McDonald's accused of discriminating Black franchisees over their white counterparts

McDonald’s company has been sued by 52 Black former franchise owners who accuse the fast-food colossal of racial discrimination by piloting them to depressed, crime-ridden neighbourhoods and setting them up for failure.

The terrible accusations come to seek up to $1 billion damages, as the complainants said McDonald’s has not offered profitable restaurant locations and growth opportunities to Black franchisees on the same terms as white franchisees, disproving its public commitment to diversity and Black entrepreneurship announced via a diversity plan in later July – have a look at McDonald’s commitment here.

A sign is seen at a McDonald's restaurant in Queens, New York, U.S. Image credit REUTERS/Andrew Kelly/File Photo

“It’s systematic placement in substandard locations because they’re Black,” the plaintiffs’ lawyer Jim Ferraro explained in a phone interview. “Revenue at McDonald’s is governed by one thing only: location.”

The plaintiffs' lawyer Jim Ferraro also defended McDonald’s record, saying the Chicago-based company had “created more millionaires within the Black community than probably any other corporation on the planet, but there’s still work to do.”

Ferraro accused the complaints to be “total hogwash,” saying the number of Black franchisees has fallen to 186 from 377 since 1998.

The grievance also stated that McDonald’s burdened the complainants under its standard 20-year franchise agreements with stores requiring high security and insurance costs, and whose $2 million average annual sales from 2011 to 2016 were $700,000 below the nationwide average.

Faith Booker, Monica Scott and Augusta Moody stand outside the Lakeland McDonald's. Image credit Tian Weinberg/Patch Media

Hence, bankruptcy was, in the majority of the cases, the common consequence, they claimed.

The plaintiffs are currently suing in Chicago federal court five weeks after McDonald’s updated its corporate values, promising a greater focus on diversity.

The president and chief executive officer (CEO) of McDonald's Corporation, Chris Kempczinski, told CNBC in June that diversity was “critically important” and needed to touch “every single aspect” of its business. Yet, something seems to have changed.

Specifically, more than 90% of McDonald’s 14,400 U.S. restaurants were recently operated by about 1,600 franchisees.

Nonetheless, the company reorganised its values before suing ousted Chief Executive Steve Easterbrook to recoup his estimated $41.8 million severance package for allegedly concealing improper sexual relationships with three employees.

Easterbrook, on the other hand, said the lawsuit is absolutely “meritless.”