Black Former McDonald's Franchisees Say They Were Set Up To Fail

Fast-food giant Mcdonald's Corp MCD faces a new legal battle as more than 50 former Black franchisees allege racial discrimination prevented them from achieving financial success.

The Lawsuit Against McDonald's: Fifty-two Black plaintiffs who operated more than 200 McDonald's restaurants allege in a federal lawsuit filed Tuesday that the company violated federal anti-discrimination laws, according to CNBC. The lawsuit seeks $1 billion in damages. 

The group alleges that McDonald's pushed Black franchisees toward operating in lower-income neighborhoods that generate lower-than-average sales but have higher security and insurance costs.

The franchisees said in the lawsuit that they were given misleading information by McDonald's that persuaded them to accept less desirable locations.

In contrast, white operators were treated differently and given access to better markets, according to the lawsuit. 

Number Of Black McDonald's Franchisees Falls: Black franchise owners were given "little to no say" in deciding where they wanted to open a new store, plaintiffs' attorney Jim Ferraro said on CNBC's "Power Lunch."

McDonald's history of unfair treatment toward Black people dates back to its creation, he said, but it wasn't until 1998 the fast-food chain "acknowledged these problems" publicly.

Since 1998, the total number of Black franchise owners fell from 377 to 186 today, Ferraro said. 

McDonald's CEO Chris Kempczinski said this year that McDonald's has likely helped to make more Black people millionaires than any other corporation on the planet. Ferraro said this is a "false statement."

Throughout the company's history, it's had around 600 Black franchisees, and to say it made more millionaires is "patently false," he said. 

"Even the Dallas Cowboys alone with the NFL made more Black millionaires than McDonald's." 

McDonald's Denies Allegations: McDonald's categorically denies allegations that discrimination prevented franchise owners from succeeding, the company told The Washington Post in a statement. The facts are on McDonald's side, according to the company, which said it will "show how committed we are to diversity and equal opportunity."

The fast food company said it does not have a say in the locations a franchise owner purchases.

McDonald's said it doesn't treat Black franchisees any different from other franchisees.

"Based upon our review, we disagree with the claims in this lawsuit and we intend to strongly defend against it," Kempczinski said in a video sent to employees and suppliers.

"But I think it's important in moments like this to remind ourselves what we do stand for. And as CEO, that's a tone I intend to continuously set from the top. McDonald's stands for diversity, equity and inclusion. I'm proud of the work we've done as a company to foster entrepreneurship, economic growth and mobility."

MCD Price Action: McDonald's shares were up 1.31% at $215.48 at last check Wednesday. 

Related Links:

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McDonald's Says Ex-CEO Easterbrook 'Breached Fiduciary Duties'

Photo by Bryan Hong via Wikimedia

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Posted In: NewsRestaurantsLegalMediaGeneralChris KempczinskiCNBCFast FoodJim Ferraro
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