A group of Black McDonald’s franchisees have served the Chicago-based fast food giant with a discrimination lawsuit, accusing McDonald’s of a supersized pattern of mistreating its Black franchisees and setting them up to fail on a “financial suicide mission.”
On Aug. 31, attorney James L. Ferraro, and others with the Ferraro Law Firm P.A., of Miami, filed suit in Chicago federal court against McDonald’s on behalf of a group of more than 50 McDonald’s franchisees. They are also represented by attorneys with the firm of Cooney & Conway, of Chicago.
The Ferraro and Cooney firms typically specialize in pressing personal injury lawsuits related to mesothelioma caused by alleged asbestos exposure.
James Ferraro
| Ferraro Law Firm
The franchisees operated McDonald’s franchise restaurant locations in 20 states, including Illinois, Indiana, Iowa, Michigan and New York, and many more in the Southeastern U.S., particularly Georgia, North Carolina and Florida.
The lawsuit accused McDonald’s of taking advantage of the “unequal bargaining power” held by Black prospective franchisees to persuade them that ownership of the restaurants in some of the most dangerous areas of cities like Atlanta, Chicago, Philadelphia, New York, Houston and Las Vegas, represented the would-be franchisees’ only chance to try their hand at becoming another of McDonald’s touted Black millionaire success stories.
“The unequal bargaining position made it easy for McDonald’s to award Black franchisees entering the system the oldest stores, in need of the most reinvestment, in tough and depressed areas, that had been routinely rejected by White franchisees, many of which McDonald’s wanted to close, but needed someone to operate until McDonald’s could sell its real estate,” the complaint said.
The complaint asserted this left Black franchisees saddled with massive added costs for insurance and security, and subject to the dangers of the surrounding neighborhoods, which the complaint characterized as plagued by drug dealers, criminal activity and large homeless populations.
The relatively low income of those communities also left the Black franchisees struggling with reduced sales revenues, relative to their white counterparts, and high employee turnover, the complaint said.
At the same time, the complaint said McDonald’s demanded the franchisees invest large sums in renovations and rebuilds of their restaurants, despite their allegedly already high costs and low operating revenues.
The complaint accused McDonald’s of also unfairly denying the Black franchisees rent relief and then hounding out any franchisees who objected.
“McDonald’s discriminatory practices led to low cash flow and decreased equity for Black owner/operators, forcing Black owner/operators, including Plaintiffs, into significant debt and, in many cases, bankruptcy,” the complaint said.
In this case, the plaintiffs said McDonald’s alleged actions led to the loss of more than 200 restaurants, valued at $4 million to $5 million per store.
The complaint said the company’s practices are part of a pattern that dates back decades, and has in recent years, resulted in a sharp decline in Black franchisees and a widening “cash flow gap” between Black and white franchisees.
The complaint said that gap tripled from 2010-2019, while the number of Black McDonald’s franchisees has been cut in half.
The complaint accused McDonald’s of violating federal civil rights law, breaching their franchise contracts and fraudulently inducing the franchisees into signing on and investing in the franchise restaurants.
They asked the court to order McDonald’s to pay damages to compensate for the loss of the restaurants and business opportunities, plus unspecified punitive damages and attorney fees.
The lawsuit is the second large racial discrimination action lodged against McDonald’s this year. In January, Black McDonald’s executives sued the fast food purveyor, accusing it of creating a corporate culture that became “overtly racist,” driving out large numbers of Black franchisees and executives.