Owning a business of one’s own is a common goal for ambitious go-getters across America. Whether you’re starting a business from scratch or buying into an already successful brand, becoming an owner-operator is an admirable decision with high risk and high reward. Unfortunately, some would-be entrepreneurs are finding it difficult to navigate the world of business ownership due to the color of their skin. For several black McDonald’s franchisees, McDonald’s allegedly deliberately set up the system to restrict success or remove that possibility entirely.
A lawsuit was filed in Illinois in September 2020 against McDonald’s citing racial barriers to franchise success for 52 black plaintiffs who formerly owned a McDonald’s franchise. These plaintiffs allege that McDonald’s system for recruiting franchisees and assigning stores to black franchisees is racially prejudiced, resulting in a greater instance of low performance for stores belonging to black franchisees.
To become a franchisee in the first place, individuals must clear a positively rigorous eligibility checklist, including having $500,000 in liquid personal assets without any borrowing, undergoing a 12–18-month training program that amounts to a part-time job, and the ability and willingness to relocate to take ownership of a store. This alone is an immense time and capital sink for all aspiring franchisees. This is only amplified by the racial disparities in socio-economic groups. According to a study published in 2019, 18.8 percent of black individuals in the United States were classified as impoverished versus 7.3 percent of white Americans. This alone significantly reduces the number of black franchisees (and indeed, Hispanics and other minorities) capable of entering the McDonald’s ranks.
The lawsuit claims that McDonald’s either assigned low-volume-sales stores in impoverished areas which require much higher insurance payments to black owners or passed black owners over entirely for a store in favor of white franchisees. Allegedly, the tendency to assign black owners to low-performance stores has cost franchisees an average of $4 to $5 million per location. On average, restaurants run by black franchisees made $700,000 to 900,000 less per year in revenue, which the lawsuit claims has discouraged black franchisees from continuing with McDonald’s. Meanwhile, McDonald’s has allegedly offered locations in safe, affluent areas that historically provide greater sales and cost less for security to white owners.
The number of black McDonald’s franchisees has been dwindling over the past 22 years. Since 1998 when black franchisee enrollment was at its peak of 377, the number of black owners have declined to less than half of that. According to McDonald’s, the ratio of black operators has not changed due to the greater number of stores.
The lawsuit states this decline in black ownership is a result of harsh internal reviews with more unattainable standards than their white counterparts. This allegedly leads to McDonald’s denial of growth opportunities to black franchisees, despite the claims of unfair scrutiny.
Racial and Economic Justice Attorneys in the Inland Empire and Beyond
Though this lawsuit continues to rage on, it’s far from the only one claiming McDonald’s has been racially biased toward their employees. The Racial and Economic Justice Practice Group of McCune Wright Arevalo, LLP, is currently investigating the need to bring their own lawsuit against the corporate giant to place more pressure on this multi-billion-dollar company to change its ways. We have a long history of success against Fortune 500 corporations and passionate attorneys ready to fight for you. If you are a current or former McDonald’s employee or franchisee who has faced racial barriers from McDonald’s in the form of unfair treatment, unrealistic standards, or other behaviors, contact us today or call (909) 345-8110!