'Financial suicide missions': Dozens of black franchise owners sue McDonald's for discrimination

More than 50 black former McDonald's operators are suing the fast-food giant for racial discrimination, alleging a "pattern of misconduct" that widened a gap of economic success between the franchisees and their white counterparts.

A lawsuit filed in US District Court on Tuesday alleges that the company's "systematic and covert racial discrimination" denied 52 franchisees "equal opportunity to economic success" by sending operators into "financial suicide missions" armed with the company's "misleading financial information" and burdened with high operating costs that forced them to close.

Plaintiffs in the federal anti-discrimination lawsuit allege that McDonald's "profits from its black customers yet places black franchisees in locations that are destined to fail, with low-volume sales and high operating costs, leading to consistent profit shortfalls or losses" preventing franchise growth and forcing franchise owners to back out, "repeating this pattern of misconduct over and over again."

Former franchise operators claim that discriminatory practises, including requirements to invest in their restaurants while the company refused financial aid, "resulted in an increasing cash flow gap" between black and white franchisees that more than tripled from 2010 to 2019, according to the National Black McDonald's Operators Association as cited by the lawsuit.

Plaintiffs say that their average annual sales of $2m was more than $700,000 less than national sales averages from 2011 to 2019.

"As a result, the historic high of approximately 400 black McDonald's franchisees in 1998 has been more than cut in half," the lawsuit claims. "At the same time, from 1998 to date, the total number of McDonald's franchised restaurants more than doubled. "

Plaintiffs operated more than 200 restaurants and left the company between 2010 and 2020. The lawsuit seeks up to $1bn in damages.

The lawsuit follows the company's recent diversity pledge in response to widespread protests against systemic racism in the wake of police killings of black Americans, "causing a reckoning and demand for action that is long overdue," the company said in a statement on 30 July.

"The public outcry has elevated and renewed our attention and deep responsibility to make changes that drive equitable opportunity for all," the statement said.

Following the lawsuit, a McDonald's spokesperson said the company is "confident that the facts will show how committed we are to the diversity and equal opportunity of the McDonald's System, including across our franchisees, suppliers and employees."