The popular fast-food chain, McDonald’s, is facing some backlash from former African-American franchise owners who accuse the company of racial discrimination, according to Ferraro Law firm, representing the plaintiffs.
The 52 former franchisees sued the company Aug. 31 for allegedly selling them franchises in under-represented locations, making it difficult to make a profit.
The lawsuit, which is filed with the U.S. District Court for the Northern District of Illinois, where McDonald’s headquarters sits, also states that McDonald’s denied African-American franchisees financial support compared to White franchisees.
It’s not the first time McDonald’s is in hot water because of racial discrimination.
The fast-food chain has a track sheet for racial misconduct. The lawsuit argues McDonald’s allegedly rejected the entry of African-Americans to the McDonald’s system until a boycott in Cleveland, Ohio changed that policy in 1969.
The former franchisees, who operated 200 McDonald’s stores, are seeking over $800 million in compensation. The lawsuit says that the fast-food company purposely signed African-Americans to undesirable neighborhoods, which got rejected by White franchise owners. The outcome was poor sales, higher costs in operating the venue, such as hiring security, higher insurance rates, and handling a higher turnover rate; which led to limited growth, lower profit, higher debt, and lower equity.
In the past, McDonald’s claimed it promoted racial equality and provided job opportunities.
“The notion that McDonald’s is a friend of the Black entrepreneur is complete fiction,” Lawyer James L. Ferraro said. “McDonald’s has been hemorrhaging Black franchisees for decades because of blatant and implicit racial discrimination. The company will now be held accountable.”
According to Forbes, McDonald’s denies the accusations and said in a statement via email that, “it is highly inaccurate to suggest that McDonald’s limits opportunities for Black franchisees to operate in certain communities. McDonald’s does not place franchisees into franchises; while McDonald’s may recommend locations, franchisees ultimately select the locations they wish to purchase.”
However, the lawsuit against McDonald’s states the opposite. It says the plaintiffs had to purchase franchises at a higher rate and agree to buy stores in undesirable locations since it was part of a so-called “package deal.” In addition, it says McDonald’s also hindered African-American franchisees to sell to other promising buyers, forcing them to close the franchise or sell for less than they initially paid for, causing them a loss.
Also, the cash flow gap between African-American franchisees and White ones has tripled from 2010 to 2019, collected data from the National Black McDonald’s Operators Association reported. However, Black-ownership of franchises has declined from 377 in 1998 to 186 in 2020.
“Each and every one of these businessmen and women tell a story of dashed hopes and lost dreams,” Ferraro mentioned in the press release. “The world will soon see how these 52 people of color risked everything on the Golden Arches only to be kept down, marginalized, and driven to ruin.”