A black franchisee claims that McDonald’s racially discriminated against him, forcing him to run low-volume restaurants in black neighborhoods and forcing him to downsize his store years later, after he unfairly classified his locations.
Herbert Washington, a former Major League Baseball player and the largest black franchisee in the U.S. chain at the time, operates 14 McDonald’s restaurants, up from 23 in 2017. He filed a lawsuit against the fast-food giant in the courtyard on Tuesday. federal state of Ohio. There are two trials of racial discrimination with similar allegations by the Black Current and former McDonald’s franchisees last year.
“When I stood up for myself and other black franchisees, McDonald’s began to dismantle my life’s work, forcing me to sell one store after another to white operators,” Washington said in a statement.
McDonald’s USA said it was still reviewing the complaint, but offered CNBC a statement saying Washington was facing trade challenges and the company offered him multiple opportunities to address the issues. The company also said it had invested “significantly” in its organization.
“This is the result of years of mismanagement by Mr. Washington, whose organization has failed to meet many of our standards of people, operations, guest satisfaction and reinvestment,” the company said in a statement. “Its restaurants have a public record of these issues, including past health and sanitation issues and some of the largest volumes of customer complaints in the country.”
A separate complaint filed by 52 black operators in September claimed that their locations generated about $ 700,000 less than the national average for its franchisees between 2011 and 2016. Washington’s complaint claims that McDonald’s told black franchisees in 2018 that it would close this cash flow gap between Black and White Operators. According to the lawsuit, the problem-solving plan involved granting white franchisees more low-volume locations that were operated by black franchisees.
Washington began as a McDonald’s franchisee in 1980. Despite living in Michigan for most of his life and having no ties to Rochester, New York, the company allegedly pushed him to buy a restaurant there in a predominantly black neighborhood, offering and other options for a store location.
After about two decades as a franchisee in Rochester, Washington operated five restaurants. According to the complaint, white franchisees in the area were allowed to expand much faster than Washington, which was only allowed to buy locations in small neighborhoods.
In one example, Washington entered into an agreement in the early 1990s to buy restaurants in the Rochester suburbs from a White operator. McDonald’s allegedly blocked the sale and instead sold the locations to a white owner.
In 1998, Washington sold its restaurants in New York to buy 25 locations from a white operator with locations in Ohio and Pennsylvania. The acquisitions made him the largest black franchisee in the United States
Over the next decade, Washington continued to buy more locations in Cleveland. Usually, the restaurants were older and in predominantly black neighborhoods, with lower sales volumes.
For example, Washington added three Cleveland’s East Side restaurants to its restaurant after the vice president of the field office asked him to intervene because the previous owners were in trouble. When he took over, McDonald’s immediately raised rents, according to the lawsuit. When Washington protested, the company told him it could run smaller volumes than anyone else.
However, according to the complaint, McDonald’s would not approve of Washington operating locations on the West Side or in the suburbs of Cleveland, which tend to have more white residents. Washington says it has complained to the company over the years about the problem.
In 2011, he received a location in the University Heights neighborhood. The restaurant was said to be near a mall that included Whole Foods, and the community was about 70 percent white, according to census data cited in the complaint.
The deal was finalized, and Washington selected the equipment and decor for the location. But then McDonald’s intervened and awarded the restaurant to a white franchisee. According to the complaint, Washington complained to the chief officer of Operation McDonald’s and told him that the White franchisee was racist, and the executive replied “I know.”
In 2015, Steve Easterbrook became the company’s chief executive, replacing his first black executive, Don Thompson. Under the leadership of Easterbrook and now CEO Chris Kempczinski, who first served as head of the US division, McDonald’s ads have stopped trying to reach black consumers, according to Washington’s complaint.
The franchise agreements prevented Washington from reaching these customers itself because it was not allowed to use advertisements or promotional materials that were not approved by McDonald’s.
“In other words, he had no recourse to the company’s decision to stop advertising in a large part of its customer base and the resulting impact on its sales,” the complaint states.
In 2017, McDonald’s told Washington that it was no longer eligible to further expand its store base, which it hoped to do to offset the costs of store renovations requested by the franchisor. According to the complaint, nothing has changed about the way he ran his restaurants, which were still profitable.
Washington claims that McDonald’s subjected its locations to “targeted and unreasonable inspections and harsh qualifications” as a pretext to force it to sell. In order to expand again, Washington had to sell some of its locations by a set deadline.
The company initially proposed to buy four locations owned by the company in a 90% white neighborhood. High-volume restaurants would help Washington pay for expensive store renovations facing U.S. restaurants, such as the addition of digital menu boards and self-ordering kiosks. Washington agreed to the plan, but McDonald’s rejected the acquisition.
McDonald’s, meanwhile, continued to insist that Washington sell some of its restaurants by a deadline before it allowed it to expand again. All authorized McDonald’s buyers in Washington for these restaurants were white. The company also put pressure on him to keep up with store renovations, including the locations it was asking him to sell.
“McDonald’s demanded that Mr. Washington subsidize his own disappearance by pouring resources into these properties as they were snatched from his hands,” the complaint said.
While Washington has struggled to find interested buyers who pay a fair price for low-volume locations, McDonald’s has told it to pack those restaurants with its high-volume restaurants to make them more attractive instead of just selling the locations.
Frenchman White, who bought three of Washington’s Cleveland restaurants, was offered $ 3 million in incentives from McDonald’s to buy the locations. Washington was never offered incentives or financial support when it bought or ran these restaurants.