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McDonald's asks judge to toss out racial discrimination suit filed by Black former franchisees, calling it 'illogical'

By Alexia Elejalde-Ruiz, Chicago Tribune on

Published in Business News

CHICAGO — McDonald's is asking a judge to dismiss a federal lawsuit filed by more than 50 Black former franchisees who allege that racial discrimination by the fast food giant set them up to fail.

Chicago-based McDonald's, in a filing Friday in U.S. District Court for Northern Illinois, called the allegations "illogical" because the company "is only as successful as its franchisees."

The Sept. 1 complaint by the Black former franchisees alleged McDonald's steered them to less profitable locations, with lower sales volumes and higher security costs, and excluded them from financial support and growth opportunities offered to white franchisees. They allege they were denied opportunities to open and operate franchises in more profitable locations.

As a result, they allege, many went out of business and some declared bankruptcy. The number of black McDonald's franchisees fell by more than half since its peak of 377 in 1998, to 186 today, and the cash flow gap between white and black franchisees more than tripled, the complaint alleges. The plaintiffs together operated 200 stores and are seeking as much as $1 billion in damages.

In its motion to dismiss the suit, McDonald's said the statute of limitations has expired for many of the claims. It also denied allegations of breach of contract, saying the agreements did not promise financial support.

"At its core, Plaintiffs' claim is that they should have been more successful. But success is promised to no one, and Plaintiffs' struggles — while regrettable — are simply not a basis for a claim against McDonald's," the company's filing said.

McDonald's is facing numerous lawsuits alleging racial discrimination. Earlier this month three workers at a McDonald's restaurant in Rock Island, Illinois, and Lakeland, Florida, filed a federal suit alleging managers called Black Cooks and cashiers "ghetto" and "lazy" and retaliated against them when they pushed back.

 

The company also is fighting a federal lawsuit filed in January by two Black senior executives, who alleged McDonald's had double standards for Black employees, purged senior leadership of African Americans and put onerous costs on Black franchisees.

Both that suit and the franchisees' suit allege the practices reflect a historic pattern at the company that was made worse after 2015 when Steve Easterbrook, a British businessman, took the reins of the company from Don Thompson, who was McDonald's first Black CEO.

Easterbrook was fired last year for having a romantic relationship with an employee and has since been sued by the company for lying about other romances, in an effort to claw back his severance. Chris Kempczinski, who served as President of McDonald's USA under Easterbrook, now runs the company.

McDonald's has denied allegations that it treats Black franchisees differently. The company said there has been consolidation in the number of franchises across all demographic groups over the past several years and that the overall representation of Black operators is "broadly unchanged."

It said cash flow at restaurants of Black operators has been improving and it is working on a case-by-case basis with owners in underperforming markets to understand what kind of relief could help.

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