Dive Brief:
- McDonald's has launched a franchisee recruitment initiative designed to grow diversity among its domestic and international operators, the company announced Wednesday. McDonald's will pledge $250 million over five years to help franchisee candidates that may face socioeconomic obstacles.
- Each McDonald's market will create diversity frameworks that are tailored to that region, but all plans will focus on recruiting, financing and development.
- This initiative comes as McDonald's struggles to shake accusations of racism at the corporate and restaurant level. Most recently, a judge dismissed a lawsuit claiming the Golden Arches operates a tiered advertising structure that differentiates on the basis of race.
Dive Insight:
Investing in programs that prioritize diversity could help McDonald's win back goodwill among employees, operators and progressive consumers who may be turned off by the growing number of lawsuits accusing the chain of discrimination.
As of 2020, only 29.6% of U.S. franchisees were from historically underrepresented groups, and women made up 28.9% of all U.S operators. McDonald's pointed out in an emailed statement, however, that these percentages are higher than U.S. Census Bureau data for these groups in U.S. employer businesses.
McDonald's hopes to improve diverse representation among operators by cutting down upfront equity requirements for eligible candidates and to use its banking partners to give better access to financing.
"Access to capital continues to be a challenge in closing the wealth gap in the U.S. — particularly for minority entrepreneurs," said Nicole Elam, president and CEO of the National Bankers Association, which is working with minority-owned and -operated banks to help finance franchisee candidates. "Efforts that eliminate barriers to entry for aspiring entrepreneurs are critical in helping to bridge that gap — providing a foundation for a lifetime of opportunity and generational wealth creation."
The move is part of a broader diversity, equity and inclusion (DEI) push at McDonald's.
In May, the chain said it will more than double its investment toward diverse media partners and create an advisory board of external marketing and subject matter experts to craft solutions to problems faced by diverse-owned media operators. McDonald's currently puts 4% of its national advertising spend toward Black-, Hispanic-, Asian Pacific American-, women- and LGBTQ-owned businesses but has pledged to increase that percentage to 10% in the next three years.
The company has hit some equity milestones as well. In October, McDonald's reached gender pay equity for workers at U.S. corporate stores and said it plans to close the pay gap at its corporate offices and international markets next year. Worldwide, McDonald's currently pays women 99.85 cents on the dollar for similar work done by male employees. Still, this parity achievement only affects employees at 7% of its total restaurants because 93% of McDonald's store network is franchised.
In February, McDonald's announced plans to tie executive compensation to diverse representation targets. Fifteen percent of executives' annual incentive bonuses will be linked to diversity benchmarks in the hopes that representation of underrepresented groups at the senior director level and above will increase from 29% in 2020 to 35% by 2025. McDonald's also wants to grow the percentage of women in leadership from 37% last year to 45% in 2025 and to achieve gender parity in leadership roles by the end of the decade.
