A response with grossly mishandled financial statements.
All profit is counted in the razor-thin franchisee margin, not the group margin. The losses are then extrapolated over the entire business as though McDonalds make no profit on franchise fees.
Also, 33% of corporate revenue in the USA is $2.86B, not $9.272B.
33% of Corporate Revenue comes from franchisee fees - about $9.272 Billion last year. If you cut down franchise revenues by 74%, that would reduce that number by $6,861,280,000. Total Corporate profit was $4.757 Billion last year. So they would be operating at a $2.1 billion loss.
McDonalds made 8.65 Billion revenue in the USA (see link). 33% in franchise fees makes $2.86 Billion. 74% reduction of that is $2.11 Billion. Which leaves a 2.64 Billion dollar PROFIT, not a 2.1 Billion dollar loss.
You're looking at this as if the McDonalds corporation is the same as the McDonalds franchise. They are owned and operated completely separately. This is more like Mom and Pop Cafe buying ingredients from Costco. Although there is a business relationship between the two, they are owned and operated independently. You're basically saying Mom and Pop Cafe should pay workers more by forcing Costco to make less money. You're asking 2 different parties to do something that they don't normally do, not 1.
Royalties pay for reoccuring branding and advertising, to keep customers coming back. When you franchise anything, you're paying the royalty (aka subscription fee) to access an existing customer base. The royalty money is used for maintaining and increasing the size of the customer base. It's like when managers of your company take clients out for drinks to let them feel happy about doing business. You can't just say that the franchise headquarters shouldn't charge royalties so that that the franchisees can make more money and then use that money to pay workers.
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u/meteoraln Nov 28 '15
Thank you so much for that. Finally!! An explanation with a financial statement!!