52 former McDonald’s franchises have come together to file a lawsuit against the company for discrimination, claiming the company denied them “equal opportunity to economic success” compared to other white franchisees.
The Illinois-based suit alleges that the Black owners were sold second-rate stores and didn’t receive adequate business support from McDonald’s, NPR reports. Black franchisees say they were guided toward neighborhoods where sales werelower while overhead was higher, leading to a smaller profit and open to more critique from corporate headquarters. The franchisees, who owned over 200 restaurants over the last 10 years, are seeking up to $1 billion in damages.
Store location is vital for fast-food eateries and Black franchisees have continually been vocal about higher costs related to security and insurance, in addition to maintaining stores that are in subpar condition.
“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 said. “These differences are statistically significant and are the result of the historical racial bias and barriers built into the McDonald’s franchise system.”
The company rejected the accusations, saying they “fly in the face of everything we stand for as an organization.”
“Not only do we categorically deny the allegations that these franchisees were unable to succeed because of any form of discrimination by McDonald’s,” the company said in Tuesday’s statement. “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.”
In addition to being steered toward purchasing older and underperforming locations that require greater upkeep, the former franchisees say that they were prevented from buying more profitable locations. This led to average annual sales of $2 million between 2011 and 2016, which was $700,000 short of the nationwide norm.
Moreover, they alleged that smaller Black-owned franchises were subjected to more inspections at random hours—and that McDonald’s blocked them from growth opportunities, which meant more debt and even bankruptcy.
McDonald’s said that though it does “recommend” locations, the franchisee decides which store to buy and that cash flow at Black-operated eateries has increased. In a video to staff, CEO Chris Kempczinski said that the company looked into the lawsuit’s claims and didn’t agree, saying McDonald’s would “strongly defend” against them.
52 franchisees? That’s quite a compelling case. McDonald’s is going to have to pay up!