2 Black ex-franchisees suing McDonald’s in a $1 billion lawsuit speak out on racial discrimination and feeling like the company became ‘all about the shareholders’

Dozens of Black former franchisees are suing McDonald's. 

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Dozens of Black former franchisees are suing McDonald’s.

Dozens of Black former franchisees are suing McDonald’s, saying they faced racial discrimination at the fast-food giant. 

A complaint filed by 52 former franchisees on Tuesday said Black franchisees faced “systematic and covert racial discrimination” at the company.

According to the complaint, McDonald’s steered these franchisees towards undesirable locations in Black neighborhoods, with higher costs and lower sales. Franchisees said in the complaint that McDonald’s excluded them from acquiring more profitable locations and expected them to withstand harsher requirements and inspections. 

Two of the plaintiffs in the lawsuit spoke with Business Insider last year as part of an investigation into inequalities within McDonald’s. With the new lawsuit, Business Insider is republishing these interviews below in which Ken Manning and Juneth Daniel describe the treatment they faced at McDonald’s. 

Read more: McDonald’s black franchisees are fighting to earn as much as their white counterparts, as dozens leave the company they once considered family

“We have said for many, many years as African American operators, there are two standards. There’s one for us, and there’s one for our general market operators,” Manning told Business Insider last December. 

“It made you feel, as an operator, like nobody cares,” Daniel said of her decade as a franchisee. “Like you are out on the island on your own. You had this big massive franchisor, but they didn’t care whether you stayed in business or not.” 

McDonald’s said in a statement to Business Insider that the company categorically denies the allegations in Tuesday’s complaint. 

“When allegations such as these occur, I want them investigated thoroughly and objectively,” McDonald’s CEO Chris Kempczinski said in a video message on Tuesday morning. “That’s been our approach to this situation. Based upon our review, we disagree with the claims in this lawsuit and we intend to strongly defend against it.” 

Editor’s note: These franchisee interviews have been condensed for length and clarity. Further context and comment from McDonald’s appears in italics.

Ken Manning, franchisee from 2001 to 2017

Ken Manning owned 16 McDonald’s locations before selling them in 2017.  According to Tuesday’s complaint, there are now only 186 Black McDonald’s franchisees, down from 377 in 1998. McDonald’s said it has consolidated its total number of franchisees, but the overall proportion of Black franchisees within the system is overall unchanged. In 2017, Manning sold his locations and ended his time as a franchisee. 

“We’ve made some great strides, but to see the number of African American owners and operators and the rates that they have decreased, that should be very alarming — particularly when, for a lot of folks, this is their livelihood and this is their life.”

If I’m a consultant and for whatever reason, I go out to an inner-city store or an African American store, and I say I don’t like the way it feels, I don’t like the way it looks — they grade harder, no question. We know they grade harder because we see our counterparts’ stores and we say, well, mine doesn’t run any different than theirs. “

I had a great career and I loved every bit of it. But at the same time, that doesn’t mean that if I saw something that was unfair and not right, that I was just going to say, ‘Hey, I’ve got mine.’ I’ve got to fight.”

 

Juneth Daniel, franchisee from 2008 to 2018

Juneth Daniel sold her three locations in Alabama in 2018. When Daniel was a McDonald’s franchisee, she said, she struggled to turn a profit at her stores in Selma and Union Springs, Alabama.  

“I came up at McDonald’s. I started as a shift manager. I’m one of those people you would say have ketchup in your veins.

I grew up in McDonald’s. I was what is called second generation, which means that my family — which was my stepmother at the time — started a McDonald’s. When my parents divorced, I then went to work for a franchisee and that’s how I stayed in the system. 

McDonald’s changed when they let go of [former CEO] Don Thompson. That changed the whole dynamics of McDonald’s overall because now McDonald’s isn’t the same place. It wasn’t about the franchisee and the partnership at McDonald’s. It’s more about making shareholders’ pockets fatter.

Historically, [Black franchisees have] always taking on the worst stores. They had the lowest cash flows. Not cash flow issues. They had serious problems with having to be staffed, if they weren’t being robbed. But you want into the system, you want it to be a McDonald’s owner-operator. So, you took the bad to hopefully get to a better place. 

That store in Selma, I was robbed at least three or four times in that store, one time by shotgun. My store in Union Springs, same thing. My store in Montgomery, though it was in a good location, it had the highest rent of all my stores. … I owned it for 10 years. I never really made any money on that store ever.

I think what got lost at McDonald’s is the three-legged stool, the vision of us all working together and the family. Because McDonald’s is a family restaurant.

You always felt like a family. I always felt like I could call my franchisor and ask questions. If I have a problem I can go to them. That got lost. It became all about the shareholders.”

McDonald’s said in a statement that it is “highly inaccurate to suggest that McDonald’s evaluates Black franchisees differently than other franchisees or offers Black franchisees different financial terms than other franchisees. The evidence will show that those allegations are categorically false.”

According to McDonald’s, consultants’ routine business reviews aim to inform operators about where they stand and how to better their chances for growth. Manning and other plaintiffs in Tuesday’s lawsuit said that McDonald’s used reviews to force Black franchisees out of the system. 

With 95% of locations run by franchisees, McDonald’s says that it has an economic incentive for all restaurants to succeed. As of 2019, over 48% of franchisees own between one and five restaurants, according to the company. However, the number of franchisees overall has declined as franchisees’ average store count has grown in recent years.  

Read the original article on Business Insider