A black franchisee claims McDonald’s racially discriminated against him by tricking him into operating restaurants in black neighborhoods and forcing him to downsize his store base years later after unfairly rating his places.
Herbert Washington, a former Major League Baseball player and the largest black franchisee in the U.S. at one time, operates 14 McDonald’s restaurants, up from 23 in 2017. He filed a lawsuit against the fast-food giant in Ohio federal court on Tuesday. It follows two lawsuits against racial discrimination with similar allegations by current and former McDonald’s franchisees.
“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 CNBC offered a statement saying Washington was facing business challenges and that the company had offered it several opportunities to address these issues. The company also said it had invested ‘significantly’ in its organization.
“This situation is the result of years of mismanagement by Mr. Washington, whose organization does not meet many of our standards in terms of people, operations, hospitality and reinvestment,” the company said in a statement. “His restaurants have a public record of these issues, including health and sanitation issues in the past and of the largest number of complaints in the country.”
A separate complaint lodged in September by 52 black operators claims that between 2011 and 2016, their locations yielded about $ 700,000 less than the national average for its franchisees. Washington’s complaint alleges that in 2018 McDonald’s told Black franchisees that it was this cash flow gap between Black and white operators. According to the lawsuit, the plan was to solve the problem that white franchisees gave more of the low volume places operated by black franchisees.
Washington started as a McDonald’s franchisee in 1980. Despite living most of his life in Michigan and having no affiliation with Rochester, New York, the company allegedly encouraged him to buy a restaurant there in a predominantly black neighborhood, which left him gave no other options to a store.
After about two decades as a franchisee in Rochester, Washington operated five restaurants. According to the complaint, white franchisees in the area may expand much faster than Washington, which has only been allowed to buy places in low-volume neighborhoods.
In one example, Washington entered into an agreement in the early 1990s to buy restaurants in the suburbs of Rochester from a White operator. McDonald’s allegedly blocked the sale and instead sold the places to a White owner.
In 1998, Washington sold its restaurants in New York to buy 25 seats at a White operator with locations in Ohio and Pennsylvania. The acquisitions made him the largest black franchisee in the US
Over the next decade, Washington bought more and more places in Cleveland. The restaurants were usually older and in mainly black neighborhoods with a lower sales volume.
Washington, for example, added three restaurants on Cleveland’s East Side to its store base after the field president’s vice president allegedly asked him to step in because the previous owners had problems. When he took over, McDonald’s immediately increased the rent, according to the lawsuit. When Washington protested, the company reportedly told him he could deliver a better volume than anyone else.
However, according to the complaint, McDonald’s will not approve Washington to operate locations on the West Side or in the suburbs of Cleveland, which tend to have more white residents. Washington claims he has complained to the company over the years about the issue.
In 2011, a place in the vicinity of University Heights was awarded. The restaurant was near a mall with a Whole Foods, and the community was about 70% white, according to census data cited in the complaint.
The deal was finalized, and Washington chose the equipment and decor for the venue. But then McDonald’s allegedly intervened and awarded the restaurant to a white franchisee. According to the complaint, Washington complained to McDonald’s chief operating officer, informing him that the White franchisee was racist, to which the executive replied, “I know.”
In 2015, Steve Easterbrook became the company’s CEO and replaced the first black CEO, Don Thompson. Among the brothers of Easterbrook and the current CEO, Chris Kempczinski, who first served as head of the U.S. division, McDonald’s ads stop trying to reach black consumers, according to Washington’s complaint.
Franchise agreements prevented Washington from reaching out to those customers himself because he was prohibited from using advertisements or promotional materials that were not approved by McDonald’s.
“In other words, he has no recourse to the company’s decision to stop advertising for a large part of its customer base, and the consequent effect on its sales,” the complaint reads.
In 2017, McDonald’s told Washington that it was no longer eligible to continue expanding its store base, which it hoped would reimburse the franchisor’s costs. According to the complaint, nothing has changed in the way he runs his restaurants, which was still profitable.
Washington claims that McDonald’s has subjected its locations to ‘targeted and unreasonable inspections and harsh ratings’ as a pretext to force it to sell. To expand again, Washington had to sell some of its locations by a set deadline.
The company initially proposed buying four businesses in a neighborhood that was 90% white. The big restaurants are helping Washington pay for the costly shopping renovations American restaurants are undergoing, such as the addition of digital menus and self-order kiosks. Washington agrees with the plan, but McDonald’s rejected the acquisition.
Meanwhile, McDonald’s continues to insist that Washington sell some of its restaurants by a set deadline before allowing them to expand again. All the approved buyers McDonald’s offered to Washington for those restaurants were White. The company also put pressure on him to keep up with the renovation of the store, including for the places he had to sell for.
“McDonald’s demanded that Mr. Washington subsidize his own death by throwing resources into these properties while it was snatched from his hands,” the complaint reads.
While Washington struggled to find interested buyers who would pay a fair price for the low-volume places, McDonald’s told him to package the restaurants with his large-volume restaurants to make them more attractive instead of just the places to give.
The white franchisee who bought three of Washington’s Cleveland restaurants offered $ 3 million to McDonald’s incentives to buy the locations. Washington never offered incentives or financial support when he bought or ran those restaurants.