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On Monday, August 31, 2020, The Ferraro Law Firm filed a federal lawsuit on behalf of 52 former Black McDonald’s franchisees alleging racial discrimination through steering, denial of growth opportunities, unequal rebuild and renovation requirements, targeted inspections and grading, and lack of permanent rental assistance, among other things, as compared to White franchisees. Systemic racism resulted in McDonald’s placing Black franchisees in over 200 high-risk, low-reward franchise locations McDonald’s knew would never allow Black franchisees to achieve the same level of economic success as White franchisees. We are demanding McDonald’s be held accountable for its discriminatory practices that has led to a mass exodus of Black franchisees.
A History of Inequality for Black Franchisees
In our Complaint, we trace McDonald’s decades-long history of racism against Black franchisees. In 1996—nearly 25 years ago—the Executive Vice President of the company acknowledged Black franchisees were pushed toward lower-profit opportunities. This candor (and no doubt an empty promise to fix these issues) seemingly led to the Company’s all-time high of Black franchise owners 2 years later, in 1998. Today, less than half of those franchises are still in business, while the company as a whole more than doubled its global franchises.
According to the National Black McDonald’s Operators Association, the wealth gap between Black and non-Black franchisees has tripled in the last decade. This is not a coincidence. This data, combined with the heartbreaking stories we heard from entrepreneurs who were robbed of the American Dream, is behind our allegations that McDonald’s methodically and intentionally discriminated against Black franchisees, setting them up to fail.
Our Allegations Against McDonald’s
The hurdles our Plaintiffs faced were not exclusive to one person or a single location. After speaking to them, we identified trends in McDonald’s behavior toward Black franchisees that violate federal law. They include:
- Pressuring Black franchisees to open locations in undesirable and dangerous areas that had less sales and higher costs in the form of increased security, higher insurance rates, and frequent employee turnover, while offering profitable and safe locations to White franchisees.
- Selling Black franchisees on these undesirable locations by misrepresenting their chance of success and promising future growth opportunities McDonald’s knew they would not provide.
- Retaliating against Black franchisees who refused to continue to operate in the neighborhoods McDonald’s steered them to by immediately increasing inspections and unfair grading as a pretext to force them out.
- Imposing unequal rebuild and renovation requirements to drive Black franchisees into financial debt as leverage against them during their franchise term.
- Denying Black franchisees meaningful financial assistance, often granting temporary relief under false pretenses that only drove Black franchisees further into financial ruin.
- Grading restaurants owned by Black franchisees more harshly than others, which resulted in poor reviews that disqualified these owners from rewrite and growth opportunities offered to White franchisees.
- Repeatedly denying Black franchisees ownership opportunities in more profitable locations without any reasonable business justification.
- Forcing Black franchisees out by consolidating ownership to White franchisees who owned more stores and were then more likely to pay McDonald’s its 4% fee, plus rent.
We allege that these actions show a clear pattern of racism in the franchise development process at McDonald’s. Black McDonald’s franchisees often dedicated over 20 years, lifetimes, to a franchise system that intentionally denied them equal opportunities. These Plaintiffs deserve full and fair compensation as well as punitive damages for the harms they unknowingly faced.
Equal Business Opportunities Are a Matter of Racial Justice
These violations, if proven in court, are an example of economic injustice and the system being stacked against Black business owners. By offering false “opportunities,” McDonald’s took money from these hardworking entrepreneurs and community leaders who were trying to take the next step toward financial independence. Instead, the 52 Plaintiffs we represent faced ruinous circumstances that made it all but impossible to achieve their dreams of becoming successful business owners. We are asking the courts to hold McDonald’s accountable and hoping this case will force them to change their practices for good.
If you or someone you know has faced a similar situation, we invite you to reach out to The Ferraro Law Firm. We are dedicated to advocating for the marginalized and helping them find justice against companies that unscrupulously take advantage of enterprising individuals.
If you have questions about your rights, you should not hesitate to discuss your case with our legal team.
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