Another 27 Black former franchisees of McDonald’s have joined a discrimination lawsuit against the franchise, bringing to 77 the number of ex-operators that claim the company did not afford them the same rights as their White counterparts.
The claims now include nearly 300 restaurants, with damages of between $4 million or $5 million per store—suggesting compensatory damages in the lawsuit could reach close to $1.5 billion.
The lawsuit, filed in September, alleges a systemwide policy of discrimination against Black franchisees, arguing that they were steered into weaker locations and not provided with the same opportunities for expansion as other operators.
It comes amid a deepening legal battle between the Chicago-based burger giant and Black employees and operators. Current Black franchisees sued the chain last month, while both executives and employees have filed their own discrimination lawsuits. “McDonald’s is now fighting a four-front legal war,” James Ferraro, lead attorney for both franchisees’ lawsuits, said in a statement.
“As the pool of plaintiffs grows, there will be more pressure on the company to dispense with the public relations ploys and focus on how it can help its Black employees and franchisees.”
McDonald’s has been taking steps to burnish its image on diversity—it recently hired a new diversity chief, for instance, and has promised to bolster equity among franchisees, at its corporate offices and among suppliers.
But it has also pushed back hard against the lawsuits. In October it asked a federal court judge to dismiss the ex-franchisees’ lawsuit, calling it “illogical.”
“On its face, this claim is illogical as it suggests the company somehow has an interest in undermining its franchisees and seeing them fail,” McDonald’s attorneys wrote in a legal filing in October.
At root in the franchisees’ lawsuit is the performance by Black franchisees and the loss of such operators in the system. The number of Black franchisees has been cut in half since 1998, according to Ferraro. And the gap in cash flow between Black franchisees and other operators has tripled between 2010 and 2019, based on data from the National Black McDonald’s Operators Association, or NBMOA.
Ex franchisees suing McDonald’s had average sales of $2 million per restaurant, or $700,000 less than the company average between 2011 and 2016. They claim McDonald’s steered Black franchisees to tough neighborhoods White operators wouldn’t go into, ultimately limiting opportunities for expansion and growth.
The lawsuit also faults McDonald’s for denying franchise opportunities to Black operators and denying them the same assistance provided to White franchisees when there were problems. It also claims McDonald’s retaliated against Black franchisees and provided misleading projections on stores offered to Black operators.