McDonald’s is being sued by media mogul Byron Allen’s company over racial discrimination. According to the lawsuit, Allen is seeking $10 billion in damages for racial discrimination, alleging it intentionally discriminated against his company Entertainment Studios and Weather Group through “a pattern of racial stereotyping and refusals to contract.”
The civil rights lawsuit was filed just hours after McDonald’s announced it is taking various steps to more than double its U.S. media spending with Black-owned media and production properties.
Allen claims African Americans represent about 40% of fast food customers, with McDonald’s taking billions of dollars each year from African American consumers. “But of its approximately $1.6 billion annual television advertising budget, McDonald’s spends less than approximately $5 million each year on African American-owned media, and it has refused to advertise on Entertainment Studios networks or The Weather Channel since Allen acquired the network in 2018,” according to the suit.
At the heart of the issue, per the suit, is McDonald’s “tiered advertising structure that differentiates on the basis of race.” Most of McDonald’s advertising budget goes to its “general market” tier, while its “African American” tier constitutes a “much smaller budget and less-favorable pricing and other terms,” according to the suit. Allen claims that by McDonald’s working with a separate ad agency — Burrell Communications — for the African American tier, it creates “separate and unequal tracks for Black-owned media companies to earn advertising revenue.” Entertainment Studios has been relegated to the African American tier, even though it operates TV networks that have general market appeal and do not specifically target African American audiences, because the company is owned by Allen, according to the suit.
“This is about economic inclusion of African American-owned businesses in the U.S. economy,” Byron Allen, founder, chairman and CEO of Allen Media Group, said in a statement. “McDonald’s takes billions from African American consumers and gives almost nothing back. The biggest trade deficit in America is the trade deficit between White corporate America and Black America, and McDonald’s is guilty of perpetuating this disparity. The economic exclusion must stop immediately.”
Early today, the world’s largest restaurant company unveiled a push to more than double its U.S. investment in diverse-owned media companies, production shops and content creators by 2024. Over the next four years, it plans to increase its U.S. advertising spending with platforms owned by Black, Hispanic, Asian American, female and LGBTQ people from 4% to 10%, with support from its U.S. franchisees.
“Together with our Owner/Operators we have doubled down on our relationships with diverse-owned partners," McDonald's said in a statement Thursday afternoon. "This includes increasing our spend with diverse-owned media from 4% to 10% and with Black-owned media from 2%-5% of total national advertising over the next four years. Once we receive the complaint, we will review and respond accordingly.”
Allen, along with other Black-owned media execs, has been vocal about calling on Madison Avenue to invest at least 2% of their ad budgets in Black-owned media.
Allen and five other leaders at major Black-owned media companies also penned an open letter to McDonald’s CEO Chris Kempczinski asking him “to stop the systemic racism by McDonald’s against Black-owned media companies.” They said McDonald’s should commit 5% to 15% of its advertising and marketing spending to Black-owned media and requested a one-hour Zoom meeting with the CEO and several of its key board members.
“Chris, we and others firmly believe that if you continue to hold the position that Black-owned media does not deserve meaningful economic inclusion and we are not worth meeting with, then you and your board should resign, effective immediately,” they wrote.
General Motors pledged last month to spend 4% of its U.S. advertising spend on Black-owned media by next year and would boost that to 8% by 2023 after the automaker was called out by Allen and the other executives for refusing to meet with the group.
The suit, Entertainment Studios Networks Inc. and Weather Group LLC vs. McDonald’s Corp., was filed today in Los Angeles County Superior Court.