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McDonald's buys out another franchisee to settle a discrimination lawsuit

The burger giant has agreed to pay $33.5 million to buy 13 restaurants from Herb Washington, who had accused the company of giving favorable treatment to White operators.
McDonald's lawsuit settlement
Photo courtesy of McDonald's

McDonald’s said on Thursday that it has agreed to buy out 13 restaurants owned by prominent Black franchisee Herb Washington for $33.5 million as part of a settlement of a lawsuit accusing the burger giant of giving preferential treatment to White owner-operators.

It is the company's second settlement announcement of the day following an earlier agreement with former CEO Steve Easterbrook. It also comes just days after the company made a similar deal with Black franchisees James and Darrel Byrd, who had also accused McDonald’s of discrimination.

The Chicago-based burger giant said that the court “did not find that the company violated any laws” and that Washington agreed to dismiss the case as part of the settlement.

“While we were confident in the strength of our case, this resolution aligns with McDonald’s values and enables us to continue focusing on our commitments to the communities that we serve,” the company said in an emailed statement.

McDonald’s said the purchase price “is no more than what we deem a fair price for the value of the restaurants.”

That price amounts to be about $2.6 million per location.

Washington sued the company in February, one of a string of lawsuits filed by franchisees as well as executives and vendors accusing the Chicago-based burger giant of discrimination.

But Washington was among the most prominent operators to make that accusation. At one point he owned 27 restaurants in New York, Pennsylvania and Ohio, which made him the system’s largest Black franchisee.

He was also a world-class athlete who briefly played professional baseball for the Oakland Athletics in the 1970s and narrowly missed a spot on the 1972 Olympic track team.

Washington accused the company of forcing him to sell seven of his restaurants to White owners. “There are two McDonald’s systems,” he said at the time of the initial filing. “One that is designed for White owners to flourish and grow and another that is designed to pigeonhole and oppress Black owners.”

McDonald’s had in turn said the problem with his stores was rooted in mismanagement and said the company invested “significantly” in his organization over the years.

Still, in October Washington’s lawsuit was allowed to proceed over McDonald’s efforts to have the case dismissed.

The settlements suggest McDonald’s is moving aggressively to get past what has been a controversial period in the company’s history. McDonald’s has been fending off numerous discrimination lawsuits to go along with the aftermath of Easterbrook’s firing—the company has been criticized for allowing its former CEO to walk away with a severance after it was found that he had an affair with an employee.

Black franchisees had argued that their cash flow gap with White operators had widened in recent years and noted that many of them have left the system.

McDonald’s earlier this month promised to invest $250 million in alternative financing methods in a bid to attract a new, more diverse group of franchisees into the system.

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