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By Sam Dolce-Powers, Esq.

Fifty-two Black former franchisees of the McDonald’s corporation are suing the famous burger brand, claiming it racially discriminated against them for decades, according to reports by Business Insider and USA Today.

The fifty-two former franchisees, who collectively operated stores between 1988 and 2018, filed a complaint Tuesday September 1st in the U.S. District Court for the Northern District of Illinois, alleging they were steered to open establishments in “economically depressed” communities and “dangerous locations” where they were less likely to generate sales. The plaintiffs allege the fast-food company denied them the same opportunities as White franchisees, establishing what they refer to as a “two-tiered system of Black and White franchisees” which ultimately set the Black franchisees up to fail.

The complaint seeks to collect more than $1 billion in damages from McDonald’s. According to USA Today, “The suit seeks the equivalent of $4 million to $5 million in damages per plaintiff, on average, for lost revenue and accumulated debt due to the company’s practices.”

If the plaintiffs filing this complaint are successful, they will have the unique opportunity to turn the financial tide around. By engaging with a professional settlement planner, these former franchisees can turn their settlement into generational wealth through the implementation of an equity-backed structure. Similar to a 401k but without age restrictions or contribution limits, equity-backed structures allow plaintiffs who are settling lawsuits with these types of economic damages to invest their settlement funds into a tax-deferred investment account. Their tax-deferred investment account is then connected to a structured payment stream, which distributes funds directly to the plaintiff. The settlement funds are not considered income, and are therefore not taxed, until they are actually received by the plaintiff. If planned strategically, a potential settlement of this amount could create substantial generation wealth for these Black former franchisees and their families long into the future.

Here’s an example: an individual franchisee receives a $10 million-dollar settlement. He or she chooses to place these funds into an equity-backed structure that pays out $200k annually. Let’s assume this investment account grows at a relatively conservative rate of 7% annually. That 7% return equals $700k in the first year. The plaintiff will now receive a $200k disbursement to pay for expenses for that year, while the extra $500k will be reinvested into the equity backed structure. That $10 million-dollar account is now a $10.5 million-dollar account, which will continue to snowball and grow, tax-deferred.

If a plaintiff elects to have no distributions, an equity backed structure can grow to approximately double in size after a period of 10 years, assuming a rate of 7% growth. This is taking all fees, costs, and taxes into account.

If this McDonalds lawsuit ends up ruling in favor of these 52 plaintiffs, we see the opportunity for the former franchisees to turn their settlements into long-term wealth accumulation plans for themselves and their families, which was probably their goal when they signed on with the fast-food chain in the first place.

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