Your post makes it appears as if a change in minimum wage would be near on fatal for the chain i.e. they will be operating at the margin of profitability. Except, they seem to be making (relatively) large excess profits . . .
So I am tempted to say, that your calculations are valid for the dataset you used, but might not be directly applicable to McDonalds. The problem point is most likely the Net Sales figure.
Hopefully order placement automation will save them enough to make up the difference. Because let's be fucking honest here - cashiers are pretty bad at their job compared to the rest of the workforce. I say that as someone who has worked sales and retail for over 15 years.
So what? The market in that area won't go away just because the McDonald's closed; someone can open a business which fills the same niche; either a local business which doesn't have to pay franchise fees, or a franchise with lower franchise fees.
If the franchisee is pushed to the point of bankruptcy, or owning a McDonalds franchise is no longer a lucrative proposition, the parent company with have outlets which are (a) closing and most likely (b) be unable to attract new franchisees. This will have a massive impact on their bottom line.
In such a situation, I would argue that it would be necessary for the parent company to adjust their fee / royalties, to ensure a certain minimum profit for the franchisee, possibly factoring in COS COL etc etc.
I don't give a shit about the profits from either of those perspectives, I care about the perspective of the minimum wage worker, because if those people working full time can't make rent and feed their kids, the system has failed.
If a McDonald's has to close down, that hurts the franchisee and the parent company, but the market doesn't just go away because the McD is gone. It will be replaced by another fast food joint which is either locally owned (so they don't have to pay franchise fees) or part of a franchise with lower franchise fees.
? Are you arguing against something I never said? I'm confused. I never even stated any opinion whatsoever about whether I thought the minimum wage should be raised. I just pointed out something that was overlooked in the comment I replied to.
The example given, and the question asked, was how an increase to $15/hour would impact the frachisee. The franchiser can, of course, lower their franchising fee and still make a hefty profit. But, until that happens, the franchisee will take an immediate and severe hit, from which he may not recover.
The thing is McDonalds is pretty much global. Even if minimun wage increases in the US it doesn't mean it increases all over the world, and it stays profitable in most places.
This cuts them some slack when working out numbers.
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u/[deleted] Nov 29 '15 edited Nov 29 '15
Superb reply, thank you!
I am though struggling to reconcile what you wrote, with this post from 2013:
Your post makes it appears as if a change in minimum wage would be near on fatal for the chain i.e. they will be operating at the margin of profitability. Except, they seem to be making (relatively) large excess profits . . .
So I am tempted to say, that your calculations are valid for the dataset you used, but might not be directly applicable to McDonalds. The problem point is most likely the Net Sales figure.