Not Lovin' It: Dozens of Black Former McDonald's Franchisees File $1 Billion Federal Discrimination Suit

Dozens of Black former McDonald's franchise owners on Tuesday filed a federal lawsuit against the fast food giant for alleged racial discrimination, claiming the company denied them the same opportunities as white franchisees by steering them toward stores in low-income areas where insurance and security costs are higher and sales revenues are lower than average.

The suit (pdf), filed by a group of 52 former franchisees, alleges that McDonald's "denied equal opportunity to economic success by... systematic and covert racial discrimination" against Black owners, including by pushing them into "depressed, crime-ridden neighborhoods."

The discrimination lawsuit, filed by 52 former Black franchisees, is at least the third one against the company so far in 2020.

"For more than 50 years, McDonald's has branded itself as a socially conscious company, committed to strengthening Black entrepreneurship, and embracing racial opportunity as a critical component of its corporate culture," the lawsuit states. "These statements are 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."

The suit continues: "McDonald's... 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 plaintiffs claim that the company's policies and actions have "resulted in an increasing cash flow gap between McDonald's Black franchisees as compared to white ones," resulting in a 50% reduction in the number of Black-owned franchises since 1998.

The franchisees, who claim their average annual sales were more than $700,000 less than McDonald's national average of $2.7 million between 2011 and 2016, and $2.9 million in 2019, are seeking up to $1 billion in damages.

"McDonald's knew or should have known that these differential revenue and operating costs of Black-operated franchises as compared to white-operated franchises are not random or due to poor management," the lawsuit states. "These differences are statistically significant and are the result of the historical racial bias and barriers built into the McDonald's franchise system."

McDonald's responded to the suit by categorically denying its allegations, saying they "fly in the face of everything we stand for as an organization."

"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 Chicago-based company, which has more than 37,000 locations worldwide, said in a statement reported by CNBC. Over 13,000 of those restaurants are in the United States, with 186 of these owned by Black people, according to the Wall Street Journal.

Many Black McDonald's franchisees and workers have spoken out about their experiences--good, bad and ugly--at the company, with many African-Americans identifying a lack of representation as a major cause of trouble.

There have been at least three racial discrimination suits filed against McDonald's so far this year.

In January, senior executives Vicki Guster-Hines and Domineca Neal, sued the company, alleging it unfairly fired Black leaders, pushed Black franchises out of business, and drove away Black customers.

Then in July, workers at a McDonald's restaurant in Lakeland, Florida filed a federal lawsuit accusing the company of racial harassment, discrimination, and retaliation.

In late July, McDonald's announced it had updated its corporate values to include a plan to recruit more diverse franchisees, although it did not define "diverse."