UPDATE: Dec. 13, 2021: McDonald's on Friday settled a lawsuit accusing the chain of racial discrimination and pushing Black franchisees toward underperforming restaurants. The lawsuit was led by brothers James and Darrell Byrd, who own four McDonald's restaurants in Tennessee.
McDonald's bought the four restaurants for $6.5 million, and the Byrds have dropped the suit and will exit the chain's system. The court found that McDonald's had not violated any laws, the chain told Bloomberg.
This settlement comes on the heels of McDonald's pledge to put $250 million over five years toward financing disadvantaged franchisee candidates and creating a more diverse network of operators.
UPDATE: June 10, 2020: On Tuesday, U.S. District Judge Harry Leinenweber dismissed a lawsuit accusing McDonald's of racial discrimination and directing Black franchisees to underperforming units. While the lawsuit provided historical incidents of discrimination of Black franchisees, the judge said the plaintiffs did not meet the minimum allegations to satisfy a discrimination case, which needs the type of discrimination, who did it and when it occurred. The plaintiffs also failed to connect any conduct of managers and executives mentioned to discrimination experienced by the plaintiffs or any class member.
"The Court does not mean to imply that McDonald's operations over the years have not been tainted by a brush of racism," the judge said, adding that historical discrimination cannot be used as the basis for this case.
Dive Brief:
- McDonald's was sued Thursday by Black franchisees who accuse the chain of racial discrimination and pushing them toward underperforming restaurants. The proposed class-action suit is led by James and Darrell Byrd, brothers who own four Tennessee McDonald's locations. The Byrds are represented by the same law firm 52 Black former operators hired to file a similar suit last month.
- The suit could include all of McDonald's current Black franchisees, and seeks between $4 million and $5 million in damages per restaurant. There are currently 186 Black franchisees in McDonald's system, said James L. Ferraro, who is representing plaintiffs in this suit and the one filed by ex-franchisees.
- "With respect to the named plaintiffs in this complaint, Jim and Darryl (sic) Byrd, McDonald's has invested significantly in each of their respective businesses after they ran into business difficulties caused by mismanagement of their organizations," McDonald's said in a statement emailed to Restaurant Dive. But this suit adds to a string of racial discrimination suits against the chain from franchisees to executives, raising questions about the restaurant's culture.
Dive Insight:
Last week, McDonald's asked a judge to dismiss the lawsuit filed by Black ex-franchisees, arguing that the statute of limitations on the claims have expired based on when the operators left the restaurant's system and argued that "this claim is illogical as it suggests the company somehow has an interest in undermining its franchisees and seeing them fail."
McDonald's echoed this sentiment in a new statement, arguing that the chain "has an obvious interest in franchisees maintaining successful and profitable restaurants."
Because most McDonald's franchisees operate more than one restaurant, plaintiffs in this new class-action suit could seek significant sums in damages. Individual Black franchisees will make the decision to be part of the class next year, Ferraro said to Business Insider. The number of Black franchisees in the system has shrunk by more than 190 operators in 22 years, according to the suit. Ferraro added that the ex-franchisee lawsuit sparked similar allegations from about 50 current operators who reached out to him, and that some feared retaliation.
This new suit is another stain on McDonald's reputation, which has become riddled with accusations of sexual harassment and racial discrimination this year. The company said earlier this summer that it is working to grow a diverse franchisee base and increase its spend with diverse suppliers. These efforts may be dwarfed by the growing narrative that the chain is giving Black operators and corporate employees alike the cold shoulder — or worse.
