Washington, DC – Today a group of individual owner operators of 27 McDonald’s restaurants in Puerto Rico filed a complaint with the Federal Trade Commission (FTC) against McDonald’s Corporation and Latam/ Arcos Dorados Holdings (Arcos Dorados,) for not making required FTC disclosures and engaging in abusive and predatory practices to take over their businesses, in violation of FTC rules. Together, the individual franchisees and operators represent 78% of all McDonald’s individual franchises in Puerto Rico.
Although Puerto Rican franchise owners and operators entered into the franchise agreements marketed by McDonald’s as identical to those in place in the continental United States, and despite claiming in its marketing materials that it would not sell franchises to investors, McDonald’s cut off all ties with Puerto Rico operators and sold its franchises, in their entirety, to Arcos Dorados, a conglomerate of foreign investors. Arcos Dorados, in turn, began downgrading services to the franchise owners who sought to remain independent in accordance with their original McDonald’s franchise agreements, to a system without the same services or opportunities, without disclosure to the FTC. The operators allege that this is a violation of FTC Act 5 Section 5 and the FTC Franchise Rule. Moreover, Arcos Dorados, the foreign controlled entity that now operates all McDonald’s on the island, has never filed a disclosure document with the FTC.
“As consumers, Puerto Rico franchisees […] dedicated their entire adult lives and savings to a franchise system marketed as a direct, personal and supportive relationship with McDonald’s Corporation. They were delivered instead a significantly inferior product. […] [They] are now ‘second-class” franchisees that must sit in the proverbial back of McDonald’s bus,” states the Complaint. “If McDonald’s decided suddenly […] to transfer its rights and obligations in a State such as Connecticut to a foreign investment entity […] and to operate the McDonald’s franchise system only in said State for the primary benefit of an unrelated absentee foreign company […], the FTC would have investigated and […] required full and detailed disclosure.”
Arcos Dorados largely operates from Colombia, Uruguay and the notoriously obscure Argentine system. Since acquiring the Puerto Rican franchises, it has, among other tactics, attempted to run individual franchise owners out of business by placing new restaurants near the operators, obstructing their access to marketing materials, and disrupting the original owners’ ability to sell products under the uniform McDonald’s menu.
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