Modern Day David and Goliath Lawsuit - McDonald's Being Sued by Los Angeles Franchisee for Fraud

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Long-time 25-year franchise owner has filed a lawsuit against fast food giant McDonald's for a supersized $11 million charging McDonald's with wrongful conduct including fraud and mispresentation as well as breach of contract.

refuses to be further victimized.

Bob Johnson. Remember that name. He has filed a lawsuit against fast food giant McDonald's for a supersized $11 million. He cites fraudulent as well as deceptive and unfair trade practices as his reason for the suit. And they are charges the long-time 25-year franchise owner says he has made because he "refuses to be further victimized."

The detailed lawsuit, Bob Johnson and Tykasa, Inc., (Case No.CV05-5810) (JFW) (AJWx) filed in the California Central District Court, shows another side of the golden arches. Johnson is charging McDonald's with wrongful conduct including fraud and misrepresentation as well as breach of contract.

Johnson owned eight restaurants prior to being induced into purchasing the two (2) LAX locations. Corporate asked him to sell his lucrative Marina Del Rey location for $1 million less than market value, and, in turn, he would be granted the privilege of buying two (2) McDonald’s stores at Los Angeles International Airport for much more than the previous owner paid for the same locations. Almost $5 million more. After he assumed the operations, Johnson was promised by a high-ranking McDonald’s executive, Jeff Schwartz, a $1.3 million cash flow as well as additional restaurants and that "he would be protected from start to finish."

That new deal, which was actually a purchase and exchange offer choreographed by McDonald’s executives with the former owners of the two failing LAX stores, was engineered to help corporate recover losses associated with the previous owners as well as McDonald’s obligations to LAX. Since Johnson is an African American, he was essential to McDonald’s so that it could comply with the Disadvantaged Business Enterprise Program because the store owner had to be a minority.

The projected cash flow he was supposed to realize quickly dissolved into a substantial loss as a result of the many obligations he was set to inherit, which Johnson says McDonald's failed to disclose before he signed on the dotted line.

Such obligations included monies owed to LAX in back profit sharing payments, unpaid utilities expenses, and required facility refurbishments which McDonald's or the prior franchisee failed to make. The most egregious burden placed on Mr. Johnson was McDonald's failure to inform him of a $1.1 million increase in yearly operational costs that he would later have to assume due to the enactment of a Living Wage Ordinance passed by the City of Los Angeles, which increased the minimum wage from $6.25 to $9.52 an hour as well as an additional annual increase of $300,000 in labor costs due to hourly wage increases of another 30 cents.

McDonald's presented Johnson with yet another deal seven months after he acquired the LAX concession stores. This time he was asked to repurchase his former Marina Del Rey store for double the amount he had sold it for because the new operators were losing money and driving down profits. But Johnson said this time he could no longer go along simply to get along, and declined their offer despite the consequences he might face.

Johnson says he filed the suit because he wants to hold McDonald's accountable not only for the substantial financial losses he has suffered (exceeding $11,000,000.00), but for failing to be ethical in how they treat licensed franchisees. Local organizations like the NAACP and Brotherhood Crusade agree and are calling for McDonald’s to do the right thing.

Johnson is represented by nationally renowned franchise litigation expert Robert Zarco and Robert F. Salkowski of Zarco Einhorn Salkowski & Brito, P.A.

Mr. Johnson can be reached for comment at Exude Media (213) 291-5860.

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Veronica Hendrix
213 291 3644
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