Restaurants

McDonald's black franchisees are leaving the chain as cash flow disparity between them and white counterparts grows

Key Points
  • McDonald's black franchisees are choosing to leave the chain, Business Insider reported Monday. In 2008, there were about 304 black franchisees at the chain and in 2017, there were 222.
  • The average cash flow of black franchisees is much less than the average cash flow of all of the chain's restaurants, the report said, citing franchisees, former corporate employees and internal documents viewed by the website.
A customer pulls into a McDonald's restaurant in Shepherdsville, Kentucky.
Luke Sharrett | Bloomberg | Getty Images

McDonald's black franchisees are choosing to leave the chain as the disparity in performance between their restaurants and their white counterparts grows, Business Insider reported Monday.

The average cash flow of black franchises is much less than the average cash flow of all of the chain's restaurants, the report said, citing franchisees, former corporate employees and internal documents viewed by Business Insider.

The gap has grown over time. In 2012, it was less than $24,600 per month and in 2017, it was about $60,600, according to documents from the National Black McDonald's Owners Association, or NBMOA, cited by Business Insider.

Some African American franchise owners are leaving the system. In 2008, there were about 304 black franchisees at the chain, but by 2017, there were 222, according to documents from NBMOA.

"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," McDonald's said in a written statement to CNBC. "These efforts are rooted in our core belief that diversity and a vibrant, inclusive and respectful McDonald's makes us stronger. McDonald's is proud to foster opportunities for entrepreneurship, economic growth and mobility in communities across the country."

Business Insider's report said that black franchises are much more likely to be located in places where sales are lower and costs like security are higher.

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"In general the trajectory of the treatment of African American Owners is moving backwards," Larry Tripplett, the CEO of NBMOA, said in a letter obtained by Business Insider to east and west zone presidents in March. "Through no fault of our own we lag behind the general market in all measures."

McDonald's reviews data from franchisees, including financial qualifications, where they live and whether they are able to meet corporate standards. According to Business Insider, multiple franchisees said they were unable to buy stores with higher cash flows due to their financial situations or other factors.

Another concern is a decline in the black leadership at the company. McDonald's lost many of its black leaders during the 2018 restructuring of its U.S. field organization, Business Insider reported.

McDonald's told CNBC that "the decrease in African American franchisees is also broadly proportional to the decrease in the overall number of franchisees at McDonald's over the last several years."

In November, Chris Kempczinski took over as the company's CEO after McDonald's fired its former CEO Steve Easterbrook for having a consensual relationship with an employee, which violated its policy.

On the day of Easterbrook's departure, Tripplett said in his NBMOA letter, "We are cautiously optimistic about some of the results we are beginning to see."

In a written statement from Tripplett shared with CNBC, he said:

"Working in collaboration with McDonald's, we both are committed to delivering world-class hospitality, operational excellence, and increasing guest visits. We are working together to make the McDonald's brand shine by fully integrating African Americans at all levels. We both recognize that when we move together; we move further. And we are encouraged by our progress."

Read the full story from Business Insider.

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