McDonald’s Corp. on Friday reached a settlement with two Black franchise owners who sued the corporation, alleging the company gave preferential treatment to white franchisees. Black McDonald’s operators are calling on the company to do more to invest in minority owners.
Brothers James and Darrell Byrd, operators of four McDonald’s restaurants in Tennessee, sued McDonald’s in October 2020, claiming the company pushed Black franchisees to areas that are “financial suicide missions.”
Court documents say the brothers filed the suit because they could not “allow other Black McDonald’s franchisees to be misled and injured by the same pipeline of discrimination that has plagued Black franchisees for decades.”
Specifically, the suit claims McDonald’s steers Black franchisees to areas with higher overhead costs where white operators refuse to open a restaurant.
The suit was filed on behalf of the Byrds and 186 other Black franchise owners across the country.
They sought damages of $4 million to $5 million for each store around the country for the “targeted discrimination.”
But the brothers dropped the suit and will leave the McDonald’s system after the company agreed to buy their restaurants for $6.5 million, Bloomberg reported.
“Discrimination has no place at McDonald’s and while we were confident in the strength of our case, this settlement enables all to move forward with an amicable resolution and in a manner that is consistent with our values,” the company said in a statement.
The statement noted that the court did not find that McDonald’s violated any laws.
McDonald’s announced before the settlement was reached that it would invest $250 million in minority owners through loan assistance programs, recruitment, and training.
The company promised on Dec. 8 finance loans for women and other minorities over the next five years in the U.S.
“We’ve made clear that our ambition is to foster equitable opportunity for every single franchisee, and have made significant progress on this front,” Bill Lowery, vice president of diversity and ombudsman at McDonald’s, said in a statement.
But on Monday an association of Black franchise owners called on the company to do even more to support Black operators.
“McDonald’s needs to address the systemic barriers to success that are currently facing existing Black franchisees,” said Larry Tripplett, CEO of the National Black McDonald’s Operators Association.
“Without a permanent change to address existing inequities, new generations of franchisees will be saddled with extraordinary debt, huge financial challenges, and unable to become meaningful contributors to the communities they serve.”
Many Black McDonald’s franchise owners are choosing to leave the system, Business Insider reported in 2019. In 2008 there were 304 Black franchise owners, but by 2017, that number dropped to 222.
Meanwhile, the gap between the amount of money white franchisees make compared to what Black owners make each month continues to grow.
In 2012, the difference in monthly cash flow between Black and white franchisees was $24,600 per month and in 2017, it was about $60,600.