McDonald’s to start focus groups with owners as part of civil rights audit

McDonald’s will begin virtual focus groups with some owners and operators as a part of an ongoing civil rights audit, according to a message to franchisees viewed by CNBC.

The fast food giant retained WilmerHale law firm to conduct the examination of its practices, the memo said.

Last year, shareholders approved of a proposal by SOC Investment group to conduct a civil rights audit in a close vote. At the time, SOC urged shareholders to back the measure ahead of the company’s annual meeting, saying, “McDonald’s plans do not adequately address the company’s civil rights impact because it largely overlooks concerns with franchisees, which make up 95% of its U.S. restaurants.”

The audit aims to determine whether the company’s policies have an adverse impact on McDonald’s U.S. stakeholders, including franchisees, employees, suppliers and customers.

WilmerHale will partner with Perception Strategies, a “nationally recognized research and consulting group focused on issues of identity, dignity, and belonging, to enhance our understanding of the experience of Owner/Operators across the country and to help the company continue to promote fairness and opportunity within our system,” the memo said.

“As part of this initiative, Perception Strategies will conduct a Climate and Belonging Assessment to gain deeper insights into the experiences of our U.S. Owner/Operators,” the memo continued.

The document added that the assessment would involve inviting randomly selected franchisees to participate in one-hour virtual focus groups about their experiences. The note also assured owners that neither McDonald’s nor anyone employed by the company would participate in the groups or the selection process.

The memo said the process is voluntary and identities would not be shared with McDonald’s, and another notice said the groups would have no more than 12 people. An owner told CNBC that some franchisees were expressing concern about the 12-person panels and potential retaliation by the company.

McDonald’s said it has high corporate governance standards and a long history of being responsive to shareholders, and looks forward to reviewing the outcome of the WilmerHale audit. The process began last year following the 2022 shareholders’ meeting and is now gathering feedback from a range of stakeholders.

The audit comes as McDonald’s has made changes to its franchising structure and restaurant grading system in recent years. In December 2021, McDonald’s pledged to recruit more franchisees from diverse backgrounds, committing $250 million over the next five years to help those candidates finance a restaurant.

Current and former Black franchisees have sued the company, alleging racial discrimination. One of the suits was dismissed, while an action brought by former MLB player Herb Washington resulted in a $33.5 million settlement from McDonald’s.

The company also faces two separate lawsuits from media mogul Byron Allen, alleging discrimination in its advertising practices. McDonald’s has fired back against Allen in recent weeks, filing a motion for sanctions against the media companies owned by Allen. It claimed one of his suits was “frivolous” and “filled with allegations that he knows are false.”

The company has also committed to increase its advertising spending with Black-owned media from 2% to 5% of its ad expenses by 2024. In the filing responding to Allen, it said it was on track to meet those goals.

Other major companies including Citi, Starbucks and Airbnb have undertaken civil rights audits in recent years, and last year Apple and Amazon shareholders approved proposals for similar assessments.