McCune Wright Arevalo, LLP Investigates McDonald’s Practices as To Whether Prospective Black Franchisees Face Systemic Racial Barriers
While McDonald’s claims it is committed to increasing its number of minority franchise operators, its entry requirements have likely played a prominent role in its reported loss of half its minority-owned franchises and failure to bring in new minority franchisees.
According to Your Path to Becoming a McDonald’s Franchisee, prospective franchisees can only enter the Franchisee Training Program if they meet the following requirements:
- Ability to invest a minimum of $500,000 in non-borrowed personal funds
- Divestiture of all existing business interests
- Commitment to an extensive training program that can range from 12-18 months, with a minimum of 20 hours per week
- Relocation based on availability of restaurants
The cash component alone excludes almost everyone, but since a prospective franchisee cannot use funds received from family members or investors, there is an even greater barrier to entry resulting in keeping the status quo of predominantly white franchisee ownership. Ultimately, the percentage of Black franchisees is believed to be small compared to the percentage of the Black population, as well as compared to the percentage of McDonald’s Black employees, managers, and customers.
For years McDonald’s has been reported to direct Black franchisees towards restaurants in low-income neighborhoods – the same neighborhoods that tend to have higher insurance costs and lower volume sales. According to CNBC, “McDonald’s states that while it may recommend locations, the decision is ultimately up to the franchisees.” However, as noted in the McDonald’s Franchising FAQs, McDonald’s will not work with applicants “who desire a specific restaurant location or limited geographic area.”
Even with the ability to overcome all financial and time-consuming obstacles, Black franchisees may still complete the training program without assurance that they will even be given a store, as existing franchise owners are typically offered new stores first. As alleged in the lawsuit, even if McDonald’s awarded a prospective Black franchisee a store, the franchisee is alleged to likely get an underperforming store with higher costs, lower revenues, and lower profits. The result could be compared to a kind of “redlining,” as minority franchisee candidates are either routed to unprofitable stores or excluded from consideration altogether.
McCune Wright Arevalo, LLP, Has Significant Experience Fighting Fortune 500 Companies
Our class action lawyers have represented clients both across the state and the nation in working towards justice and maximum financial recovery in legal battles against prominent defendants who have wronged our clients. Contact us today if you were an accomplished McDonald’s manager who attempted to obtain a franchise and were turned down or dissuaded from applying because of McDonald’s franchise entry requirements.