McFamily Feud: Scandal, lawsuits, and cultural upheaval at McDonald’s

Former CEO Steve Easterbrook supersized the company's performance—until he was fired amid a scandal. Now his successor, Chris Kempczinski, must persuade the company's many stakeholders to reunite.
April 5, 2021 10:30 AM UTC
Dan Saelinger

Subscribe to Fortune Daily to get essential business stories straight to your inbox each morning.

To have a successful career at McDonald’s, one must make peace with the practice of putting “Mc” in front every noun that will take it. Customers can order Egg McMuffins and McGriddles for McDelivery. Employees at the old corporate campus caught the McShuttle. Executives who leave a frustrating meeting are McOverIt. 

But in 2016, “McFamily” was struck from the company’s lexicon. The term was more than a feel-good name for the burger giant’s collection of employees—it embodied the cohesiveness and shared fate of everyone who made up the McDonald’s system. 

Former McDonald’s CEO Steve Easterbrook found the word distasteful. To him, it was “soft and represented the past,” says a former executive, and embodied the mindset hindering the company’s performance. Easterbrook, a Brit who had come up through McDonald’s U.K., had been tapped by the board in January 2015 to turn the struggling restaurant behemoth around. Consumer preferences had changed, and the home of the Big Mac and “Billions Served” could no longer simply wield its massive scale to stay ahead of the competition. Easterbrook pledged to become an “internal activist” and bring about radical change—including eradicating the cronyism and paternalism that McFamily seemed to represent.

In February 2016, the company held a town hall announcing the death of McFamily. The message: You couldn’t pick your family members, but you could pick your team. From then on, they would collectively be known as McTeam. 

No huge surprise, the new phraseology did not exactly take off. “It rubbed a lot of people the wrong way,” says James Floyd, a former vice president of operations for the company. “They felt, ‘How dare you, we are a family.’ ” The repercussions went far beyond the company’s Oak Brook, Ill., HQ. Atlanta-based restaurant operator Vicki Chancellor, who chairs the McDonald’s Operator’s National Advertising Fund, says the shift in rhetoric reflected a new way of doing business: “It was more transactional, and ‘results by any means.’ ”

Easterbrook shrugged off the blowback and plowed ahead, making a flurry of changes that represented the biggest break with the past ever experienced by the tradition-steeped fast-food icon: He pulled the trigger on all-day breakfast, a long-debated and highly controversial idea within the company. He moved headquarters from the historic Oak Brook campus to Chicago. He bought an artificial intelligence startup and added outsiders from the tech industry to turbocharge the insular company’s digital efforts.

To a large degree, it worked. During his four-and-a-half-year tenure, Easterbrook grew McDonald’s market cap by over $50 billion—more than any restaurant CEO has ever added during a similar time span, says industry consultant Aaron Allen. “He did what the board asked him to do, and Wall Street rewarded him for it,” says J.C. Gonzalez-Mendez, who retired in 2015 as head of global CSR, sustainability, and philanthropy, after 31 years with the company. “But he did it at the expense of the McFamily.” 

Some thought it was all too much too fast, while others viewed Easterbrook as implementing a much-needed culture of accountability—though in retrospect, not so much for himself. In November 2019, the board announced that it had fired Easterbrook for sexting with an employee. Since then it has taken the unusual step of suing its former CEO to claw back his compensation. In its complaint McDonald’s alleges that in addition to the inappropriate text messages, it has since found evidence that Easterbrook had sexual relationships with three employees in the year before his departure. Industry observers were shocked by the company’s move. No one expected to see an institution like McDonald’s, as old-school as it gets, break with the norms of corporate America, which would have prescribed sweeping the whole mess under the rug. Instead, the company is opting to air its dirty laundry in an attempt to distance itself from its former CEO. It’s a counterintuitive strategy: reveal the R-rated details to protect the brand’s family-friendly image. 

Easterbrook’s ouster led to the ascension of Chris Kempczinski, or Chris K., as he’s known around the company. The onetime consultant and former Kraft executive, who Easterbrook hired in 2015, stepped into the CEO job amid the sordid drama drummed up by his former boss. He’s now in the strange position of leading a cultural turnaround rather than a business one. “Ordinarily when you come into these jobs, you’re first talking about the business—you’re not talking about values and standards,” he told Fortune in late March.

McDonald’s is now attempting to walk a fine line—positioning Kempczinski as someone who has all of Easterbrook’s good traits and none of the bad. To Wall Street, he is Easterbrook’s rightful successor who helped architect his old boss’s strategy and is continuing to execute their plan. Internally, he presents himself as the anti-Easterbrook, a marathon-running, Filet-O-Fish–loving family man. In his first employee town hall as CEO, Kempczinski talked about his strong Catholic upbringing—that included a mother who at one time aspired to become a nun—and the values that instilled in him. 

NEW BURGER KING Chris Kempczinski in 2018 (then U.S. president, now CEO) presents at the old HQ in Oak Brook, Ill.
Richa Naidu—Reuters

But in the aftermath of Easterbrook’s departure, Kempczinski must do more than rebuild trust with employees and reset the company’s moral compass. Fortune spoke with 27 current and former executives and franchisees who laid out a picture of a company that, like many U.S. institutions, is attempting to remake itself to keep up with the larger forces transforming the world: a pandemic, digital disruption, political and social upheaval. At McDonald’s, this already complex task is made all the more difficult by its powerful network of franchisees. Kempczinski is attempting to repair the company’s internal damage while also feuding with operators over everything from finances to accusations of racial discrimination. McDonald’s is a company with many stakeholders, all of whom have their own relationship with the company’s long history and their own ideas of how its culture should—and should not—evolve as it tries to escape the shadow of the Easterbrook era. 

Newsletter-Red-Line-15

It was early 2015, and McDonald’s financials were all moving in the wrong direction: evaporating market share and profits, deteriorating margins, slowing sales growth. The company had just reported its first year of negative global same-store sales in more than a decade. Investors had lost patience with then-CEO Don Thompson. So had the board, which wanted him to slash $500 million in costs. “Don was reluctant,” says Tim Fenton, McDonald’s former COO who today is a franchisee with 17 restaurants in Florida. “No one wants to be the grim reaper.” Thompson instead retired, comforting crying employees in the halls of Oak Brook the day the news was announced. “Don was a likable guy,” says Cowen analyst Andrew Charles. “He liked to play good cop, which made it challenging to make the hard decisions.” In a statement at the time, Thompson said, “It’s tough to say goodbye to the McFamily, but there is a time and season for everything.”

If Thompson was the good cop, Easterbrook seemed willing to play the bad one. Easterbrook had transformed the U.K. business into one of the company’s most successful markets, waging a battle in Europe against critics of the company’s food. Earlier in his career he’d become a bit of a celebrity around Oak Brook for holding his own during a BBC debate with Fast Food Nation author Eric Schlosser. After stints running U.K. restaurant concept PizzaExpress and then Wagamama, a British chain of ramen noodle bars, he returned to McDonald’s as global chief brand officer in 2013. While some old-timers derided his time away from the company—how big a deal could a British pizza chain really be?—the investment community liked that he had experience on the outside.

Almost immediately after becoming CEO, Easterbrook started cutting costs through a global restructuring plan called Atlas, setting up a face-off between the old and the new guard. Executives at McDonald’s tended to stay forever, many retiring after 40 or 50 years at the company with the expectation that the McFamily would always take care of them. “People could be very uncomfortable with change,” says Floyd, “especially when they built their life around it. All of their friends were from McDonald’s.” 

Now legacy employees sensed that as Easterbrook took layers out of the company, he was purging anyone with McDonald’s history or who supported the old ways of doing business. Indeed, McKinsey consultants soon stalked the halls. Easterbrook hired former Obama administration press secretary Robert Gibbs to run communications, putting McDonald’s in the same company as Amazon and Walmart, who had made it en vogue to bring on onetime White House staffers. He tightened his inner circle. At the start of one leadership meeting, Easterbrook asked who was new to the company or their role. Practically every hand went up.

New hires faced their own struggles, stymied by how McDonald’s operated more like Congress than a corporation. “There was pork barreling, gerrymandering, filibustering,” says a top executive who joined from the tech industry. “It was not a system designed to move strategically or fast when I first arrived.” McDonald’s employees prided themselves on knowing how to navigate its unique structure—the three-legged stool, as founder Ray Kroc had dubbed it, which distributed power between corporate, franchisees, and suppliers. Company doctrine decreed that McDonald’s was at its most commanding and creative when the three were aligned. But to new talent hired to shake things up, that system could be plodding and painful. 

Members of the old guard who escaped layoffs and buyouts faced a final unconventional wave of restructuring. Easterbrook decided to abandon the company’s longtime Oak Brook campus and relocate headquarters to Chicago, a move he said at the time was “symbolic of our journey to transform the brand” and attract younger talent. The new office, which was once the site of Oprah’s Harpo Studios, had a bar and an open floor plan—the signifiers of a modern workplace. Rumors flew that Easterbrook had picked a location far from the commuter train station to make the trip difficult for Oak Brook holdovers, who viewed the move as just another step in the culling of the herd.

Newsletter-Red-Line-15

That bar on the top floor of McDonald’s new headquarters would soon become a major point of focus. When news broke on Nov. 3, 2019, that the board had fired Easterbrook, reports surfaced that the CEO would occasionally drink there with staffers at the company’s weekly Thursday happy hours. A source close to Easterbrook said the CEO, a divorced father of three whose kids were back in the U.K., realized he needed more allies to execute his ambitious agenda and had started to socialize more. 

 Two weeks before Easterbrook’s firing, McDonald’s learned of an allegation that the CEO had engaged in a relationship with an employee. According to the lawsuit the company would later file, the board hired an outside law firm to conduct an investigation, during which the employee said that the relationship was consensual and consisted of text messages and video calls over the course of a few weeks. 

Easterbrook confirmed the woman’s account and said he had never had another relationship—physical or otherwise—with a McDonald’s employee. A source familiar with the matter said the law firm brought in a forensics team to examine Easterbrook’s iPhone 11 and iCloud account; it found no evidence of any additional relationships.

The board voted unanimously to fire Easterbrook for violating the company’s policy about engaging in a relationship with a subordinate. However, it decided not to terminate him for cause, meaning he would leave the company with more than $40 million in severance and compensation. The suit claims the decision was an attempt to move on in a way that protected the company’s interests and created minimal disruption. Insiders told Fortune that some employees resented that Easterbrook walked away with millions after slashing so many jobs.

He did what the board asked him to do. But he did it at the expense of the McFamily.

J.C. Gonzalez-Mendez, former McDonald’s executive

Kempczinski was named CEO, and the matter seemed settled. But in July 2020, the source familiar with the lawsuit says board chairman Rick Hernandez received an anonymous letter alleging that an employee (“Employee 2”) had engaged in a sexual relationship with Easterbrook during his time as CEO. The source said the investigators used the new name to search the company’s servers. The suit claims the investigation found “dozens of nude, partially nude, or sexually explicit photographs of various women” that the company says is evidence Easterbrook had a sexual relationship with not just Employee 2 but also two other women who worked for the company. Easterbrook had sent the photos as attachments in emails from his corporate email to his personal Hotmail account, according to the source. But the suit alleges Easterbrook had deleted them from his phone with “the intention of concealing their existence from the company.”  It further claims that Easterbrook had approved a discretionary grant of restricted stock to Employee 2 “shortly after their first sexual encounter and within days of their second.” 

Faced with this new evidence, the board reversed course, filing its suit against Easterbrook in August. The complaint claims that the board would never have agreed to the terms of the settlement if it had known about his alleged sexual relationships with the three women and the resulting cover-up. Hernandez told Fortune in a statement the suit is an attempt to recover the money but also “to send a clear signal to shareholders and the broader McDonald’s community that [Easterbrook’s] misconduct, which clearly deviated from McDonald’s values, must not be ignored.”

Easterbrook has tried unsuccessfully to get the suit dismissed, with his lawyers calling it “meritless—and misleading.” They’ve argued that the company had all the evidence available to it when it fired him and claimed that the board approved Employee 2’s stock grant. Easterbrook, through his lawyers, did not respond to multiple requests for comment. At press time, the case was in pretrial discovery.

GOLDEN BOY? Then-CEO Steve Easterbrook speaks at the 2015 reopening of a McDonald’s at Frankfurt International Airport.
Christoph Schmidt—DPA/AFP/Getty Images

McDonald’s directors knew that filing the suit would bring unwanted attention to its 2019 decision to fire Easterbrook without cause, says the source familiar with the matter. And the choice has made them a target, with a shareholder group calling for a refresh of the board over what it views as a failure to follow best practices in the “bungled” investigation. The group is demanding the removal of Hernandez, a 25-year director with the company. Hernandez, who is also a director at Chevron, retired under pressure from his board seat at Wells Fargo in 2018 amid its fake accounts scandal. The incident has raised questions about his ability to provide strong governance at McDonald’s. “The board needs to examine itself,” says Dieter Waizenegger, executive director of CtW Investment Group, which is spearheading the shareholder efforts. “It rushed to conclusions to get it over with. That reveals something else about the culture of the company. It opens up the question of what else they are missing.” In a statement to Fortune, McDonald’s said the board believes there needs to be “a balance of institutional knowledge and fresh perspectives among its directors” and that in regards to Easterbrook it has taken “swift and unprecedented actions.” (All of the directors who oversaw the Easterbrook investigation continue to serve on the board.) 

The day after Easterbrook was fired, HR chief David Fairhurst announced he was leaving the company. The two had worked together in the U.K., and Easterbrook had brought Fairhurst over to run global HR, part of Easterbrook’s importing of U.K. executives, or what employees called the British Invasion. The company would later reveal that Fairhurst had been fired for cause; in August, his replacement, Heidi Capozzi, who joined the company from Boeing last year, told employees that he had repeatedly made female McDonald’s employees feel uncomfortable, according to notes from the meeting viewed by Fortune. Fairhurst did not respond to requests for comment.

$10 billion

Estimated cost of controversial modernization plan instituted by Kempczinski. The cost is split between corporate and franchisees.

Several former executives said that alcohol had become a big part of the HR department on Fairhurst’s watch. The Wall Street Journal reported in August that an employee complained after a holiday party in 2018 about heavy drinking and that Fairhurst and “one of his subordinates made inappropriate physical contact.” The company investigated the episode, according to the Journal, and told the employees that it should be reported if it happened again. Two former executives told Fortune that the environment in HR during Fairhurst’s tenure made employees feel as if they had little recourse for reporting bad behavior. The source familiar with the matter says that the whistleblower letter to Hernandez also raised the possibility of improper behavior by other employees in the HR department, which the company has been investigating.

Firing Fairhurst was one of Kempczinski’s first moves as CEO, and he decided as a member of the board to launch the lawsuit against Easterbrook. “In situations like this, there’s a tendency to gloss over it,” he says. “But I thought it was very important for us to be very upfront and frank about what had happened.” He says he hopes employees will see the actions as a sign that they can trust in the company, trust in him. It’s evidence, he says, that the same standards apply to everyone at McDonald’s—and that includes those who sit at the very top.

Newsletter-Red-Line-15

If you want to know the average tenure of a McDonald’s CEO, ask a franchisee. (The answer: six years.) They keep that piece of trivia in reserve in case anyone needs reminding who is really the heart and soul of the brand. Compared with their 20-year franchisee agreements and penchant for passing their restaurants on to their children—McDonald’s Next Generation training program is designed for just this purpose—chief executives might as well be temps. When franchisees clash with a CEO, they employ a tried-and-true strategy: “Wait the bastard out,” as one operator explains it.

Franchisees’ issues with Kempczinski started during Easterbrook’s reign. The then-CEO named Kempczinski head of the U.S. business in 2017, a role that immediately put him in conflict with operators. It was a job that had historically gone to a lifer—someone with “ketchup in their veins,” as the saying went—who had come up through the operations side and knew how to get behind the counter and flip a burger. Graduating from college had never been a prerequisite, and some operators scoffed at Kempczinski’s degrees from Duke and Harvard, considering him an MBA hatchet man. “It’s difficult to swallow when you bring in Chris, who knows nothing about McDonald’s culture, and put him in charge,” says Richard Adams, a consultant to franchisees.

It was a time of widespread anxiety about the future of the company. Although everyone agreed change was necessary, Kempczinski says, there was no agreement about what form it should take. That didn’t stop him from pushing through a plan he helped create: Bigger Bolder Vision 2020, or BBV2020, which called for operators to remodel their restaurants and invest in major technology upgrades. The changes needed to happen quickly and would cost a franchisee who required a full overhaul about $700,000 per store. (The company picked up 55% of the bill for the $10 billion endeavor.) Reflecting on the ultimatum, Kempczinski says, “When you have to make some tough decisions and make some decisions that maybe are unpopular, it’s going to subject you to criticism, and that just goes with the territory.”

The board needs to examine itself. It rushed to conclusions … it opens up the question of what else they are missing.

Dieter Waizenegger, CTW Investment Group

That criticism took the form of the National Owners Association (NOA), a group of franchisees that was created in response not only to BBV2020, but to a broader concern that the company was treating them more like employees than restaurant owners. McDonald’s had always had committees representing the restaurant operators, but the NOA, which claims that about 75% of franchisees are members, is self-funded. It could therefore be more vocal and has its own legal war chest to sue the company if necessary, something the group regularly reminds corporate about. The formation of the NOA represented a major escalation over the usual corporate-franchisee jousting; some thought Kempczinski would get fired over it.

 Over its 66-year history, McDonald’s had made some franchisees very wealthy—together operators globally generate $85 billion in sales compared with the company’s $19 billion in revenue—and the NOA was a realization of their collective power. The group is led by Blake Casper, a third-generation franchisee whose grandfather bought his first franchise from Kroc. Today he is one of the largest franchisees in the U.S. with 60 restaurants. “When Caspers Company speaks, they are to be taken seriously,” Mark Kalinowski, CEO of his eponymous research firm, wrote in an analyst note when the group formed in 2018.

Determining the status of the corporate-franchisee relationship had always been relatively easy. All you had to do was look at restaurants’ cash flow. If it was good, it was a lovefest. If it was bad—look out. But that dictum is not holding right now, which has industry watchers puzzled. The company reported record cash flow for U.S. franchisees in 2020, thanks in part to streamlined menus during COVID-19 and lower labor costs with so much business going through the drive-thru. BBV2020 had also finally started to pay off. And yet there is still so much angst. Kalinowski has been surveying franchisees for 18 years, asking them to rate their relationship with corporate. Last quarter, they gave it the third worst score in the rating’s history. Only two quarters in 2018, when the company was pushing through BBV2020, got lower marks.

When you have to make some tough decisions … some decisions that maybe are unpopular, it’s going to subject you to criticism, and that just goes with the territory.

Chris Kempczinski , CEO of McDonald’s

Two of the big issues at play are, not surprisingly, about money. But they are also intertwined with history and heritage. One is the Happy Meal. McDonald’s has ended its 19-year history of subsidizing the iconic boxed kids’ meal. Operators felt blindsided and outraged that the company would revoke what the NOA calls “a token of partnership”—$300 per store per month—in the middle of a pandemic and all at once rather than through a phased approach.

The second is a $70 million technology bill that both sides firmly believe the other is responsible for paying. Beyond the cost, some franchisees see the charge as indicative of a larger problem. By selling franchisees technology like the company’s app, McDonald’s has violated one of Kroc’s maxims: that corporate must never be a supplier to franchisees—something Kroc believed would lead to conflict of interest and discord. A group of operators has since floated the idea of creating a technology co-op to give franchisees more control.

One former executive told me the current tenor feels reflective of what’s happening in the country more broadly—the acrimony and inability to find common ground. Tensions ran so high that in December franchisees voted to “pause” any nonessential communication with the company, leading a group of Ohio operators to ghost McDonald’s U.S. president Joe Erlinger on a planned  call. “The NOA has some good points,” says Fenton, who is not a member, “but you’re not going to go forward in this system when you’re always at odds.” 

Newsletter-Red-Line-15

In the days that followed the Jan. 6 siege on the U.S. Capitol, CEOs took to their digital-era soapboxes to denounce the riots. Kempczinski sent his own email to the entire McDonald’s system, decrying the “unimaginable attacks on democratic norms and institutions” and endorsing the Business Roundtable’s message that condemned President Trump for inciting the insurrection. 

Such a letter may be standard fare for many Fortune 500 companies, but it was new territory for McDonald’s. The Golden Arches had a history of shying away from anything with even a drop of controversy or politics. It had happily let rival Starbucks step into the role of outspoken corporate citizen, with former CEO Howard Schultz weighing in on everything from gun control to same-sex marriage. “Starbucks has historically been a very progressive company. It admits that, and it’s part of its identity,” says Credit Suisse analyst Lauren Silberman. “It’s never been part of McDonald’s, and it has never strayed from that line.”

 Two major shifts forced McDonald’s to reevaluate that stance—one micro and one macro. Having your former CEO tied up in a sex scandal, especially when you have long touted your all-American, wholesome brand, requires a strong statement. And beyond the internal concerns, the new rules of corporate America increasingly demand that companies sell not just a product but also a set of values. “I don’t think this shift is unique to McDonald’s,” says Katie Beirne Fallon, who was hired by Kempczinski in October as chief global impact officer, a new role for the company. “There’s more pressure on corporations to solve problems in a way that the public sector doesn’t seem to be able to anymore.” 

But to some franchisees, every press release and corporate tweet is a distraction that will end up costing them money. A contingent of operators have grown increasingly uncomfortable with what they view as Kempczinski’s focus on selling a liberal agenda rather than Big Macs. “Corporate needs to immediately stop the sponsoring and acceptance of liberal and social justice issues,” wrote one operator in Kalinowski’s survey in October. “We are a family restaurant and should be entirely neutral on social and political issues.” Another steamed that “social justice warriors” had taken over the company.

NOT-SO-HAPPY MEAL Franchisees are upset about corporate’s decision to stop subsidizing the iconic meal boxes.
Daniel Acker—Bloomberg/Getty Images

Franchisee consultant Adams runs a message board where operators post their musings about the news of the day and, recently, their displeasure over McDonald’s messaging on everything from Black Lives Matter to Asian hate. “Being self-employed makes you conservative,” Adams told me, breaking his policy of not talking politics. “You might not be a Trump supporter or Republican, but fiscally you are conservative.” Kempczinski, he said, was a “dyed-in the-wool liberal environmentalist.” He views the current climate at McDonald’s as a culture clash between “conservatives who want to be left alone to run their business, and McDonald’s corporate, which has become very liberal, as many companies have.” 

Unlike his predecessors who tended to come up through the operations side of the business, Kempczinski grew up as a marketer. In his view, having divergent messaging coming out of headquarters and the restaurants is a problem. “You can’t say your consumer brand stands for inclusion and opportunity if your corporate brand doesn’t stand for those same sorts of things,” he says. In February, the company released its demographic data and said that it would tie part of executives’ bonuses to hitting diversity targets. The announcement makes McDonald’s one of the few companies of its size and scale to make that kind of a commitment. Ten days later the company also said it would review its policies around workplace safety and release new global standards.

It is difficult to reconcile McDonald’s recent DEI and workplace safety developments with the raft of lawsuits the company is facing. The global standards announcement came the same day as a CBS report detailing alleged sexual harassment in McDonald’s restaurants, a long-standing complaint that’s become a bigger and more high-profile issue for the company as groups like the Time’s Up Legal Defense Fund have gotten involved. (At the time, Kempczinski said in a public memo that sexual harassment has “no place in any McDonald’s restaurant” and that the company will ensure that “every allegation is fully and thoroughly investigated.”)

The company is also facing a number of lawsuits from both franchisees and employees accusing it of racial discrimination. The most recent is from Herb Washington, a former track star and MLB player who at one time owned more McDonald’s than any other Black franchisee. He has accused the company of redlining and retaliating against him for speaking out about unfair treatment over the years. “How this is handled is going to have a long impact on this brand,” Washington tells me. “There has to be a reckoning.” 

Former U.S. Attorney General Loretta Lynch, who is representing McDonald’s in the discrimination lawsuits, calls the idea that the company would set Black franchisees up to fail “illogical” and “contrary to [McDonald’s] clear interest in the financial success of all its restaurants.” Her statement continues: “Should these cases proceed, we are confident the facts will show that McDonald’s did not discriminate against these plaintiffs or any other Black franchisees.”

Newsletter-Red-Line-15

These days, practically every missive that comes out of the CEO’s office is addressed to the McFamily. It’s a reversal for Kempczinski, who early on in his tenure as president of the U.S. business caused an outcry by saying, “Relationships matter, but results matter more.” In a company video he recorded in 2019, Kempczinski said he now understood why the “famous or infamous” comment had created such a stir. It’s an unusual admission for a Fortune 500 CEO.

“When I think of Chris K. under Steve, he was very results driven,” says Atlanta-based franchisee Chancellor. “As I think about him today, I think Chris now understands the meaning of McFamily.” She says the company seems more interested in collaborating lately, and that franchisees have eased the “pause” in communications. 

Kempczinski acknowledges that the family feud is not yet resolved, but says the friction is primarily with the U.S. operator leadership rather than the rank-and-file franchisees. A lot of it, he says, goes back to the ways technology and pandemic-fueled shifts like the rise in delivery are changing the business. “We’ll work through what’s going on now,” he says, “but I’m sure in two years from now, there will be another tension. It’s just the nature of the relationship.”

$85 billion vs. $19 billion

Annual sales generated by franchisees compared with the company’s annual revenue

Kempczinski, in true marketer fashion, has leaned hard into the family metaphor. But he’s also aware of the pitfalls that come with it. For those who buy into the concept, there could be a tendency toward silence for the sake of keeping the peace, so Kempczinski says he’s trying to foster what he calls a “speak-up culture.” That covers everything from reporting bad behavior to offering new ideas—something chief global impact officer Fallon says the company’s vast and complicated structure can sometimes hinder. 

But the flip side of using the language of family to talk about your business is that, well, it’s still a business, and some struggle to reconcile all the kumbaya talk with the realities they have lived working in the restaurants. Gillian Thomas, a lawyer for the ACLU who is handling several sexual harassment complaints against McDonald’s franchised and corporate stores, says it’s great that McDonald’s took swift action against its former CEO for his inappropriate behavior. But it’s troubling to her how long McDonald’s has taken and how little it has done to create a safe workplace for line-level employees. “The contrast couldn’t be more stark,” she says. “It says a lot about whose lives they think matter.”

This is one area where both franchisees and the company seem completely aligned: that Easterbrook, Kempczinski, or frankly any other denizen of the corner office shouldn’t stand for all that the McDonald’s system is and aspires to be. “The culture is what happens in the restaurants,” Fenton tells me. “We are the backbone of this system. We are the face in the restaurants, in the communities. Chris K. is the face to Wall Street and on CNBC and Fox Business.” 

“The CEO does not define the organization,” says Chancellor. “They get the attention, but they’re not McDonald’s.” 

Newsletter-Red-Line-15

Who’s the boss?

After a period of stability under CEO Jim Skinner, McDonald’s top job has been a hot seat for nearly a decade. Here’s a look at who’s taken a turn in the corner office. 

Scott Olson—Getty Images

Jim Skinner, 2004–12

Origin: The longtime McDonald’s exec took the reins after former CEO Jim Cantalupo died of a heart attack and his successor, Charlie Bell, underwent treatment for cancer. 
Big accomplishment: Talent and leadership development. 
Exit: Skinner retired on top in 2012 after 41 years with the company. He oversaw eight years of consecutive same-store sales growth and a more than doubling of profits. 

Ray Tamarra—Getty Images

Don Thompson, 2012–15

Origin: The engineer by training took a job at McDonald’s designing robotics for food transport and cooking equipment before moving into operations.
Big accomplishment: Launching the company’s  digital strategy. 
Exit: Performance suffered during Thompson’s tenure, with the company in 2014 reporting its first year of negative same-store sales in more than a decade. 

Drew Angerer—Getty Images

Steve Easterbrook, 2015–19

Origin: Easterbrook joined McDonald’s in the U.K. in 1993; he was running all of Europe by 2010. After a stint elsewhere, he returned as global chief brand officer in 2013.
Big accomplishment: All-day breakfast; increasing the company’s speed.
Exit: Easterbrook added more than $50 billion in market cap but was fired for sexting with an employee. The company is suing him after alleging new details came to light.

Courtesy of McDonald’s

Chris Kempczinski, 2019–present

Origin: The onetime consultant and former Kraft exec joined the company in 2015 as part of Easterbrook’s push to bring outside talent into the insular organization. He helped architect and execute the company’s Bigger Bolder Vision 2020 plan and was named CEO when Easterbrook was fired.
Big accomplishment: Steering the company through the pandemic; U.S. operators had record cash flow in 2020.

Newsletter-Red-Line-15
Herb Washington in one of his McDonald’s franchises, Youngstown, Ohio, March 2021.
Andrew Rush

Supersized suits

The past year and a half has been a litigious time for McDonald’s. In addition to defending itself against a flurry of Lawsuits from franchisees and former employees, it filed one of its own against former CEO Steve Easterbrook.   

Plaintiffs: Victoria Guster-Hines and Domineca Neal 
Filed: January 2020 
The two McDonald’s executives filed a lawsuit claiming that the company “subjected them to continuing racial discrimination and a hostile work environment impeding their career progress.” The suit claims that between dismissals and demotions, the company underwent a “ruthless purge” of Black officers, reducing their number from 42 in 2014 to seven by 2019. McDonald’s says it disagrees with the characterizations in the complaint.

Plaintiff: McDonald’s; defendant: Steve Easterbrook 
Filed: August 2020
After firing its former CEO in November 2019 for sexting with an employee, the company filed a suit against Easterbrook to claw back his compensation after alleging he had sexual relationships with three employees in the year prior to his departure and attempted to cover it up. Easterbrook’s lawyers have said the suit is meritless and misleading and have unsuccessfully tried to get the case dismissed. 

Plaintiffs: 77 Black Former Franchisees
Filed: September 2020 
A group of 52 Black former franchisees filed a federal lawsuit, alleging that the company sent them on “financial suicide missions” by providing “misleading financial information” and directing them to neighborhoods with low sales volumes and high security and insurance costs. Since the initial filing, more plaintiffs have joined the suit. McDonald’s has filed a motion to dismiss and said the suit contains “inflammatory rhetoric, bald accusations, and unadorned speculation.”

Plaintiffs: James and Darrell Byrd
Filed: October 2020
The brothers, who are franchisees, are the lead plaintiffs in a suit seeking class action status, alleging McDonald’s growth strategy was “predatory.” The suit cites data from the National Black McDonald’s Operators Association finding that the cash flow gap between Black and white franchisees tripled between 2010 and 2019. McDonald’s has  said the claim is “without merit and should be dismissed” and asserted that it should not proceed as a class action.

Plaintiff: Herb Washington
Filed: February 2021
The one-time track star has accused McDonald’s of racial discrimination, alleging that he “has suffered deplorable treatment as compared with white franchisees,” that the company steered him to stores in areas they knew would be less profitable, and forced him to sell restaurants to white owners. McDonald’s has said the situation is “the result of years of mismanagement” by Washington and that it has invested “significantly” in his restaurants.

Correction: A previous version of this story misstated the number of years McDonald’s has been subsidizing the Happy Meal for franchisees. It is 19 years, not 40.

This article appears in the April/May issue of Fortune with the headline, “McFamily Feud.”