Black franchise owners of McDonald’s accused the fast-food giant of racial discrimination for steering them to underperforming stores and filed a lawsuit that could potentially run into billions of dollars.
The law firm representing 52 Black former franchisees who filed a similar lawsuit on August 31 filed the proposed class action and it as led by James and Darrell Byrd, brothers with four McDonald’s restaurants in Tennessee.
Accusations that the fasts food chain had deliberately placed franchisees owned by Black people in undesirable inner-city locations with high security and insurance costs but with below-average sales were brought against it. The proposed class action also alleged that this policy of McDonald’s resulted in many of those franchises being driven into a position hen they are unable to support themselves because of rising debts and declining profits.
McDonald’s has 186 Black franchisees in the United States, compared to 377 in 1998 who own “700-plus” stores, according to estimates of Jim Ferraro, a lawyer for the plaintiffs.
Claims of damages of $4 million to $5 million per store, potentially totaling more than $3 billion, has been sought in the lawsuit that has been filed in a federal court in Chicago, where McDonald’s has its headquarters.
It has an “obvious interest” in the franchisees’ success, McDonald’s USA said in a statement and added that significant investments had been made by the company in the Byrds’ franchises after they encountered difficulties.
It will defend against the lawsuit, McDonald’s said.
With the aim to address concerns about its workplace culture, a number of measures have been taken by McDonald’s this year which includes updating its corporate values for the first time since 2008.
Allegations against it of treating its Black franchisees differently have been denied by the company even while acknowledging that there is more scope for greater diversity in its franchisee ranks. Charges of racial discrimination against it in a lawsuit filed in January by two Black executives have also been denied by the company.
“They’ve been on a massive PR campaign to clean up their image,” Ferraro told reporters on a conference call. “This is actually a good thing, at some level, but not a good enough thing.”
A law suit filed by the former franchisees seeks damages of up to $1 billion from McDonald’s was filed earlier. That law suit alleges that thee fast food chain had disclosed the risks of owning stores and did not set anyone up for failure. McDonald’s sought to dismiss the lawsuit last week.
(Adapted from CNBC.com)