State Rep. Joe Towns Jr. (D-Memphis) has asked the state treasurer to pull the state out of any investments in McDonald’s Corp. because of a class-action lawsuit that alleges the fast-food giant discriminates against minority franchise owners and former owners.
The lawsuit has gained 27 more ex-franchisees to bring the total to 77 named plaintiffs in the suit, originally filed by 52 black former franchisees on Sept. 1, according to a news release from attorney James L. Ferraro, who is representing the plaintiffs.
The plaintiffs include brothers Jim and Darrell Byrd, who own stores in Shelby and Fayette counties.
“I don’t believe we should be supporting corporations that deal from the bottom of the deck and discriminate against minority owners,” Towns said when contacted by The New Tri-State Defender.
“That is not fair. When you invest your hard-earned money in a major corporation you should expect equity and fairness at all times.”
The claims now include nearly 300 stores, with plaintiffs seeking compensatory damages that average between $4 million and $5 million per store, exclusive of punitive damages.
The plaintiffs allege McDonald’s sold itself as a recruiter and developer of Black talent, profited from its Black consumer base and maintained a two-tier system that pigeonholed unsuspecting Black owners and assigned them horrible locations guaranteed to fail, the release said.
Towns said he has sent a letter to Tennessee Treasurer David H. Lillard asking that the state take out any funds invested in McDonald’s and reallocate the money in companies “practicing good corporate citizenship.”
A media team representing McDonald’s had the following e-mail response.
“These allegations fly in the face of everything we stand for as an organization and as a partner to communities and small business owners around the world,” the e-mail reads.
It continued, “Not only do we categorically deny the allegations that these franchisees were unable to succeed because of any form of discrimination by McDonald’s, 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.”
Treasury spokesperson Shelli King said Lillard is drafting his response to Towns’ letter.
In an e-mail, she said the Tennessee Consolidated Retirement System asset portfolio has an estimated $255 million invested in McDonald’s Corporation, including stocks and bonds.
At the end of FY20, the market value of the TCRS fund was $52.4 billion. The amount invested in McDonald’s would represent .4 percent or less than half of one percent, of the overall portfolio, she said.
“I believe that this is a moment where Tennessee needs to take a stand for racial justice and reconsider our state’s investment in the McDonald’s Corporation,” Towns said in his letter to Lillard.
“We would like to see funds invested in McDonald’s to be divested and smartly placed in other corporations that are practicing good corporate citizenship.”
In a written statement, attorney Ferraro said the company has turned a blind eye to obvious racial problems while promoting its public image.
McDonald’s once boasted a high of 377 Black franchisees in 1998. That number now stands at 186, even though McDonald’s has increased its stores from 15,086 to 36,059. The cash flow gap for Black franchisees more than tripled from 2010 to 2019, per National Black McDonald’s Operators Association (NBMOA) data.
Plaintiffs’ average annual sales of $2 million was more than $700,000 under McDonald’s national average of $2.7 million between 2011 and 2016 and $900,000 under the national average of $2.9 million in 2019.
The lawsuit claims McDonald’s was ruthless in steering Black operators toward the oldest, most decrepit stores in the toughest neighborhoods routinely rejected by white franchisees.
This severely limited opportunities for expansion and growth, and far too often set in place a chain of events – low cash flow, decreased equity, debt and bankruptcy – that led to financial ruin, the release said.
The amended complaint was filed in the U.S. District Court for the Northern District of Illinois Eastern Division.