27 Black former franchisees join suit in Chicago
By Erick Johnson
A class action lawsuit against McDonald’s has ballooned to nearly 80 plaintiffs, after 27 Black former franchisees filed their complaints this month in federal court in Chicago.
The new amended complaint now has 77 named plaintiffs in a lawsuit that was filed by 52 Black former franchisees on September 1, 2020. The claims now include nearly 300 fast food McDonald’s franchises with compensatory damages that average between $4 million and $5 million per store, exclusive of punitive damages.
Many of the new plaintiffs are Black former franchisees who owned McDonald’s restaurants in Florida. On December 18, in a separate lawsuit, two additional former Black franchisees, James Byrd Jr. and Darrell Byrd, two brothers who own and operate four McDonald’s in the Nashville, Tennessee, area, filed a lawsuit against McDonald’s. The complaint says that the Nashville region has “the highest cash flow disparity between white and Black McDonald’s franchisees in the nation.”
And on October 29, another separate, federal class action lawsuit was filed against McDonald’s by current Black franchisees. There are 14 Black franchisees in Florida, four of whom own McDonald’s restaurants in Hialeah, Homestead and Lauderhill locations.
But the class action lawsuit involving 77 plaintiffs continues to grow. In the latest filing, 27 former franchisees make similar allegations that accuse McDonald’s of selling itself as a recruiter and developer of Black talent, while profiting from its Black consumer bases as it maintained a two-tier system that pigeonholed unsuspecting Black franchisees and assigned them bad locations that were guaranteed to fail.
According to the amended lawsuit, plaintiff Jeffery Rogers is a former Jacksonville region McDonald’s franchise owner and operator who became a franchisee in 2005 before he was allegedly forced out in 2011. Rogers owned and lost one store. Another plaintiff, Douglas Hollis and his wife, Glenna Hollis, lost five McDonald’s franchisees in 2013 in the Orlando region after they started their enterprise in 1998.
The new plaintiffs say their average annual sales of $2 million was more than $700,000 under McDonald’s national average of $2.7 million between 2011 and 2016, and $900,000 under the national average of $2.9 million in 2019.
The lawsuit also claims that McDonald’s was ruthless in steering Black operators toward the oldest and toughest neighborhoods that were often rejected by white franchisees. The plaintiffs allege the practice severely limited their opportunities for expansion and growth, and led to low cash flow, decreased equity, debt, bankruptcy and financial ruin.
The new plaintiffs argue McDonald’s violated federal civil rights laws by:
- Excluding Black franchisees from the same growth opportunities found at safer, higher-volume, lower-cost stores offered to whites.
- Retaliating against Black franchisees for rejecting strong-arm offers to continue operations in crime-ridden neighborhoods.
- Denying Black franchisees meaningful assistance during financial hardships, while white franchisees were routinely given such support.
- Failing to provide any legitimate business reasons for repeated denials of franchise opportunities over many years.
- Unfairly grading the operations of Black restaurants, which resulted in poor internal reviews, effectively pushing Black franchisees out of the McDonald’s system by denying them the eligibility for growth and favorable franchise terms.
- Providing misleading projections, which induced Black franchisees to purchase undesirable franchises.
McDonald’s has denied the allegations.
In the original lawsuit filed in September, Black operators also alleged that they faced retaliation from McDonald’s after they rejected offers to continue running their restaurants in low-income neighborhoods. The plaintiffs also allege that McDonald’s provided misleading projections that persuaded them to buy undesirable franchises and denied them better locations typically given to white franchisees, who operated safer restaurants with higher sales and lower security costs.
According to the National Black McDonald’s Operators Association (NBMOA), McDonald’s at one point had as many as 377 Black franchisees in 1998. Today there are only 186, even though McDonald’s has increased its stores from 15,086 to 36,059. The cash flow gap for Black franchisees more than tripled from 2010 to 2019, according to the NBMOA.
The suit comes on the heels of a separate federal class action lawsuit filed October 29 by current Black franchisees. That same month, three current and former McDonald’s workers filed a civil rights suit accusing managers at a local McDonald’s of subjecting Black workers to racially derogatory terms and disparate treatment that resulted in them receiving harsher discipline, and fewer hours, than white colleagues.
In a separate lawsuit in January, two Black executives at McDonald’s filed a lawsuit accusing the fast-food chain of discrimination and removing many Black employees from its top ranks.
But the class action lawsuit involving 77 plaintiffs details practices that occurred for many years and threatened to cost McDonald’s hundreds of millions of dollars in damages.
In November, McDonald’s hired Reggie Miller as its vice president and global chief diversity, equity and inclusion officer. He will replace Wendy Lewis, who last summer announced that she was retiring this year.