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McDonald’s settles franchise lawsuit over racial disparities

On Behalf of | Dec 27, 2021 | Franchise Law |

When it came to marketing toward minorities and minority owners, McDonald’s was one franchisor that took the lead, particularly among the Black community.

Black entrepreneurs welcomed the attention and the opportunities presented by McDonalds. They bought into the franchise, feeling like they had found a company where they belonged – until it became obvious that they didn’t.

A number of class action lawsuits by Black franchisees have put a glaring spotlight on what many feel are policies and practices driven by racism.

What’s going on with Black-owned McDonald’s franchises?

In the words of the chief executive officer of the National Black McDonald’s Operators Association, “Despite sales growth, Black franchisees collectively earn lower profits than non-Black McDonald’s franchisees due to ongoing systemic and historical inequalities within the McDonald’s Corporation.”

Take, for example, the recent lawsuit that McDonald’s settled for $33.5 million with a Black franchise owner who operated 14 restaurants throughout Ohio and Pennsylvania. The owner alleged that the McDonald’s corporation openly steered Black owners to open restaurants in economically disadvantaged areas – and even outright denied him the opportunity to open restaurants in predominantly white, affluent areas. According to the lawsuit, the systematic method of putting Black owners only in Black neighborhoods cost Black franchisees around $700,000 per year in annual sales.

For its part, McDonald’s claims it merely settled the suit for what their unhappy franchise owner’s restaurants were worth. However, this isn’t the first lawsuit the company has been forced to deal with regarding racial disparities.

Over 50 former franchise owners – all Black – filed a similar suit back in 2020. In addition to allegations that they were relegated to restaurants in poorer areas, they also allege that they were obliged to foot the bill for increased security, higher insurance and renovations – things that white owners didn’t have to manage or could get help with from the franchisor.

If you believe that your entrepreneurial dreams as a franchisee have been damaged by a franchisor’s unfair practices (racially motivated or not), find out what you can do to assert your legal rights.