Black McDonald’s Franchise Owners Say They Were Set Up To Fail

This article was last updated on April 16, 2022

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Black McDonald Franchise Owners fail,

Remember the old days, when hearing “you know, that famous McDonald’s lawsuit” made you think of hot coffee? That might soon change. Last night, 52 Black plaintiffs (yes, 52) who formerly owned McDonald’s franchises filed a federal lawsuit in Illinois accusing the company of pushing them to take ownership of stores in lower-income neighborhoods with high operation costs that were “destined to fail.” It alleges that this racist practice led to the plaintiffs’ annual sales being more than $700,000 below what the average annual sales are for all franchisees, and that many were forced out of the company “after decades of sweat and tears dedicated to the franchise.”

In addition, the lawsuit accuses McDonald’s of excluding Black franchisees from buying other franchises on the open market, giving them misleading financial information that made undesirable locations look desirable, and providing less support to them than white franchisees. The plaintiffs also claim they faced much higher scrutiny and “unreasonable inspections” if they refused an offer for a franchise in a high-crime area.

These allegations show how workplace racism — despite being illegal under federal labor law — escapes being coded into official policy, yet holds the ability to shape someone’s economic success through processes that never explicitly mention race. The lawsuit claims that the Black franchisees only became aware they were facing vastly different treatment later; the “discriminatory and fraudulent practices were not apparent to plaintiffs when committed.”

According to the lawsuit, the cash flow gap between Black-owned franchises and white-owned franchises is partly attributable to the fact that Black franchisees were taking ownership of some of the oldest stores that had already been rejected by white franchisees. These locations required the most money to fix up and get up to McDonald’s operating standards. The cost of operating drove many Black franchisees into debt or even bankruptcy.

The suit also notes that McDonald’s has been systematically discriminating against Black franchisees by keeping them out of white neighborhoods for decades, since the first Black franchisees took ownership of locations in 1969. The filing details how, in the late 1990s, the company even acknowledged that it had denied equal opportunities to its Black franchisees. In 2020, there are only 187 total Black franchisees — less than half the number there were in 1998. Yet, just this past June, McDonald’s CEO Christopher Kempczinski said during an appearance on the CNBC show Mad Money With Jim Cramer, “McDonald’s has created more millionaires within the Black community than probably any other corporation on the planet.”

“These allegations 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,” a McDonald’s spokesperson told Refinery29. The lawsuit is seeking up to $1 billion in damages and a jury trial.

The megacorporation has been hit with a slew of lawsuits recently. In April, McDonald’s employees filed a $500 million lawsuit for systemic sexual harassment, and in July, McDonald’s employees in Tampa filed a federal lawsuit claiming they experienced a racist, hostile work environment and faced retaliation for bringing up the racism. Employees have also been regularly protesting and striking for higher wages during the pandemic, pointing out that the company’s ostensible support for Black Lives Matter flies in the face of how poorly it pays its workers, many of whom are Black. According to a new Bloomberg report, McDonald’s has been one of many companies ordering employees who contracted COVID-19 to not tell their coworkers that they have it.

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