McDonald’s should be investigated for gouging franchisees on rents and deceiving them about how the amounts are calculated, a labor union said in letters to two attorneys general.

The biggest U.S. fast-food chain collected more than $3 billion in rent from franchisees in the country in 2015, more than a third of its U.S. revenue that year, the Service Employees International Union said Tuesday in a statement.

The rents are calculated in a secretive process that violates state law in California and Illinois, said the union, known as SEIU. That’s making it harder for the franchisees to pay higher wages, the union said.

The labor group asked California Attorney General Xavier Becerra and Illinois Attorney General Lisa Madigan to subpoena McDonald’s for information about how it calculates rents, as well as any documents about undisclosed or hidden franchisee costs.

“McDonald’s is luring potential franchisees into paying rents that far exceed industry norms, all while reassuring them that everything is appropriate and nothing unusual is taking place,” SEIU said in the complaint.

McDonald’s, based in Oak Brook, Illinois, didn’t immediately respond to an email sent to the company’s press office.

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McDonald’s requires franchisees to lease their restaurants from the company, with rent eating up an average of about 10.7 percent of sales, according to the letters. SEIU contends that the fast-food chain’s rate of return on its real estate ranges from 10.5 percent to 19.3 percent — between double and triple the industry average of 5.9 percent.

McDonald’s returns compared to its competitors’ cast doubt “on the company’s claims that its base rent generates merely an appropriate return on real estate investments,” the union said.

SEIU, which has clashed with McDonald’s over increases to the minimum wage, said its findings are based on an analysis of publicly available franchising documents and a survey that the union conducted of 267 current and former McDonald’s franchisees.

The hamburger chain’s disclosures to franchisees about their rent costs are inaccurate and misleading because they don’t disclose the rent formula as required under state laws, the union said.

McDonald’s rent income is no surprise since its first chief executive officer, Harry Sonneborn, told investment analysts that the company “was in the real estate business, not the hamburger business,” according to the letters.

“McDonald’s real estate system is similar today to what Sonneborn devised 50 years ago,” SEIU said.

McDonald’s re-opened its re-built restaurant on Main Street in Farmington in 2015.


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