Monday, December 7, 2020

Mcdonalds: Racial lawsuit (2020)

 Mcdonalds: Racial lawsuit (2020) 


Abstract 

(McDonalds famous logo)
        As the years fly by, more and more racial injustice is brought to life from all over the United states. This new light really displays the true colors of some organizations that you’d perceive as friendly companies. McDonald’s is one of those organizations. The famous fast food organization was hit with their third racial discrimination lawsuit just this year. This case involving 52 franchise owners compared their locations of the restaurants and brought up the case of a racial tier involving the owners. The 52 African American owners explained how the CEO’s would locate the Black owners' businesses in “depressed and dangerous” area’s. They described it as if they were set on a suicide mission that was doomed from the start. From an ethical standpoint, McDonald’s actions could be discussed in many ways.         The first theory of Individualism states that an individual’s job for the company is to maximize profit but only within the law. An individualist would find it unethical with the actions but wouldn’t pursue them to achieve a maximized profit. As these actions are within the law, the cost of these franchise’s are millions of dollars. Also, after the lawsuits were filed, profit dropped dramatically. Utilitarianism's ethical theory is to maximize happiness for the majority of stakeholders. Utilitarians would see these actions as unethical to the majority of stakeholders. Even if the organization as a whole is happy and satisfied, the majority goes to their African American customers and the African American franchise owners. Next is Kantianism, and the formula of universal law, to be ethical under the formula of universal law one must treat others with respect and not use others as just a mere means, as well as not lying and/or stealing. Kantians would find McDonald’s action’s as unethical as well. The misplacement of the locations of only Black owned franchises demonstrates the example of using these franchises as just a means, in an attempt to profit more with White owned franchises. Finally, the virtue theory would describe the actions of Mcdonalds as lacking the virtues of prudence and Fairness. With these actions as an outside reference, the unfair treatment of the Black franchise owners is something Mcdonalds needs to heavily change in the future in order to stay in business. 

 Background

         In 1955, McDonald’s consisted of a small restaurant owned by Ray Kroc and the two brothers Dick and Mac McDonald. Ray Kroc was an ambulance driver for the red cross at the age of 15. As he grew up, his profession changed from a piano player to a multimixer salesman. As he traveled the country, selling the multimixer products, he ran into the small business in California and was impressed by the effectiveness of their operation and he quickly became a partner in the business. The small organization focused their menu on limited items including burger, fries and beverages. As the company grew, Ray founded McDonald’s system inc. and in only three years the small business sold their 100 millionth hamburger. In 1961, 
(Ray Kroc, founder of McDonalds)

Kroc launched Hamburger University, which at the time was a training program in a new McDonald’s restaurant in Elk Grove Village, Illinois. Franchisees were “trained on the proper methods for running a successful McDonald’s restaurant. Hamburger U utilized a research and development laboratory in nearby Addison, Illinois to develop new cooking, freezing, storing and serving methods”(Mcdonalds, our history). More than 275,000 franchisees, managers, and employees have graduated from the program. Today, McDonald's is the world's largest fast-food restaurant chain and one of the best-known brand names. “The company has more than 39,000 locations in about 100 countries. A pioneer in the fast food industry, the company has maintained consistent, moderate growth through affordable prices, speedy service, and by constantly expanding and refreshing its menu offerings”(Mcdonalds, our history). Starting from nothing to what they are now, McDonald’s had a huge uprising and is known by everyone around the world but, did the global company let the fame get to their heads? 

 The case 

(McDonalds CEO, Chris Kempczinski)
         In September of 2020, 52 former franchise owners sued the global giant for racial discrimination. They explained how Mcdonalds denied them the same opportunities as White operators and they believed that Mcdonalds had a two tier system of Black and White owners and attempted to push out the Black owners. “Under what the suit describes as a two-tiered system of Black and white franchisees, McDonald's profited from Black business operators and a Black consumer base, but eventually Black franchisees failed because they had been sent on financial suicide missions”(Washingtonpost, McD. Lawsuit) From 2010 to 2020, the 52 black franchise owners operated 200 restaurants and profited as long as they possibly could. One of the owners' attorneys stated “Revenue, at McDonald’s, is based on one factor and one factor only,location... It has nothing to do with the taste of a Big Mac. You don’t go to a different McDonald’s because the Big Macs are better. You go to the closest McDonald’s, period”(CNBC, racial discrimination). McDonald’s then stated the location wasn’t up to them but to the franchises itself. They also stated that they provided high performing franchises to Black owners as well. These claims were true until the accusations that were discussed behind closed doors were brought up. The owners agreed that it was up to them on paper but in reality, the location’s were being forced on them. “The lawsuit alleges that Black operators who rejected offers to continue running their restaurants in low-income neighborhoods faced retaliation. The plaintiffs also allege that McDonald’s provided misleading projections that persuaded them to buy undesirable franchises and denied them better locations typically given to White franchisees, who operated safer restaurants with higher sales and lower security costs”(CBNC, racial discrimination). ” Mcdonalds CEO went on to say that the company stands for diversity, equity and inclusion and said they also disagree with the claims in the lawsuit and that they intend to strongly defend against it. This led to the creation of the NBMOA which stands for National Black McDonald's operators association. They stated that the treatment of African American owners is moving backwards. Larry Tripplett, chairman of the NBMOA, said in a letter to McDonald’s executives last year, according to the lawsuit. “Through no fault of our own we lag behind the general market in all measures. This is reflected in the loss of sales to African American consumers. We believe that the loss of sales is closely correlated to how African Americans are treated within the company” (Restaurant business online, mcdonalds). African Americans contribute to 25% of all McDonald's customers. It was recorded that after the lawsuits, McDonald's revenue dropped 30% as a whole in the last quarter according to Jordan Vanslinsky of CNN. 

Stakeholders 

         These actions, if proven guilty can drive revenue down for Mcdonalds like it already has. The stakeholders involved are the upper management at Mcdonalds and the black community involving the 52 franchise owners who were mistreated. These allegations can really hurt the famous brand name of McDonald’s. Especially today, in an era of racial reform and the Black Live Matters movement, these actions will not go unnoticed. Maintaining their ethnic stakeholders is a huge reason why McDonald’s is as successful as they are today. For McDonald’s, 25% of customers are African American, 24% of customers are hispanic, 21% are White and 20% of customers are Asian American’s. They’ve also denied all of these allegations but for 52 different Black franchise owners and 200 of their businesses going under, it’s hard not to believe them especially with the proof they’ve displayed. 

Individualism 

         An individualist would view this case as unethical due to the main goal of individualism, which is to maximize profit within the law. Milton Freedman was an American economist and statistician best known for his strong belief in free-market capitalism. He preached revenue and profiting from a managerial standpoint. For McDonald’s as the global organization, they average roughly 21 billion dollars from the United States every year. Recently, the franchises that were put in these financially depressed areas lost 4 to 5 million dollars per location. “ After subtracting restaurants’ costs from missed revenue over the years active, the plaintiffs say their losses are $4 million to $5 million per location on average”(CNBC, mcdonalds racial discrimination). If we estimate that 200 McDonald’s businesses closed and each of these businesses lost 4 to 5 million each, Mcdonalds as a whole roughly lost 800 million to 100 million dollars over the past 10 years due to the Black franchise owners being put in certain areas. A utilitarian will “avoid short-sighted thinking that often boosts profits momentarily but leads to a quick demise” (Salazar 20). These actions boosted profit momentarily at the beginning of the 2010’s but are slowly decreasing as the years go on. In 2013, McDonald’s hit 28.11 million dollars in revenue. The most they've ever profited in a year. Since then, McDonald’s revenue has slowly decreased every year and in 2019, like I stated early, they achieved 21 billion dollars. Since 2020, is not over yet and the fourth quarter income sales have yet to be reported, their revenue can’t yet be reported but The global fast-food chain reported fiscal first-quarter net income of $1.11 billion, or $1.47 per share, down from $1.33 billion, or $1.72 per share, a year earlier. Net sales dropped 6% to $4.71 billion as the company observed dramatic changes. These dramatic changes have hurt McDonald’s greatly. 

Utilitarianism 

         A Utilitarian would find McDonald’s actions as unethical due to the majority of the stakeholders being unhappy and unsatisfied. Like I stated earlier, African American’s make up 25% of McDonald’s customers. This is the highest race percent of McDonald’s customers. McDonald’s needs to make all of their ethnic customer’s happy to be ethical under Utilitarianism. The fact that 4 different racial discrimination lawsuits were filed against McDonald’s just this year, proved how unhappy and how mistreated the African American race feels. In one of the lawsuits, it stated that the Black male workers heard racially derogatory terms and disparate treatment that resulted in them receiving harsher discipline, and fewer hours, then their white colleagues. Also an earlier complaint filed in July by Black employees of a Lakeland, Florida McDonald's was amended after two of the workers were fired, they said “it was there retaliation for speaking up about their abusive work environment.The Illinois suit's allegations are symptomatic of a pattern or practice of McDonald’s corporate leadership’s failure to address”(USA today, racial discrimination). This related to the retaliation that the Black franchise owners faced when they wanted to move locations. They had the fear of being punished and fired from their job. The African American race has been mistreated for too long, especially from the McDonald’s organization. 

Kantianism

         A Kantian that believes in respecting others, and not using others a mere means would find these actions as unethical as well. The lawsuit stated that McDonald’s “ denied them financial support and assistance often afforded to White franchise owners. As well as unfair graded Black-owned operations, which led to poor internal reviews and pushed out those franchisees”(Washingtonpost, McD. Lawsuit). This was their attempt to drive Black franchise owners out of the organization and to promote white franchise owners. Kant characterized the categorical imperative as “an objective, rationally necessary and unconditional principle” that we must always follow despite any desire we may have. Mcdonalds were irrational in an attempt to get what they desired. And what they desire is pushing these Black franchise owners out of the business. These actions brought in revenue at first in the beginning of the 2010’s but eventually lost them millions of dollars. McDonald’s attempted to profit off of these Black franchise restaurants as much as possible knowing they wouldn’t last and that's exactly what happened. “McDonald's profited from Black business operators and a Black consumer base, but eventually Black franchisees failed because they had been sent on “financial suicide missions”(USA today, racial discrimination). 

Virtue theory 

         From a virtue theory standpoint, they would describe the actions of Mcdonalds as lacking the virtues of prudence and Fairness. The ethical definition of prudence is one being concerned with what is good and advantageous to oneself, others, and life as a whole. It includes being careful when taking action concerning human goods. McDonald’s lacked prudence behind closed doors rather than over the media. They handled it well over the media by denying the allegations but there prudence around other races lacked. They allegedly graded Black-run restaurants unfairly, leading to poor internal reviews and subsequent denials of growth opportunities and better franchising terms. As well as having abusive environments towards different races. Meanwhile over the media McDonald’s CEO stated “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”(CNBC, racial discrimination). The ethical definition of fairness is establishing moral standards for decisions that affect others. Fair decisions are made in an appropriate manner, while thinking of others based on appropriate criteria. I think it’s clear that these African American franchise owners and employees were mistreated from the start. Having a racial tier of Black and White franchise owners and giving the better opportunity and chance of growing their restaurants to the white franchise owners and setting the Black owners up to fail is a clear discrepancy of unfairness within the organization. 

 Justified ethics theory

         In my opinion, The fact that 52 different Black franchise owners went through the same struggle of being pushed out of the organization is completely ridiculous. McDonald’s actions of racism are exactly what our generation is attempting to get rid of. A quote that I’ve followed my entire life is to judge someone's character not race or background. Every man or woman is created equally and I think McDonald’s as an organization needs to realize this. I also know that not everyone in the organization is a clear racist, but if one of the CEO’s or higher management is giving Black franchise owners bad reports and mistreating them in an attempt to drive them out is destroying the structure and brand name of McDonald’s. I don’t think McDonald’s handled it well with their responses. They never disapproved of any of the accusations but instead stayed calm and stated how they’ve hired people of diversity. From an outside standpoint I believe McDonald’s is completely in the wrong here. They mistreated and used their own employees as well as driving their revenue down at the same time. 

 Action plan 

         McDonald’s is facing new lawsuits every year, like I stated early they received 4 racial discrimination lawsuits this year alone. As an organization, McDonald’s needs to evaluate and commit to their actions as well as having repercussions to these actions. These repercussions should hold the CEO’s and other high management positions to be held accountable for their actions. I believe the organization should preach equality and fire the CEO’s who have been involved in the scandal. As well as having other positions look over franchise evaluations in case of mistreatment given to Black owned restaurants. The organization should also relocate some of their Black franchise owned restaurants to more profitable areas . These franchise owners should have the right of relocating without facing repercussions and threats of being fired or un-promoted. These franchise owners need to be represented more than just a mere means of profit. McDonald’s also needs to realize there stakeholders that bring in revenue for their restaurants. These stakeholders involve their diverse customers and employees. Mistreating and discriminating against other races, especially the ones that run your businesses and purchase your food will only hurt the company in the long run. Finally, by promoting diverse movements, not using their franchise owners just to profit, and changing the locations of some restaurants, will make Mcdonalds stakeholders happy and make their actions ethical. 

Conclusion 

        
         The actions that McDonald’s have been accused of are unethical and the morals of the global fast food chain need to be adjusted as soon as possible. In a generation of equal opportunity and public reform for racial injustice, me as a citizen of the United States find these actions disgusting. No individual should feel the stress and pain of being mistreated as well as operating a business that is setting you up to fail. The ethical background of this case involving each theory describes how unethical these actions were. From non-profiting, to unsatisfying the majority of stakeholders to mistreating and using their own employees to achieve what they want proves how unethical this case was. Hopefully in the future, McDonald’s can make a change in their organization and take responsibility for their actions.

- Christian Bianco

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