McDonald's says it has made more Black millionaires than any other company. But Black franchisees say they face systemic inequality.

McDonald's was faced with an internal settlement of the race.
Samantha Lee / Business Insider
At the end of 2019, McDonald's Black franchisees totaled $ 68,000 less per month than the average McDonald's franchisee. The gap has more than doubled in recent years.
While the differences between black and white franchisees continued in 2020, some insiders say McDonald's is making new efforts to address inequalities.
"McDonald's has created more millionaires in the black community than probably any other company on the planet, but there is still a lot to do," CEO Chris Kempczinski told CNBC in early June. "We are certainly not perfect."
McDonald's recently met with black franchisees to discuss "aggressive measures to eliminate the differences between black franchisees".
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McDonald's has taken a strong stance against racism in recent weeks.
The fast food giant announced in early June that it would donate $ 1 million to the National Urban League and the National Association for the Advancement of Colored People (NAACP). An ad was released mourning the death of blacks killed by the police or in racist violence. Joe Erlinger, head of McDonald's US business, said in an internal meeting that "silence is not an option".
However, a recent comment by the company's CEO raised the eyebrows of some current and former black franchisees who spoke to Business Insider.
Related: How McDonald's menu items look around the world
"We probably have - McDonald's has created more millionaires in the black community than probably any other company on the planet, but there is still a lot to do," CEO Chris Kempczinski told CNBC earlier this month. "We are certainly not perfect, we talk to our franchisees about how we can continue to attract different franchisees."
A recent franchisee who was granted anonymity to speak freely called the statement "inflammatory, misleading and pandering".
At the end of last year, Black McDonald's Business Insider franchisees said their businesses earned an average of $ 68,000 less per month compared to the average McDonald's franchisee. This cash flow gap has been a major problem for owners and operators of McDonald's Black for decades, and this gap has more than doubled in recent years.
In 2012, the gap between averages was less than $ 25,000. In 2017, the cash flow gap was approximately $ 60,600, according to the National Black McDonald's Owners Association. Business Insider could not get official updated numbers for 2018 or 2019, but two franchisees say the gap has grown to around $ 68.00 since then
McDonald's cash flow gap.
Shayanne Gal / Business Insider
In December, McDonald's said in a statement that "one of our top priorities is that all McDonald's franchises in all communities have the ability to thrive, grow, and achieve their business ambitions." The company declined to comment further on the topic or changes the fast food giant made this year.
According to internal documents and franchisees who spoke to Business Insider, the differences between black and white franchisees continued in 2020. However, insiders say that McDonald's is finally making some efforts to address inequalities.
McDonald's Black franchisees have been treated as second class citizens in the past.
A study by Business Insider found that McDonald's Black franchisees earned hundreds of thousands of dollars less than the system-wide average.
"African American franchisees have always struggled to be in a strange position where they were very successful business people who ... became very rich with the system," said Marcia Chatelain, author of "Franchise: The Golden Bows in Black America ".
"But they were second class citizens within the larger McDonald's structure," she said.
McDonald's cash flow gap.
Shayanne Gal / Business Insider
Black franchisees are more likely to do business in areas where sales are lower and costs and security are higher, also because they are more likely to be in black and Latin American communities. While franchisees' personal preferences mattered, some said McDonald's made it difficult for black franchisees to buy locations in higher-income areas.
"Historically, we always do the worst business," former Junde Daniel McDonald's franchisee told Business Insider. "They had the lowest cash flows. ... They had serious problems getting filled - unless they were robbed. But you want in the system, you want it to be a McDonald's owner-operator. So you took that Evil to hopefully get to a better place. "
Some McDonald's insiders also said that black franchisees were rated harsher when business consultants visited. A former consultant who left McDonald's in 2016 said she was pressured to inspect black franchisees 'restaurants far more often than white franchisees' locations.
"As an African American operator, we have said for many, many years that there are two standards. There is one for us and one for our general operator," said Kenneth Manning, a former McDonald's franchisee.
McDonald's did not respond directly to allegations of tougher restaurant visits, but emphasized that the claims do not represent the chain's 1,700 franchisees.
Count McDonald's franchisees.
Shayanne Gal / Business Insider
McDonald's shift to a business model where fewer franchisees have more locations - a trend in the fast food industry - has also disproportionately displaced black franchisees. In 2007, black franchisees made up 304 of the chain's 2,270 franchisees, or 13.4%. This emerges from a presentation by the National Black McDonald's Operators Association (NBMOA) from 2018. At the end of 2017, that number had dropped to 222 or 12.5% ​​of the chain's 1,781 franchisees in the United States.
Read More: McDonald's black franchisees struggle to earn as much as their white counterparts as dozens leave the company they once considered family
McDonald's inequality has been highlighted
McDonald's Corona Virus Drive-Through
Catherine Ivill / Getty Images
Black franchisees have been discussing inequalities within the system for years. However, tensions increased in 2019.
"In general, the process of treating African-American owners is moving backwards," said NBMOA CEO Larry Tripplett in a letter to McDonald's executives in March 2019 that Business Insider had received.
"Without our own fault, we are lagging behind the general market in all our measures," continued Tripplett.
In November, McDonald's CEO Steve Easterbrook was abruptly pushed out of the company after investigating the relationship between the executive and a colleague. With Kempczinski as the new CEO and Erlinger as the President of the United States, the new leadership team tried to improve McDonald's' image - including fighting racist claims by franchisees and executives.
Read More: In McDonald's efforts to counter racial allegations and erase the "party culture" of former top executives.
Two days after Business Insider published its investigation into McDonald's Black franchisees, the company announced that it would create a new role that focused on the diversity of franchisees. However, public criticism continued in the new year.
In January, two Black McDonald's executives filed a lawsuit alleging that they face discrimination, a hostile work environment, and "irrational, hideous, and cruel" retaliation at work. In the complaint, executives said that black McDonald's franchisees were "armed to varying degrees."
In February, Business Insider reported that a group of minority franchisees had hired a law firm to investigate allegations of discriminatory practices. James Ferraro, the firm's president and lead attorney for the investigation, declined to comment on Business Insider.
Erlinger recently said internally that he had tried to surround himself with various executives and found that 100% of the sales representatives are now colored people. The company has also internally highlighted efforts to further diversify its suppliers and corporate headquarters, including establishing recruitment programs at historically black colleges and universities.
In the months since the Erlinger and Kempczinski promotions, numerous black franchisees have met with McDonald's headquarters to discuss their cash flow and renegotiate the rent, a source with knowledge of the situation. According to a February NBMOA template viewed by Business Insider, franchisees were urged to press for permanent rent cuts at a meeting with the company.
According to a knowledgeable source, the cash flow for black franchisees began to improve in the fourth quarter of last year and continued to improve compared to the average franchisee cash flow by 2020. However, as Kempczinski said in his CNBC interview, the company admits that much remains to be done.
In early June, Kempczinski and Erlinger met with the NBMOA after protests related to George Floyd's death. The two main businesses were McDonald's relationship with black franchisees and "aggressive measures to eliminate the differences between black franchisees".
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