The plaintiffs claim that they were treated unfairly by the company and essentially forced out of business.

By Jelisa Castrodale
September 02, 2020
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Credit: John Greim / Getty Images

Earlier this week, 52 former McDonald's franchisees filed a federal lawsuit against the company for racial discrimination and breach of contract, among other allegations. The plaintiffs, who are all Black, say that they were essentially forced out of business by the fast food giant.  

The lawsuit states that "McDonald's proclaims a commitment to racial equality [and] profits from its Black customers," but allegedly steers Black franchisees toward "depressed, crime-ridden neighborhoods" where their restaurants will be hindered by a combination of low sales, high operating costs, and decreased profits. 

According to the filing, the annual sales gap between Black and white franchisees "more than tripled" between 2010 and 2019; the plaintiffs say that they averaged $2 million in annual sales, which was more than $700,000 under the national average for franchisees between 2011 and 2016, and more than $900,000 below the national average last year. 

The plaintiffs also allege that Black franchisees were subject to more frequent inspections and their restaurants were graded unfairly, which meant that they were skipped over for "growth opportunities," like higher-volume stores with lower overhead costs. 

“Revenue, at McDonald’s, is based on one factor and one factor only: location,” James Ferraro, the attorney representing the plaintiffs, told CNBC. “It has nothing to do with the taste of a Big Mac. You don’t go to a different McDonald’s because the Big Macs are better. You go to the closest McDonald’s, period.”

Ferraro also took issue with comments that McDonald's CEO Chris Kempczinki made during an appearance on Mad Money with Jim Cramer, when he claimed that McDonald's had probably turned more Black individuals into millionaires than any other company. (Ferraro said that was an "odd and false" thing to say, as he believes that the NBA and NFL are responsible for more Black millionaires than McDonald's is.) 

According to the lawsuit, this is just the latest chapter in McDonald's long history of discriminating against Black franchise owners; although the restaurant's franchise system was established in 1955, there were no Black franchisees until 1969. (Those stores were located "in depressed areas" of Cleveland, Ohio.) 

In 1983, a Black McDonald's owner in Los Angeles filed a discrimination lawsuit against the company, alleging that Black franchisees were not permitted to operate stores in predominantly white neighborhoods. "My stores are in hellholes," Charles Griffis said in a 1984 interview. "They get robbed once or twice a month, and I pay $20,000 a month in security services they don't pay in good neighborhoods. We had a murder in one, and we still get the windows smashed and the bathrooms vandalized. I've upgraded my stores a lot and I don't see why I shouldn't have a shot at a store in a good neighborhood." 

In a statement, McDonald's strongly denied basically everything that was written in the lawsuit. “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,” the fast food giant said. 

“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.”

According to Reuters, more than 90% of the McDonald's locations in the United States are operated by about 1,600 franchisees; only 186 of those franchisees are Black. The plaintiffs, who have operated more than 200 restaurants combined, are seeking damages of between $4 million and $5 million per store.