bad business reviews” to force the franchisees out of the McDonald’s system due to their race; and/or

Placing the plaintiffs in “untenable positions of economic duress,” denying eligibility for growth and agreement renewal and arbitrarily denying final approval of their buyers, leaving the former franchisees with “no choice but to exit on McDonald’s terms, at a loss.”

“But for Plaintiffs’ race, McDonald’s would have offered Plaintiffs profitable restaurant locations, opportunities for growth and expansion, on equal terms as White franchisees, rather than forcing them out after decades of sweat and tears dedicated to the franchise,” the lawsuit alleges. “McDonald’s discriminatory and fraudulent practices were not apparent to Plaintiffs when committed, and only became apparent when viewed in light of the later acts establishing a pattern of systematic and covert racial discrimination targeted against Black franchisees.”

The suit’s filing marks at least the third time McDonald’s has been hit with a racial discrimination lawsuit in 2020 alone, saying nothing of the litigation the company faces over alleged sexual discrimination and its alleged failures in protecting workers from COVID-19, among other legal action filed this year. Additionally, former McDonald’s CEO Stephen Easterbrook was hit with a lawsuit over claims he concealed a sexual relationship with an employee to receive a better severance package.

In a statement, McDonald’s categorically denied the allegations presented in the case detailed on this page, saying it intends to fight the lawsuit.

“Not only do we categorically deny the allegations that these franchisees were unable to succeed because of any form of discrimination by McDonald’s, 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,” the company said.

The complaint can be found below.

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