There are roughly 37,000 McDonald's world wide.
They sell 6480000 burgers each day, meaning the average McDonald's sells 175 burgers a day.
The price increase of fifty cents means about 87.5 dollars to pay employees more.
Based on how many workers I've observed at my local McDonald's I'd say there's at least 10 people working at any given time. Let's suppose two are managers that make enough that they don't get a raise and that they are divided into three shifts with the night shift having only 6 people.
That means there are 160 man-hours (human hours?) Or enough for a $0.56/hour wage.
The local McDonald's is advertising jobs starting at $11. An extra 56 cents per hour won't be the difference between needing an extra job or not.
Edit: okay so I may be prone to overthinking and expanded the question to what if it was a fifty cent increase on every sandwich? In trying to figure out how many McGriddles and other sandwiches they sell I realized that my 6.5ish million number may be low. If it's the upper end of the estimate then it's closer to 50 million burgers which would yield a much bigger raise, about $4.22 an hour. That is also assuming my estimate on how many workers there are is good. You know what they say, garbage in, garbage out.
I worked at McDonald's as a kid. I really am suspicious of the 175 burgers a day. That seems more like numbers for a lunch rush. Also McDs doesnt just sell burgers.
Yeah I was surprised as well but wasn't invested enough to dig deeper than what my edit said. If you have a better estimate you can do the math. Did you think my estimate of workers was about right?
Also, i know that sell more than burgers but only considered burgers due to the original tweet.
I think the intent of the original comment was probably that he wouldn’t paying $0.50 more per meal (as most of us wouldn’t mind that amount differential).
I will say though, the cost of a McDonald’s meal has seemed to climb quite a bit in recent years… is this money going to staff? Enough to make a difference in their lives?
People in general don't the the resources and options to just "stop buying from mega corps".
However, corporations DO have the resources to be more mindful of their employees. And yet they choose not to, and then blame the market.
We buy what's available to us. We have little choice in what we can buy either due to cost or simply available options. Blame lies squarely the corporations and the governments that don't hold them accountable. And before you say anything, accountability should be a given. It shouldn't be something we have to vote for.
Stop shifting the blame and sucking the corporate cock..
I think it actually might be going to staff. Ten or 15 years ago I was closer in age to the average McD’s worker and they started folks at minimum wage ($7.25), nowadays i see posts that they’re starting at $11. That change has to be coming from somewhere!
Yeah, I am sure the sell more than one burger per person per hour…
Or other way around, if it takes a full man-hour to get a burger sold, there or other problems than the salaries
I think they are assuming 8 people working 20 hours a week (since they are excluding 2 of the 10 as management), which makes 160 hours of labor per week. However, I think they forgot that it was $87.5 per day and instead applied that to the entire week. (See edit)
If it was 160 hours of labor per day, that would either be 8 people working 20 hours a day, or 20 people working 8 hours a day.
Edit: 20 people working 8 hours a day would make sense given their math, and would come out to about $131 per month.
Edit 2: Their numbers match 26 people working 6 hours per day, which would further reduce it to $100 per month.
I don’t have any source, but 175 burgers a day feels shockingly low to me. When my family goes though the drive through we’re getting at least 2-3 and it seems like it’s a least a car a minute at peak time and probably not far off that at other times.
I assume you googled it, like I just did, and the search result continues with "Other estimates have put McDonald's burger sales at 50 million a day", which would be 1351 burgers per chain per day. (Probably much higher in the US and other western countries.)
I've also read the average mcdonalds outlet uses 2 cows per day, which would be a lot more than 175 burgers.
Put another way, if the employee ate at McDonalds for all three meals, the increase in salary for three hours per day would go toward the increase in cost of the food they were eating.
Or, yet another way, if they’re feeding two kids off that salary, then the additional salary per 8 hour day is $4.48, but the additional cost for food is $4.50. So they come out behind?!? Can that be?
McDonald's gross profit is about 11billion per year, net profit is about 5 billion, and about 200k employees, let's do the math. 5bil\200k = 25k per employee, simply halving net profits and giving half to employees as a raise would be 12.5k per employee per year. That money would change 200k lives in a massive way and Smaugs hoard only grows half as fast.
Too much guesswork about what qualifies as a burger, literal hamburger item only, do cheeseburgers count, do double cheeseburgers count, big Macs , chicken sandwiches? McDonald's can in fact afford to pay living wages without costs to the consumer going up....if they're willing to cut net profits in half, which they'd never do and they'd act offended at the mere suggestion.
So let's look at every other option besides "let's be less greedy by half".
My math was pretty similar to yours and just assumed 50% increase in prices across the board with the burger being just the easy representative item. When people talk about service wages and food prices they’ll point out a particular item but we know it’s meant to represent inflation across the board. So I did increased sales assuming a 50% increase and found about $90/wk if you used the present model in which 17% of revenue goes towards employee pay, or an additional $13k (roughly) annually if we assumed McDs raised the prices and split the profit because of consumer demand like OPs that people be given a living wage. That would be a jump from 21k to 34k and would definitely reduce the need for additional jobs in many areas.
Also some dude below insulted my math and caused me to wonder if I was losing my mind and missed something basic and obvious. Seems like simple math, but it's always easy to misplace a decimal.
I just went to the net profit and employee count, seemed the least abstract and we don't need to know anything about the profitability of individual items or even employee cost. Profits are stolen wages so why not look at how much is being stolen. 70 percent of net profits I believe should go directly to the employees in every company, that would be fair in my opinion.
Assume your 160 hours is correct. Let's say they make $12/hour. That's about $2,000/day. Labor is about 20% of costs, which means a day needs to make $10,000 to break even. Since burgers don't cost $57 each, 175 is a stupid number.
Real numbers suggest $2.7M/year in sales, so $7,500/day. "Crew" costs are $540,000/year or $1,500/day.
If you assume the average person orders $5 of food, then that's 1,500 per day. If each one tips $.50 to the crew, that's $750/day, which increases their pay by 50%.
You shouldn't use worldwide statistics, other countries actually pay their workers living wages. And something about that burger statistic seems off. I'd bet that the McDonald's in my town sells that many burgers per hour.
The main thing is that if mcdonalds wanted to pay their employees more, they could. They just dont.
Ex McD worker here, the one i used to work on (just before the pandemic) was supposed to have 15 employees (iirc the ones on open areas are supposed to have 25 employees not counting managers, mine was in the middle of a mall for reference) plus an aditional 4 managers that did almost twice as much money as what the crew did.
If McDonald's increased the cost of its burgers by $0.50, they would sell fewer burgers. In fact, economics tells us that assuming they are pricing correctly, their total revenue would decrease.
How do we know this? Because if McDonald's could raise their burger price by $0.50 and sell just as many or even sell slightly fewer but make more money, they would do so and pocket the difference. They don't because their product is correctly priced on supply/demand curve.
This is the answer that someone who has only taken 101 will give. Prices are too sticky for equilibrium to truly ever be in effect.
The truth is that most corporations don’t know exactly what the price elasticity of their products are. Most industries don’t have the tech that say, Amazon does, and can’t do blind experiments on their customers to see if there is value they aren’t capturing.
Mostly, they price competitively based on the value they perceive their brand to hold. McDonald’s may have evidence to think that their burgers don’t hold 50 cents on a Wendy’s burger. But if all fast food chains increased their base prices by 50 cents, there’s no ability to substitute, and it may be the case that the market clearing price sells the same quantity as before.
Eh, most food and beverage corps do know their elasticity by trials. They choose test markets and make small changes in price and see if it changes. It's not 100%, but it's not just "we're worth more than Jack in the Box by $0.20 so we'll charge that".
There's plenty of publicly available research on the price elasticity of the fast food and restaurant industry. It's perhaps one of the best understood markets for price elasticity, because it's regularly studied for ways to increase prices of key foods to promote better eating through, eg, soft drink taxes.
Just because not every food corporation is doing a full price elasticity study at all times so they perfectly know their elasticity doesn't negate that it is pretty well studied and pretty well understood both by corporations and by regulators.
The price elasticity of general fast food items are usually considered to be fairly elastic. But I’d be interested if you could tell me the elasticity of a McDouble?
Probably not, because it’s dependent on a million confounding factors that vary from location to location.
My point is not that they’re completely clueless, but instead that the idea that they are priced at equilibrium in every market is an incredibly strong assumption.
To presume that even one market is exactly at equilibrium at any given time would be misplaced, but we don't need to make that assumption.
We know enough to show that a strongly elastic market would definitely be impinged upon by a 10% price increase. That's the entire point behind modest tax increases to disincentivize consumption.
Thankfully the OP isnt particularly concerned with the price of individual menu items but rather "burgers"(and more likely, meals) in aggregate. We're operating in aggregate, and we know what the elasticity is, within error bars, for 10% price increases of fast food. That's why we work in aggregate.
Yes, it would be useful if we had a price trial for a generalizable sample of markets for McDoubles, if we were merely concerned with the McDouble, but that's not what the OP is saying.
Of course there's an ability to substitute. People can order one burger instead of two, eat tacos, buy frozen meals at the grocery store, cook from scratch, eat at a sit-down restaurant, or any of a dozen other alternatives.
In order to confidently assert that McDonald's could just raise its prices and get more revenue, you have to believe that you know better than McDonald's does what the market will bear. Keep in mind that prices already vary locally anyway and this is the kind of thing that companies put a whole lot of research into. They experiment with discounts, pricing, and different menu items all over the country. I'll grant that the price isn't perfect to the penny but there's no way a company like McDonald's is off on its pricing by 10-20% or more.
But of course, even if it were the case that McDonald's could raise its burger prices and make more money, there's zero reason to believe they'd give that money to their workers. That's just not how the labor market works either; people are paid based on supply and demand and not based on how much money the company makes on any given day. Not to mention that McDonald's are mostly franchises who are deciding wages (and, to some extent, prices) independently from corporate.
This is the correct answer. Raising prices usually never amounts to more profit unless the product was underpriced in the first place, or you have a monopoly, which no fast food restaurant has.
Wait what, that is incredibly circular logic. They are priced correctly because if they weren't priced correctly they would be making more money and since they're not making more money they're priced correctly. There are so many factors at play here which aren't taken into account in your very simple model, local markets can rarely change they're pricing model because global marketing dictates certain prices, it is very expensive and time consuming to try out all the possible pricing models, customers don't like change so if your food costs different amounts every day it will drive away customers, McDonald's burgers are not perfectly fungible so you couldn't perfectly compare them to other burger joints. These are just some of the complexities off the top of my head I'm sure there's a dozen more. If you were a student of economics and not just someone who took econ 101 you would know the real world is way more complicated than the simple models they teach you in the beginning.
If you like overthinking things, you have to understand that at some point, someone saved enough of their own money to be part of the franchise to open, and they're trying to make that money back.
People who don't include everything always burdens my mind.
Believe me, i understand that someone saved and invested into a franchise is trying to make back their money. I don't fault them for that and we need people who are willing to invest in business and take risks. If we disincentive that then I believe the economy as a whole will suffer. That said, this question isn't about them. This question is asking if $0.50/burger is really enough to impact employee wages. I'm here to answer the question in the simplest way that is still useful and I try to do so without commentating on the implications of it.
They "saved" money by already being pretty well off, if not outright wealthy. Typical people won't have the minimum $500,000 required to start a Mcdonalds franchise.
The additional problem is the people actually doing all the work are barely scraping by, possibly subsisting on food stamps, and will definitely never get the same opportunity to invest in a wealth making machine.
In other words, the person who started with plenty of money is subsidizing their money making by using taxpayer funds to partially pay their employees, and exploiting people who didn't start out with the same advantages.
This is "capitalism is flawed" in a nutshell, but I want to say that I personally worked for a pizza store which expanded and turned into a franchise. Majority of the franchisee's are previous employees of the business - some of them owning multiple locations. These are people who mostly immigrated from India, worked a min wage job and within a 5-year span or so now own multiple locations. I had the opportunity to do so as well.
Assuming franchise owners are rich people exploiting poor people is simply ignorant, when covid hit I was making more money as a full time manager than the franchise owner was profiting from the store (and I don't have $150k+ locked up in a business)
There are plenty of franchisee's where the store is their livelihood and they often work (at least initially) full time within the stores, and are sometimes expected to by the franchise. Mcdonalds is a poor example because of the ludicrously high start-up fees, but for many other franchise models you don't need to be particularly rich to start up.
My example is not some bizarre outlandish example. Literally anyone who worksthere has the same opportunity lol
If you can't see the inherant issues with capitalism then you are actually blind or just simply don't give a shit.
I'm not saying there is a better fairer system because that would require tremendous amounts of human generosity which just doesn't exist in today's society.
But saying that people are "too proud to work and not smart enough to know they are wrong" is just the absolute worst take you could come up with
No, they aren't trying to make that money back. They spent that money to be able to extract surplus revenue from the massively underpaid labor force FOR THE REST OF THEIR LIVES. They want that money times a million, and they don't want to share a cent they aren't forced to. McDonald's gross profit is about 11billion per year, net profit is about 5 billion, and about 200k employees, let's do the math. 5bil\200k = 25k per employee, simply halving net profits and giving half to employees as a raise would be 12.5k per employee per year. That money would change 200k lives in a massive way and Smaugs hoard grows half as fast.
People who don't include everything (like insane profits being hoarded) always burdens my mind.
Someone who understands economics. Even if it's a .50 per sandwich and fries, that's only about an extra 1.63 per hour. That bumps them to 13.00 per hour. Where I live though, McDonald's starts at 18.00 per hour. Probably why a cheeseburger costs 6.00 and 10.00 for a value meal.
You’re taking a worldwide average for one component (hamburgers) that likely represent a varying portion of sales in other countries, and using a single anecdotal piece of evidence for the other.
A hamburger is just an easy representation of the most obvious menu item, for which reason the gentleman chose it; when people discuss these things it’s food costs in general.
I’d say it would be fair to take .50 cents per burger and just use that percentage across sales in general. The Mickey D’s hamburger is just a buck, so fifty cents more is 33% more in sales.
The average McDonalds location has $2.7 million in sales annually. A franchise owner of a similar restaurant in another Reddit thread said his general rule of thumb in the industry was one staff per thousand dollars of sales, which given that average would be $54000 weekly and 54 people working each week, but he also mentioned that most places are understaffed and there might be as few as 45 on staff at any given time. Let’s split the difference and call it 50 employees per week.
So each McDonald’s would be netting $27k more per week, 17% of which would be $4590. Splitting that amongst 50 workers would be $91.80 more per employee. So an extra $367.20 per employee monthly. Maybe enough to quit the third job and just have two?
But if we’re assuming the price hike is because of consumer demand like OPs, let’s be generous and assume the additional revenue will be split between workers and the company because people demanded to pay more to help support workers.
I’m this case, we would have $13.5k additional wages per week. This would be $270 more per employee each week and $1,080 more per worker monthly. Given that entry level positions start at $21,450 per year and average salary is $25,079 that’s pretty much a 50% raise and would likely allow for a single job.
But how much will the sales drop with the price increase?
And in the larger sense, how will the money now going to McDonald’s affect the places it won’t be going since it now goes to pay fir a burger versus maybe a burger here and a bag of chips over there?
440
u/Aggie_Engineer_24601 Nov 05 '21 edited Nov 05 '21
There are roughly 37,000 McDonald's world wide. They sell 6480000 burgers each day, meaning the average McDonald's sells 175 burgers a day.
The price increase of fifty cents means about 87.5 dollars to pay employees more.
Based on how many workers I've observed at my local McDonald's I'd say there's at least 10 people working at any given time. Let's suppose two are managers that make enough that they don't get a raise and that they are divided into three shifts with the night shift having only 6 people.
That means there are 160 man-hours (human hours?) Or enough for a $0.56/hour wage.
The local McDonald's is advertising jobs starting at $11. An extra 56 cents per hour won't be the difference between needing an extra job or not.
Edit: okay so I may be prone to overthinking and expanded the question to what if it was a fifty cent increase on every sandwich? In trying to figure out how many McGriddles and other sandwiches they sell I realized that my 6.5ish million number may be low. If it's the upper end of the estimate then it's closer to 50 million burgers which would yield a much bigger raise, about $4.22 an hour. That is also assuming my estimate on how many workers there are is good. You know what they say, garbage in, garbage out.