Kate Taylor, Business Insider, August 31, 2020
McDonald’s is facing a new lawsuit from Black former franchisees who say they faced decades of discrimination at the fast-food chain.
A complaint filed by 52 former franchisees on Tuesday in the US District Court for the Northern District of Illinois is seeking more than $1 billion, collectively, in direct damages from McDonald’s.
Franchisees in the complaint said they faced “systematic and covert racial discrimination,” with the company denying them the same opportunities as their white counterparts. McDonald’s has to approve all new franchisees, and the lawsuit argues it “systematically steered” Black franchisees to buy locations in Black neighborhoods. These locations tend to have higher insurance and security costs while bringing in less revenue.
One franchisee said in the complaint that Black franchisees were at such a significant disadvantage that acquiring McDonald’s locations as a Black franchisee was a “financial suicide mission.”
The franchisees say they lost more than 200 McDonald’s locations over the past decade because of misconduct by the company. The franchisees are seeking compensatory damages averaging $4 million to $5 million a store, with collective damages of more than $1 billion.
Dozens of other Black franchisees have been forced out of the chain over the past two decades, according to the complaint. The complaint says there are only 186 Black McDonald’s franchisees, down from 377 in 1998.
“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 complaint says.
“My priority is always to seek the truth,” McDonald’s CEO Chris Kempczinski said in a video message about the lawsuit to employees and suppliers on Tuesday morning.
“When allegations such as these occur, I want them investigated thoroughly and objectively,” Kempczinski continued. “That’s been our approach to this situation. Based upon our review, we disagree with the claims in this lawsuit and we intend to strongly defend against it.”
McDonald’s said in a statement to Business Insider that the company categorically denies the allegations, saying that they “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.”
Recently, McDonald’s has been emphasizing the importance of values and diversity at the company. The company donated $1 million to the National Urban League and the NAACP in the aftermath of protests over George Floyd’s death in Minneapolis. McDonald’s released an advertisement in early June mourning the deaths of Black people killed by the police or in incidents of racist violence. Joe Erlinger, the head of the US business at McDonald’s, said in an internal meeting at the time that “silence is not an option.”
“We’ve probably — McDonald’s has created more millionaires within the Black community than probably any other corporation on the planet, but there’s still work to do,” CEO Chris Kempczinski told CNBC in June. “We’re certainly not perfect — we’re talking with our franchisees about how do we continue to bring in diverse franchisees.”