Torts and Liabilities

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Liebeck v. McDonald's Restaurants (the Hot Coffee Case)

a) McDonald's is a multinational restaurant chain with its head office in the United States that serves hamburgers, sandwiches, fries, and drinks. The company has the largest revenue chain by services and revenue and has more than 69 million customers daily. Most of its revenues come from its franchisees. McDonald's has operations in 100 countries and is considered to be the second-largest employer in the world. McDonald's is known for its fast food and its Big Mac is a double-decker burger with tomato, lettuce, and "secret sauce". McDonald's was set up in 1940 by Maurice & Richard McDonald's, in San Bernardino California. The restaurant was repositioned as a hamburger stand and the two founders began franchising their brand to other businesses. The golden arches were first used in 1953 and in 1955 Ray Kroc, the company's franchising agent bought the company while expanding it. Croc was responsible for the expansion of McDonald's and its growth into international territories. One of the marketing ploys of McDonald's is the creation of the fictional individual Ronald McDonald. His friends include Grimace, the Fry Kids, Birdie the Early Bird, and Mayor McCheese.

Today, McDonald's gets revenues from company-owned stores, fees and royalties from its franchisees, and rents. Today, McDonald's increases its revenues by increasing its franchisees. It supports them with building purchases, collects rent from franchisees, and gets brand royalties from them. McDonald's enhances its revenues by owning 45% of the land of its restaurants and 70% of its buildings. The net income of McDonald's in 2019 was $6.0 billion, it declined in 2020 to $4.7 billion because of the pandemic, it increased to $7.5 billion in 2021, and stabilized at $6.17 billion in 2022. McDonald's quarterly sales growth rate is 4.1%, the gross profit is $13.2 Billion, and the net income available to common shareholders is $6.8 billion. Overall, McDonald's is a financially strong company.

b) The lawsuit impacted the business and industry little. Other people have continued to report injuries from spilling McDonald's coffee. In 2019 and i2020, two more cases were filed in Texas alleging injuries from very hot coffee. The coffee firms have shown Ms. Liebrick to be the villain. McDonald's has not cut down the temperature at which it serves coffee. It continues to serve coffee at 176-194 degrees Fahrenheit (e). The two changes observed are that the warning on the cups has become stronger and the cups are made of rigid foam so that future liability can be minimized. From the industry perspective, The Specialty Coffee Association of America supports improved packaging methods instead of lowering the temperature of serving coffee. The association has also provided support to companies for subsequent burn cases. Other companies such as Starbucks sold coffee at 175-185 degrees Fahrenheit (f). The reason is that subsequent ...