Samantha Lee/Business Insider
McDonald's black franchisees say the deck is not stacked in their favor.
- There are significant disparities between McDonald's black franchisees and the rest of the system, according to an investigation by Business Insider.
- Black franchisees' stores net $68,000 less a month, on average, than McDonald's overall franchisee average.
- McDonald's said it "is among our top priorities that all McDonald's franchises in all communities have the opportunity to prosper, grow and achieve their business ambitions." Last week, the company announced that it was creating a new role focused on franchisee diversity.
- Black franchisees shared similar stories detailing a lack of equal opportunities and a decline in black representation, with one franchisee recalling an incident earlier this year when a recipe that included Australian "coon cheese" was presented at a US conference.
- Read on for three franchisees' stories about their time at McDonald's, in their own words.
- Sign up for Business Insider's retail newsletter, The Drive-Thru, to get more stories like this in your inbox.
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Many black McDonald's franchisees feel the deck is stacked against them at the chain. And, they have the numbers to prove it.
Black franchisees told Business Insider that their stores net $68,000 less a month, on average, than McDonald's overall franchisee average.
According to documents from the National Black McDonald's Operators Association obtained by Business Insider, this cash flow gap more than doubled from 2012 to 2017, going from less than $24,600 to about $60,600.
Shayanne Gal/Business Insider
The cash flow gap is growing.
As McDonald's overall franchisee count has shrunk, the number of black franchisees at the company has declined significantly. There were 304 black franchisees at the company at the end of 2008, according to NBMOA documents. NBMOA documents showed that number had dropped to 222 by the end of 2017. Today, two franchisees said, black franchisees make up fewer than 200 of the roughly 1,700 franchisees at McDonald's.
Interviews with more than a dozen current and former franchisees and corporate employees, as well as internal documents from the NBMOA, the National Owners Association, and McDonald's, revealed systematic disadvantages faced by black franchisees, which were detailed in a Business Insider investigation published early last week.
McDonald's told Business Insider in a statement in late November that it "is among our top priorities that all McDonald's franchises in all communities have the opportunity to prosper, grow and achieve their business ambitions." Last week, the company announced internally that it was creating a new role focused on franchisee diversity, according to leaked documents viewed by Business Insider.
"These efforts are rooted in our core belief that diversity and a vibrant, inclusive and respectful McDonald's makes us stronger," McDonald's said in its late November statement. "McDonald's is proud to create opportunities for entrepreneurship, economic growth and mobility in communities across the country."
Three franchisees - one current and two who left the company within the last two years - who spoke with Business Insider agreed to go on the record to share their experiences at the chain. They shared similar stories of struggles with costs, a lack of equal opportunities, and a decline in black corporate leadership at McDonald's.
Jim Byrd, who owns two McDonald's locations in Tennessee, said that he was shocked when a recipe using "coon cheese" was presented at a US franchisee meeting earlier this year. While coon cheese is a common brand in Australia, Byrd said the incident helped highlight for him the current lack of representation at McDonald's.
"You don't really want to realize that the deck is not really stacked in your favor," Byrd said. "It's a bitter pill to swallow."
Franchisees also spoke of things that they loved about their time at McDonald's.
"You always felt like a family. I always felt like I could call my franchisor and ask questions," said Juneth Daniel, who sold her locations in 2018.
"That got lost," Daniel added. "It became all about the shareholder."
Here are three black franchisees' stories in their own words, edited for length and clarity. Business Insider's additions are in italics.
Jim Byrd, franchisee from 1989 to today
Jim Byrd is a McDonald's franchisee who owns two stores in Tennessee.
My first store was in 1989. It was a brand new store in Memphis, Tennessee. I was, of course, very proud to be successful, to be able to open the store. When you start ... you're busy doing what you're supposed to do. You're busy trying to get a business going and trying to hire people to train. And it probably wasn't until about the early '90s where I started to hear about other situations and the different fights. And I would go to the NBMOA meetings and conventions and it just started to be quite enlightening.
Shayanne Gal/Business Insider
The cash flow gap between black franchisees and McDonald's average franchisee.
Every time you would go to the meetings and you look at the numbers, those gaps didn't seem to be any better. And in fact, now the gaps seem to be widening.
It's been a systematic decline, not only of cash flow and sales, but the number of black operators started to dwindle.
Byrd said that he was worried that he could face retribution from McDonald's for speaking out. However, he said he felt the need to take action after seeing how he and other franchisees were treated.
You're going to get attention. They're going to come and inspect your stores. Any deficiencies that you could have will be exploited or used against you.
Any deficiencies that you could have will be exploited or used against you.
Over the years I've seen it all, at least from the operators' side. Talking to some former employees, they've been directed and instructed to do certain things.
The biggest reprisal is you just never have the opportunity to get opportunities. You're excluded from it. I know people personally who over the years have spoken out. When new stores became available or growth opportunities, they just weren't included in that process.
McDonald's said in its November statement: "Building a robust and transparent marketplace for the buying and selling of restaurants that maximizes the potential for all franchisees to grow is a top priority. McDonald's is a fair and equitable company for all people, including people of color, and uses data and facts to support a robust process that drives decisions regarding restaurant sales."
Byrd said disparities between the treatment of black and white franchisees remain, and that it is "humiliating" that black franchisees feel they have to beg for equal treatment.
Life is not fair. I've known people who have had a lot of trouble, who McDonald's has stepped in to help. It seems like it's always a one-off. But, you just believe that it can be right and you try to make your stores better.
You try to do all the things that you're supposed to do. All franchisees and McDonald's are held theoretically to that same standard, so that you spend a lot of time just doing what you're supposed to do. And you don't really want to realize that the deck is not really stacked in your favor. It's a bitter pill to swallow.
While McDonald's says the decline in black leadership has been broadly proportional following recent restructuring, Byrd says that changes in McDonald's leadership in recent years contributed to black franchisees' problems at McDonald's.
Earlier this year, Byrd says, he received a text from another operator who was attending a marketing meeting where a recipe for a burger made with "coon cheese" - a popular kind of cheese in Australia - was presented. Chris Kempczinski, then the head of the US business, who became McDonald's CEO in November, apologized for the incident at the time. McDonald's declined to provide Business Insider comment on this specific incident.
It's quite hurtful. But, that's a situation where there are apologies, but you just kind of wonder why was it even presented? It was just so overlooked. If you had the right people in the room that were empowered to speak up, a lot of these things wouldn't be the way they are.
Business Insider
A text sent to Byrd.
I got a picture of it from an operator. It was kind of downplayed like, oh, that's just a cheese that's in Australia, no big deal. But then when you get the president of the company to stand up and apologize - it is a big deal.
It makes you start to look at or wonder about the leadership and who's in the room. You start looking around and there's no representation.
Byrd says that he is starting to think about what comes next for him at McDonald's after 30 years in the business, as the chain's franchisee count shrinks.
I've been doing this for a good number of years. I have a physical investment, emotional investment. My children have grown up with me being in this business. Overall it's been good. ... You don't want to hurt the goose that laid the golden eggs. We just need some more eggs.
Byrd says that one of his highlights was watching his brother become an owner-operator, as well as all that comes with the daily life of running a McDonald's restaurant.
I've always enjoyed it - the operation. You watch that young person come in and get that Happy Meal. Or, you just see somebody eating lunch. I've just stepped out of the store and you just watch the guy eat that good, juicy quarter-pounder.
There is a lot of good that happens every day. You watch people that grow. People that start out crew and next thing you know, they're doing really good and they're managing your stores.
I had one young man who was one of the first employees I hired back in '89 and now he's had his three children work for me over time. Go to high school, go to college. His youngest son just started. He's 16 years old.
Ken Manning, franchisee from 2001 to 2017
Ken Manning owned 16 McDonald's locations before selling them in 2017.
We've made some great strides, but to see the number of African American owners and operators and the rates that they have decreased, that should be very alarming - particularly when, for a lot of folks, this is their livelihood and this is their life.
Manning and other franchisees said that they and other black franchisees have dealt with harsher treatment from McDonald's operational consultants.
If I'm a consultant and for whatever reason I go out to an inner-city store or an African American store, and I say I don't like the way it feels, I don't like the way it looks - they grade harder, no question. We know they grade harder because we see our counterparts' stores and we say, well, mine doesn't run any different than theirs.
If I have stores in the inner cities, the likelihood of it running poorly is probably higher than if I'm in Maine in the suburbs. Not that it doesn't happen, but it's very tough to operate stores in inner cities or in some of these rougher neighborhoods.
If you come out and you grade me and I fail now, I'm now marked as being a bad operator. ... Sometimes it is the operator, sometimes it is the store or the area. We have said for many, many years as African American operators, there are two standards. There's one for us, and there's one for our general market operators.
According to McDonald's, consultants' routine business reviews aim to inform operators about where they stand and how to better their chances for growth. The company did not respond directly to multiple franchisees' claims of harsher restaurant visits, but emphasized that these concerns do not represent the chain's 10 regions and 1,700 franchisees.
As recently as 2017, they failed me four times. An operator went after a piece of wallpaper, peeling off a piece of wall and she said, well, you'll need repair. A piece, not the whole wall. And then I would tell them, well wait a minute, y'all own a store down the street? The whole store hasn't been touched in 50 years!
I said something about a decision a vice president made about awarding a store. Well, no sooner than I questioned him ... I got a visit on a Friday night in two different stores when I had been there two years and never had a visit on Friday night. That seemed to be very odd. And then I got another visit when I complained again, on Christmas Eve. And that was odd.
I called back to McDonald's and I said, look man, y'all are not going to bully me or step on people because you think you can. I gave it to him. I said, y'all need to stop that crap. I said that I will sell the restaurants, retire, you don't have to go through your little exercise.
I clearly said to them, you can write all the bad stuff up in my file all you want. Failure is not anything for me other than opportunity to do better.
I think a lot of times they tend to try to take your humanity and your dignity and label you. When people start to hear what happened, people start to look at you differently or treat you differently. It's a very weird dynamic. I will tell you, socially, the fabric of this country has spoken to that for years against African Americans. If you tell a kid he's stupid or he's ugly, what do you think the kid is going to do and think the rest of his life?
I will tell you, socially, the fabric of this country has spoken to that for years against African Americans. If you tell a kid he's stupid or he's ugly, what do you think the kid is going to do and think the rest of his life?
Soon after Steve Easterbrook started as CEO in 2015, he made a comment that Manning interpreted as saying that diversity among franchisees was unimportant. McDonald's declined to comment on this incident when reached by Business Insider.
When the CEO of the company says diversity doesn't matter, that's a real stinger. And then he comes to our meeting and tries to clean it up by saying, well what he meant was the best operator gets the store and it shouldn't be based on diversity.
Well, in America that's never been the case. Programs to help underserved has always been in place. And when you're trying to get an extra piece of the pie, it's really weird how the folks who have all of the pie complain that they have to give up some of the pieces.
If we thought it was fair, we wouldn't have to have a lot of these parity deals and programs in place to level the playing field … We know as African Americans that we get up, we work harder, we're a lot smarter, we do things a lot better. But we're not given the same opportunities.We know as African Americans that we get up, we work harder, we're a lot smarter, we do things a lot better. But we're not given the same opportunities.
We want to send our kids to Harvard and private school too.
Manning says incidents such as inappropriate comments being made by a corporate vice president and new stores near black franchisees' existing locations being awarded to white franchisees made some black franchisees lose faith in McDonald's.
Those are the kinds of lack of trust that causes you not to believe or trust that they're looking out for your best interest.
These things are not things that have happened just yesterday. These things are historical in a lot of cases. When we meet every four or five, six times on this issue and you meet year over year and nothing ever changes, then that becomes the definition of insanity, doing the same thing over and over and over, and you see no change or very little change.
In 2017, Manning sold his locations and ended his time as a franchisee.
I had made a personal decision to say, "Hey, I'm not going to fight with McDonald's." I made a decision to remodel these restaurants. It did not work. I made a decision to buy these restaurants. The deal with not that great of a deal. For me, there were opportunities to restructure it to make me hold. When I started to see that was not going to happen, I just said, no worries. I'll sell them the restaurant and that's what I did.
I had a great career and I loved every bit of it. But at the same time, that doesn't mean that if I saw something that was unfair and not right, that I was just going to say, "Hey, I've got mine." I've got to fight.
Juneth Daniel, franchisee from 2008 to 2018
Juneth Daniel sold her three locations in Alabama in 2018.
I was in McDonald's for 20 years overall. And for 10 years, I was a franchisee. I was a franchisee in the Alabama market, which is a part of the Atlanta region. If you know the history, the Atlanta region itself was the region of McDonald's where the most black operators reside. I don't believe that is true any longer because, as I was exiting the system, a lot of people were exiting the system.
I came up at McDonald's. I started as a shift manager. I'm one of those people you would say have ketchup in your veins.
I'm one of those people you would say have ketchup in your veins.
I grew up in McDonald's. I was what is called second generation, which means that my family - which was my stepmother at the time - started a McDonald's. When my parents divorced, I then went to work for a franchisee and that's how I stayed in the system.
McDonald's changed when they let go of [former CEO] Don Thompson. That changed the whole dynamics of McDonald's overall, because now McDonald's isn't the same place. It wasn't about the franchisee and the partnership at McDonald's. It's more about making shareholders' pockets fatter.
When Daniel was a McDonald's franchisee, she said, she struggled to turn a profit at her stores in Selma and Union Springs, Alabama.
Historically, we're always taking on the worst stores. They had the lowest cash flows. Not cash flow issues. They had serious problems with having to be staffed, if they weren't being robbed. But you want into the system, you want it to be a McDonald's owner-operator. So, you took the bad to hopefully get to a better place.
You took the bad to hopefully get to a better place.
You're basically set up in a situation where you had the highest issues. That store in Selma, I was robbed at least three or four times in that store, one time by shotgun. My store in Union Springs, same thing. My store in Montgomery, though it was in a good location, it had the highest rent of my all my stores. … I owned it for 10 years. I never really made any money on that store ever.
As I got more involved, in going to operator meetings and going to NBMOA meetings, I realized that it wasn't the norm. We always had that cash flow gap. Always. They put those numbers on the screen. You're always amazed by, well, okay, how can they ask so much? I have so little and I still can't make ends meet, and nobody sees a problem with it, you know? It made you feel, as an operator, like nobody cares. Like you are out on the island on your own. You had this big massive franchisor, but they didn't care whether you stayed in business or not.
In 2017, McDonald's unveiled its "Experience of the Future" growth plan, which involved a focus on tech and remodeling restaurants. These remodels could cost up to $750,000 a location, which Daniel said she could not afford, even with McDonald's covering 55% of costs.
I went to Chicago and they showed us the McDonald's of the future. Most operators, they were just like, oh my God. I think in that meeting operators were already preparing to sell their stores. It was operators having conversations, like, this is my time to check out. Because just costs alone - they want you to redo roofs, and they want you to redo the facade of the store, and then every 10 years they want you to redo the tiles in the store.
That's a lot of costs to take on for floors that the average customer doesn't care about. That was really it for me. It was kind of like, I don't know that I can do this anymore.
And then the pressure from the consultant teams. Because when you're not liked and McDonald's by regional staff, oh, they make it very hard for you. ... I kept pushing back. In the meeting, I would push back on things that didn't make sense to me. And when you become that person that's not going with the norm, they start visiting you more often, grading you harder and just making it hard for you to be able to want to continue.
Shayanne Gal/Business Insider
McDonald's franchisee count is shrinking.
With 95% of locations run by franchisees, McDonald's says that it has an economic incentive for all restaurants to succeed. As of this year, over 48% of franchisees own between one and five restaurants, according to the company. However, the number of franchisees overall has declined as franchisees' average store count has grown in recent years.
What basically changed for you as the operator was that you couldn't be a small operator anymore. The whole McDonald's concept that Ray Kroc had started was that the average Joe can come in and own your own business. That didn't matter anymore at McDonald's.
I couldn't afford it. So, McDonald started to change up consultants. A consultant grades you, makes sure you meet the McDonald's standards. So, I started to get consultants that would not work with me, but work against me and those consultants applied too much pressure. Because the whole idea was to get me out - because I was a small operator. I only had three stores. In order to be able to meet the demands of the new McDonald's, you have to have 10 or more stores. They weren't going to give me 10 or more stores.
Because I couldn't get the help I needed, that kind of forced me to have to sell my stores for basically nothing. I basically gave my stores away because at that point there was nothing I could do, I had to get out.
Daniel said that in leaving McDonald's, she felt as if she had lost her family.
I think what got lost at McDonald's is the three-legged stool, the vision of us all working together and the family. Because, McDonald's is a family restaurant.
You always felt like a family. I always felt like I could call my franchisor and ask questions. If I have a problem I can go to them. That got lost. It became all about the shareholders.
- Read more about McDonald's black franchisees:
- McDonald's black franchisees are fighting to earn as much as their white counterparts, as dozens leave the company they once considered family
- The inside story of how McDonald's ex-CEO's push to modernize the chain left black franchisees behind
- McDonald's new CEO is tackling the fast-food giant's reputation problem from the inside
- McDonald's creates new 'vice president of operator diversity' position after backlash from black franchisees