Black for­mer fran­chisees sue Mc­Don­ald’s over al­leged dis­crim­i­na­tion

Chicago Sun-Times - - NATION / WORLD - BY DEE-ANN DURBIN AP Busi­ness Writer

More than 50 Black for­mer Mc­Don­ald’s fran­chise own­ers are su­ing the burger chain, say­ing the company steered them to less-prof­itable restau­rants and didn’t give them the same sup­port and op­por­tu­ni­ties given white fran­chisees.

The 52 plain­tiffs, who owned around 200 U.S. stores be­fore be­ing forced to sell them over the last decade, are seek­ing com­pen­sa­tion of $4 mil­lion to $5 mil­lion per store, ac­cord­ing to the law­suit. The suit was filed Tues­day in fed­eral court in Chicago, where Mc­Don­ald’s is based.

Ac­cord­ing to the law­suit, Mc­Don­ald’s steered Black fran­chisees to stores in in­ner-city neigh­bor­hoods with lower sales vol­umes and higher se­cu­rity and in­sur­ance costs. The company would pro­vide them with mis­lead­ing fi­nan­cial in­for­ma­tion or push them to de­cide quickly when a store be­came avail­able, the law­suit says.

Once Black fran­chisees owned a store, they would be asked to re­build or re­model within a shorter pe­riod of time than white fran­chisees with­out the rent re­lief and other fi­nan­cial sup­port given to white fran­chisees, the law­suit says. Black fran­chise own­ers were also de­nied the chance to buy more prof­itable stores in bet­ter neigh­bor­hoods, it says.

As a re­sult, the plain­tiffs av­er­aged sales of $2 mil­lion per year. By com­par­i­son, Mc­Don­ald’s av­er­age U.S. store brought in $2.7 mil­lion an­nu­ally between 2011 and 2016 and $2.9 mil­lion in 2019, the law­suit says.

“Rev­enue is de­ter­mined by one thing and one thing only: lo­ca­tion,” said James Fer­raro, the Mi­amibased at­tor­ney rep­re­sent­ing the plain­tiffs. “It’s a Big Mac. They’re the same ev­ery­where.”

Fer­raro also noted that the num­ber of Black Mc­Don­ald’s fran­chisees has fallen by half over the last two decades. The chain had 377 Black fran­chisees in 1998; it has 186 now. At the same time, the num­ber of fran­chised restau­rants has more than dou­bled to 36,000.

Mc­Don­ald’s Corp. de­nied the al­le­ga­tions and de­fended its his­tory with Black fran­chisees.

“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 company 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.”

Mc­Don­ald’s has a trou­bled his­tory with Black fran­chisees. In 1969, ac­tivists boy­cotted four Mc­Don­ald’s in Cleve­land un­til the company sold them to Black own­ers. In 1983, a Black fran­chise owner from Los An­ge­les sued the company for dis­crim­i­na­tion; Mc­Don­ald’s even­tu­ally paid him $4.5 mil­lion.

In 1996, Mc­Don­ald’s lead­er­ship ac­knowl­edged that Black fran­chisees weren’t achiev­ing par­ity with their white coun­ter­parts and re­solved to make changes. Don Thompson, the company’s first Black pres­i­dent and CEO, served from 2012 to 2015.

GENE J. PUSKAR/AP

Mc­Don­ald’s Corp. says it “cat­e­gor­i­cally” de­nies al­le­ga­tions from Black for­mer fran­chise own­ers.

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