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The average McDonald's makes $1.75 million per year in profit for the owner and the average payroll and payroll expenses are in the neighborhood of $500k (accor

The average McDonald's makes $1.75 million per year in profit for the owner and the average payroll and payroll expenses are in the neighborhood of $500k (according to their franchise information). Let's assume all of them are making minimum wage, so $15 per hour would basically double it (the average wage is almost definitely higher than $7.50 considering minimum wage in some area). Now the average profit per year for a McDonalds owner is $1.25 million per year. You think the activity is going to cease? Of course it may make automation about $500k more appealing, but automation was happening one way or another.

matthewmarkus 9y ago
To simplify things, let's say the McDonald's owner owns the property. If his profit drops to $1.25 million per year, but he can sell the property and invest the proceeds so that he earns $1.3 million per year, then the activity will cease. Even if a McDonald's is profitable, something else may be even more attractive when costs change.
- learc83 9y ago
  The average cost to start a McDonald's is around $1 million. The rate of return is absurd. Most franchise owners also become experts running at running a restaurant franchise making them even less likely to move into something else. McDonalds isn't going anywhere when minimum wage goes up. Your point would have been better if you'd been talking about someone working at a small struggling restaurant that was barley able to stay open. Even then, you're completely ignoring the effect that moving money from the wealthy to low income earners will have on the economy (read up on velocity of money). There are definitely more efficient ways to do this, but you can't just ignore the effect and state that minimum wage = fewer jobs.
  - matthewmarkus 9y ago
    I never said that minimum wage = fewer jobs in all contexts. It will definitely destroy certain employment opportunities in certain circumstances. I suppose I would consider it an accelerant for automation.
    - learc83 9y ago
      You implied that a minimum wage of $15 would eliminate fast food jobs. The numbers indicate that it won't. >It will definitely destroy certain employment opportunities in certain circumstances. Sure and a 0.1% sales tax will destroy certain employment opportunities in certain circumstances. The key is to find a balance. I'd prefer a universal basic income or an increase in the EITC. But I think fighting for a $15 minimum wage that won't kick in until 2024 at the earliest, and will probably be negotiated down to $12, is better than what we have now. $15 in 2024 will be about $12.50 in 2016 dollars based on projected inflation by the way.
  - lsiebert 9y ago
    The US has raised the minimum wage multiple times. Want to read a study of seven decades of historical data about what happens when the minimum wage increases? http://www.nelp.org/publication/raise-wages-kill-jobs-no-correlation-minimum-wage-increases-employment-levels/ http://www.nelp.org/publication/raise-wages-kill-jobs-no-cor... There is no correlation with decreased employment, in fact most times, there are employment increases, and these increases are bigger in industries more effected by minimum wage like retail and hospitality.
- ams6110 9y ago
  McDonalds franchisees do not own the property. That is how corporate keeps them under control.
  - matthewmarkus 9y ago
    Yes, I purposely simplified things. In the case of the corporation, it has to look at the rent it can squeeze from the franchisee versus selling or repurposing the land. In that case, it is even more likely the store will be shut down since the corporation has way more opportunity cost than the franchisee.
ams6110 9y ago
Having worked at McDonald's (though nearly three decades ago) I question that number. Thats sounds more like sales. 1.75 million in profit is nearly $5,000 per day. Assuming 10% profit that's almost $50,000/day in sales, which stretches credibility for the average restaurant.
- lsiebert 9y ago
  Yeah, I found data on the average Mcdonalds franchise costs vs profit. http://www.mymoneyblog.com/mcdonalds-franchise-cost-vs-profit.html http://www.mymoneyblog.com/mcdonalds-franchise-cost-vs-profi...

matthewmarkus 9y ago

To simplify things, let's say the McDonald's owner owns the property. If his profit drops to $1.25 million per year, but he can sell the property and invest the proceeds so that he earns $1.3 million per year, then the activity will cease. Even if a McDonald's is profitable, something else may be even more attractive when costs change.

learc83 9y ago
The average cost to start a McDonald's is around $1 million. The rate of return is absurd. Most franchise owners also become experts running at running a restaurant franchise making them even less likely to move into something else. McDonalds isn't going anywhere when minimum wage goes up. Your point would have been better if you'd been talking about someone working at a small struggling restaurant that was barley able to stay open. Even then, you're completely ignoring the effect that moving money from the wealthy to low income earners will have on the economy (read up on velocity of money). There are definitely more efficient ways to do this, but you can't just ignore the effect and state that minimum wage = fewer jobs.
- matthewmarkus 9y ago
  I never said that minimum wage = fewer jobs in all contexts. It will definitely destroy certain employment opportunities in certain circumstances. I suppose I would consider it an accelerant for automation.
  - learc83 9y ago
    You implied that a minimum wage of $15 would eliminate fast food jobs. The numbers indicate that it won't. >It will definitely destroy certain employment opportunities in certain circumstances. Sure and a 0.1% sales tax will destroy certain employment opportunities in certain circumstances. The key is to find a balance. I'd prefer a universal basic income or an increase in the EITC. But I think fighting for a $15 minimum wage that won't kick in until 2024 at the earliest, and will probably be negotiated down to $12, is better than what we have now. $15 in 2024 will be about $12.50 in 2016 dollars based on projected inflation by the way.
- lsiebert 9y ago
  The US has raised the minimum wage multiple times. Want to read a study of seven decades of historical data about what happens when the minimum wage increases? http://www.nelp.org/publication/raise-wages-kill-jobs-no-correlation-minimum-wage-increases-employment-levels/ http://www.nelp.org/publication/raise-wages-kill-jobs-no-cor... There is no correlation with decreased employment, in fact most times, there are employment increases, and these increases are bigger in industries more effected by minimum wage like retail and hospitality.
ams6110 9y ago
McDonalds franchisees do not own the property. That is how corporate keeps them under control.
- matthewmarkus 9y ago
  Yes, I purposely simplified things. In the case of the corporation, it has to look at the rent it can squeeze from the franchisee versus selling or repurposing the land. In that case, it is even more likely the store will be shut down since the corporation has way more opportunity cost than the franchisee.

ams6110 9y ago

Having worked at McDonald's (though nearly three decades ago) I question that number. Thats sounds more like sales. 1.75 million in profit is nearly $5,000 per day. Assuming 10% profit that's almost $50,000/day in sales, which stretches credibility for the average restaurant.

lsiebert 9y ago
Yeah, I found data on the average Mcdonalds franchise costs vs profit. http://www.mymoneyblog.com/mcdonalds-franchise-cost-vs-profit.html http://www.mymoneyblog.com/mcdonalds-franchise-cost-vs-profi...