McDonald’s has a Bigger Problem than Defending its Lawsuit Versus Black Franchisees

(McDonald’s corporate headquarters, image courtesy of CNBC)

McDonald’s clearly doesn’t see it yet but in its zeal to defend itself in different lawsuits filed by Black franchisees about alleged discriminatory and exploitive practices, it is talking down to and possibly gaslighting minority owners.

This reactive strategy will only serve to escalate media scrutiny, invite more investigative reporting and quite likely confirm beliefs in the Black community about alleged predatory inequality towards people of color.

A $1 billion class action suit was filed in August by 52 former franchisees. Now, another suit has been filed by two brothers, James Byrd, Jr. and Darrell Byrd.

The lawsuits have alleged that McDonalds restricted plaintiffs to stores in poor or crime-ridden areas of town, with lower sales and higher costs, which included higher security and insurance expenses, according to Reuters. Other claims by both former and current owners are of “harsher inspections and renovation requirements.”

These particular stores and opportunities were labeled by some franchisees as ‘financial suicide missions.’”

Business Insider investigated in 2019 and the findings, drawn from 2017 data from the National Black McDonald’s Owners Association, show the average company store location earned $60,000 more per month on average than those locations of Black franchisees.

McDonald’s is offended and must realize how this will look in court and more so, in the court of public opinion and has taken the surprising, if not shocking approach of communicating in a manner that is condescending of the plaintiffs, especially considering the strength of social advocacy in 2020.

“Plaintiffs offer nothing in support of this extraordinary theory beyond vague and conclusory assertions, self-serving speculation on ‘information and belief,’ and a handful of personal anecdotes,” the company has communicated.

This is, however, not unprecedented communication in scandalous conflicts.

“There are predictable patterns in crisis response,” says Helio Fred Garcia, president of Logos Consulting Group. “One such pattern of ineffective crisis response is for organizations to say and do things that feel good to them, but translate as uncaring, defensive or dishonest to those who matter, which in effect prolongs the crisis and causes self-inflicted harm.”

The behavior, arguably arrogant, is a common response before court proceedings.

“The lawsuit remains in its early stages and it is common for corporate defendants to, at least publicly, focus on the their legal arguments and defenses,” says Robert C. Bird, Professor of Business Law at the University of Connecticut and an Eversource Energy Chair in Business Ethics.

“As the lawsuit progresses, some claims may be dismissed while others may proceed onward to trial. While this happens, each side learns more about the strength of the other’s case, creating a background framework for a possible settlement between the parties,” Bird adds.

McDonald’s reactive, unrestrained and demeaning communication and posturing will be remembered negatively by the plaintiffs and critics, stoking the fires of resentment and feeding confirmation bias.

“McDonald’s voiced desire for every operator in its system to thrive while attacking a subset of its operators falls short of demonstrating the care necessary to effectively resolve this crisis,” Garcia says.

Company attorneys have reportedly argued that the plaintiffs have not proven McDonald’s intentionally discriminated against Black franchisees or that the company committed fraud by hiding information it had a duty to disclose. They then go so far as to say the claims are also not valid because they are outside the statues of limitations.

One former franchisee described what they observed and experienced that they allege is exclusive to Black franchisees.

“We’re always taking on the worst stores,” Juneth Daniel told Business Insider, adding “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.”

McDonald’s appears not to recognize how it is coming across in its legal defense and communication made to the franchisees, media and public.

“Humans behave in predictable ways. One such way is that we are really bad at making smart decisions in a crisis without mental readiness. When we feel anxious, scared, or attacked, our critical thinking shuts down and we go into survival mode,” says Garcia.

This often leads to earned, badly damaged public relations and compromised conflict resolution. It is emotionalism and reveals questionable or poor risk management of reputation. That doesn’t help the marketing leaders any.

“McDonald’s response to this complaint seems to be focused on minimizing legal risk, rather than how to acknowledge and address the business problem they are facing and restore trust among their franchisees,” Garcia says. “Strategies that work in a court of law don’t always play as well in the court of public opinion, where reputations are built or destroyed.”

This act of being being above reproach to the plaintiffs comes with risk assumption and immediate and long-term consequences.

“McDonald’s is assuming the risk of a drawn-out legal battle and an unknown financial investment by engaging this battle. While McDonald’s has the wallet to withstand such a battle, they’re creating the perception of ‘punching down’ and attacking the smaller guy,” Garcia says.

The company could very well be burning a high amount of trust with its brand, to the point that it “is risking its ability to attract future franchisees and maintain current ones, who may observe McDonald’s stance in this lawsuit and think, ‘No thanks,’” Garcia speculates.

McDonalds has some difficult decisions to make. It has to decide if it wants to resolve an ongoing conflict wisely or go scorched earth and risk activism and a full-blown crisis. How it specifically communicates in and out of court and defends itself will play a significant role in the response by the media, on social media and with the larger public and activists.

Far wiser and successful legal counsel communication is possible that still protects McDonald’s name and profits and strikes a balance between legal protection, ethical practices, improvement and quality business relationships.

“In an ideal world, lawyers get involved to prevent a legal problem from ever starting versus resolving or exacerbating an existing one,” Garcia says. “Every crisis is a business problem before it is a legal problem and the company needs to balance the risk of legal liability against the risk of losing the trust of those who matter to the company.”

Garcia stresses it’s not a binary decision to make.

“It isn’t either-or but rather the right balance in the right order. You can completely protect against of some future legal liability in the long term but lose significant competitive advantage in the process,” he says. “The paradox is that maintaining or restoring trust quickly can actually reduce the risk of litigation, or the size of the legal risk should litigation proceed.”

McDonald’s is not the only company proceeding through disputes, conflicts, scandal and crisis in a bumbling way. It is becoming a newest case study with a tone deaf, competitive reaction to problems that could be resolved more beneficially for itself as well as current, past and future franchisees.

The company and its attorneys are having difficulty recognizing the opportunity. It will likely not recognize it until it’s too late.

Michael Toebe is a reputation specialist who helps individuals and organizations. He writes Red Diamonds Essays and Reputation Specialist Essays (both on the Medium platform) and analysis and advisory for online publications: Chief Executive, Corporate Board Member, New York Law Journal, Corporate Compliance Insights and Physicians Practice. He also publishes on LinkedIn and beBee and is the voice of the Red Diamonds Podcast.

Michael Toebe is a specialist for reputation, scandal and crisis, writing about organizations and individuals.