Defender News Service
Black franchisee owners hit McDonald’s Corp MCD.N with a potentially multi-billion-dollar lawsuit. The franchise owners accused McDonald’s of racial discrimination for steering them to underperforming stores.
The lawsuit is led by brothers James and Darrell Byrd, owners of four Tennessee McDonald’s restaurants. The lawsuit was filed by the law firm representing 52 Black former franchisees who filed a similar lawsuit on Aug. 31.
McDonald’s is being accused of placing Black franchise owners in less than desirable inner-city locations with below-average sales along with higher costs for security and insurance. The lawsuit also claims McDonald’s is driving many Black franchisees away by failing to support them as debts rise and profits fall short.
The lawyer for the plaintiffs, Jim Ferraro, estimated that McDonald’s has 186 Black franchisees in the U.S., a number far lower than the 377 Black McDonald’s owners in 1998, the year that number peaked. Those 377 franchisees owned “700-plus” stores.
The lawsuit, filed in federal court in Chicago, where McDonald’s is headquartered, seeks damages of $4 million to $5 million per store, totaling a whopping $3 billion-plus in potential damages.
McDonald’s said it will defend against the lawsuit, and added in a statement that the global fast food goliath has an “obvious interest” in the franchisees’ success, and invested significantly in the Byrds’ franchises after they encountered difficulties.
To address concerns about its workplace culture, McDonald’s has taken several steps including updating its corporate values for the first time since 2008. Still, McDonald’s denies treating Black franchisees differently, while acknowledging it seeks more diversity among its store owners. McDonald’s also denied racial discrimination claims in a lawsuit filed in January by two Black executives.
“They’ve been on a massive PR campaign to clean up their image,” Ferraro told reporters on a conference call. “This is actually a good thing, at some level, but not a good enough thing.”
McDonald’s sought last week to dismiss the lawsuit by the former franchisees, which seeks up to $1 billion in damages, saying it disclosed the risks of owning stores and did not set anyone up for failure.