McDonald's accused of discriminating against black franchise owners in lawsuit

• Popular fast food franchise McDonald's is being sued by former black franchise owners.
• This is on the basis that the franchise is allegedly discriminatory.
• McDonald's has, however, dismissed the allegations.

McDonald's Corp has been sued by 52 black former franchise owners who accuse the fast-food giant of racial discrimination by steering them to depressed, crime-ridden neighbourhoods and setting them up for failure.

In a complaint seeking up to $1bn in damages, the plaintiffs said McDonald's has not offered profitable restaurant locations and growth opportunities to Black franchisees on the same terms as white franchisees, belying its public commitment to diversity and Black entrepreneurship.

In a statement on early on Tuesday, McDonald's denied the charges that the franchisees were unable to succeed due to discrimination.

"We are confident that the facts will show how committed we are to the diversity and equal opportunity of the McDonald's system, including across our franchisees, suppliers and employees", the statement added.

Stores

The complaint said McDonald's saddled those suing the company under its standard 20-year franchise agreements with stores requiring high security and insurance costs, and whose $2m average annual sales from 2011 to 2016 were $700,000 below the nationwide norm. Bankruptcy often resulted, they said.

"It's systematic placement in substandard locations, because they're Black," the plaintiffs' lawyer Jim Ferraro said in a phone interview. "Revenue at McDonald's is governed by one thing only: location."

The plaintiffs are suing in Chicago federal court five weeks after McDonald's updated its corporate values, pledging a greater focus on diversity.

Chief Executive Chris Kempczinski told CNBC in June that diversity was "critically important" and needed to touch "every single aspect" of its business.

He also defended McDonald's record, saying the Chicago-based company had "created more millionaires within the Black community than probably any other corporation on the planet, but there's still work to do."