Reference no: EM132862356

Transfat Inc. is a publicly traded fast food company with locations in inner cities throughout the United States. Each of its restaurants are independently owned and operated by a franchisee. The franchisees' only contractual obligation is to sell the trademark Transfat Giganto Burger and Gastro Fries. These items are supplied by the parent company. In return for benefiting from the company's extensive marketing and robust supply chain, franchisees pay Transfat Inc. 20% of their gross earnings each year.

85% of Transfat's customers, and 72% of Transfat's employees are underrepresented minorities, while only 2% of its franchisees are from minority groups.

Although the company has benefited from rapid growth in recent years, there are some complaints about said expansion's effect on minority communities. Over 30% of minorities suffer from obesity, while less than 20% of non-minorities are obese.

The new CEO, Lamar Smith, believes that it is in the best interest of the company to increase the number of minority franchisees. In order to increase the number of minority owners, Smith has decided to implement a franchisee affirmative action policy.

This policy would consist of guaranteeing 80% of all new franchises for minority ownership.

The company does not expect that there will be a dearth of applicants, either minority or non-minority.

However, historically there have been many more non-minority than minority applicants.

Discuss the ethical and social responsibility issues surrounding Mr. Smith's decision?