|
It appears that McDonald’s has more to worry about than attempting to claw back the magnanimous termination settlement with ex-CEO Steve Easterbrook occasioned by his extensive peccadillos. The larger issue is the class-action lawsuit filed by approximately 50 former McDonald’s franchisees claiming racial discrimination. The plaintiffs, the majority of whom are black claimed that they were forced to relinquish stores that were subjected to discriminatory business practices over a ten-year period. Collectively they are seeking between $4 to $5 million per store in direct damages. With as many as 200 units involved, the $1 billion of potential exposure, without even considering punitive damages, eclipses the $34 million involved in the Easterbrook scandal.
The plaintiffs claim:
- They were forced to franchise stores in inter-city neighborhoods with low sales volume and high security and insurance costs.
- The company provided misleading financial information and coerced them to enter into franchise agreements.
- Black franchisees were pressured to rebuild and remodel at a disproportionate rate compared to non-minority franchisees.
- Black franchisees were denied the opportunity to purchase more profitable stores in neighborhoods with a higher income demographic.
- Advertising and promotional initiatives were withheld from minority-owned locations.
|
Ethnic-centered McDonald's Advertizing |
The plaintiffs claim that their average store revenue amounted to $2.0 million per year compared to an average of $2.7 million between 2011 and 2016.
In responding to the lawsuit McDonald’s Corporation noted, “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 statement added, “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 diversity and equal opportunity in the McDonald’s system including franchisees, suppliers and employees.”
Irrespective of the response by McDonald’s, it is evident that the chain numbered 377 black franchisees in 1998 compared to 186 at the present time, although the number of franchised restaurants doubled to the current level of 36,000.
It is ironic that Don Thompson was the first black president and CEO of McDonald’s serving from 2012 through 2015 when franchisees were experiencing what is claimed were discriminatory practices. Plaintiffs will obviously enter into evidence previous conflicts between McDonald’s and black franchisees dating back to 1969.