McDonald's has paid out $700,000 to members of the Muslim community after one of its franchise restaurants in Michigan falsely advertised its food had been prepared according to Islamic dietary laws.

A Muslim Detroit resident, Ahmed Ahmed, claimed he bought a chicken sandwich in September 2011 at a Dearborn McDonald's but found it was not halal - meaning it did not meet Islamic requirements for preparing food.

The restaurant is one of two in Dearborn which sells halal products to cater for an area with one of the nation's largest Arab and Muslim communities.

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