5 ms·

> Minimum wage laws are fundamentally a tax on low-margin businesses "For the fiscal year 2017, McDonalds reported earnings of US$5.2 billion" Why are you mak

by grrowl 7y ago

> Minimum wage laws are fundamentally a tax on low-margin businesses "For the fiscal year 2017, McDonalds reported earnings of US$5.2 billion" Why are you making this sound like a bad thing? What's with the EITC drum-beating in this thread?

scarface74 7y ago
You realize there is a difference between revenue and profit? https://www.prnewswire.com/news-releases/mcdonalds-reports-fourth-quarter-and-full-year-2017-results-and-first-quarter-2018-cash-dividend-300589866.html https://www.prnewswire.com/news-releases/mcdonalds-reports-f... Their net income was less than $700 million and it’s not corporate McDonalds that pays the employees in the stores - it’s the franchise owners. Franchise owners make less than $70K a year per store. https://work.chron.com/average-income-fast-food-franchise-owners-24587.html https://work.chron.com/average-income-fast-food-franchise-ow...
- Spooky23 7y ago
  McDonalds franchise owners make 3x that. The average is dragged down by low rent chains like Subway or Wendy’s Keep in mind that the owners make that after leasing the building from McDonalds. It’s a turnkey business and there are many, many people who have gotten pretty rich on operating these places.
  - scarface74 7y ago
    From the cited article. So after investing $1-$3 million dollars, a McDonalds franchise owner makes about the same as a software engineer in a major US city and the software engineer didn’t have to spend $1 to $3 million and has a lot less risk. Most franchise owners aren’t “starting a business” they are “buying a job”. But a 2013 report from Franchise Business Review dug down into the numbers and came up with a net profit of $66,000 per franchise. McDonald's did much better with an average of around $150,000 per restaurant. But when you consider that a McDonald's franchise costs more than $1 million and can easily run more than $2 million, even McDonald's doesn't generate excellent average returns on investment. The fast-food franchise business is tough, and success doesn't come easy.
    - Spooky23 7y ago
      Remember with a global system, average doesn’t mean major city. It’s apples and oranges to compare to a SWE. With Chick-Fil-A, operators just get one store. They are buying a job. McDonalds franchisees usually own multiple stores and have different business interests.
      - scarface74 7y ago
        And wouldn’t a McDonalds store in the middle of nowhere also make less money than a major city? But even at $150K net income, there isn’t much room to raise salaries.
        Spooky23 7y ago
        McDonalds is the place where you can get something like a cheeseburger for a dollar without getting food poisoning. McDonalds was a high quality product at one time. There’s no regulatory environment that prevents exploitation of the workforce, so doing so is the low risk choice. The company chose a low quality bar and competitive pressure forces them to mercilessly attack cost.
        scarface74 7y ago
        Back of the napkin math. If we assume that a McDonalds is open 16 hours a day and they have an average of 4 people every hour. 16 hours x 4 people x 7 days x 52 weeks Equals about 2400 hours a year. How much could they raise the hourly rate of their employees and raise prices before the demand went down and still be profitable if they are only making $150K now? At what point does it not make sense to invest $1 - $3 million a year to make meager returns?
        Spooky23 7y ago
        That is McDonald's problem. They may need to look at the business and franchise model. They have a fubar business with hundreds of SKUs. 5 Guys is able to make money on a freshly cooked burger, higher standards for quality and higher cost. Make a "McDonald's Classic" concept that cooks real food at higher prices. Again, McDonald's makes a business decision to have a system that encourages franchisees to utilize labor at the lowest cost possible because it is the lowest risk decision for them. For the larger company, the profitability struggles of the operators aren't a world-ending problem -- they own the real estate assets, and get to be an exclusive supplier and pull their percentage of gross sales first. From my POV, I don't care a whit about McDonald's -- as a human it's awful that people are treated the way that they are, and as a taxpayer it's awful that society as a whole gets to pick up the pieces when hard working people fail and end up dependent on social services for survival. If McDonald's business can't deliver, that's their problem. The demand for food isn't going anywhere and a competitor will fill the void.
ThrowawayR2 7y ago
Just a reminder that revenue != profit. McDonald's net income for 2017 was US$698.7 million [EDIT] which is only 13% the number cited in the above post. Don't be misled by people unintentionally (we hope) citing revenue numbers to bolster their case.

by grrowl 7y ago

scarface74 7y ago

You realize there is a difference between revenue and profit? https://www.prnewswire.com/news-releases/mcdonalds-reports-fourth-quarter-and-full-year-2017-results-and-first-quarter-2018-cash-dividend-300589866.html https://www.prnewswire.com/news-releases/mcdonalds-reports-f... Their net income was less than $700 million and it’s not corporate McDonalds that pays the employees in the stores - it’s the franchise owners. Franchise owners make less than $70K a year per store. https://work.chron.com/average-income-fast-food-franchise-owners-24587.html https://work.chron.com/average-income-fast-food-franchise-ow...

Spooky23 7y ago
McDonalds franchise owners make 3x that. The average is dragged down by low rent chains like Subway or Wendy’s Keep in mind that the owners make that after leasing the building from McDonalds. It’s a turnkey business and there are many, many people who have gotten pretty rich on operating these places.
- scarface74 7y ago
  From the cited article. So after investing $1-$3 million dollars, a McDonalds franchise owner makes about the same as a software engineer in a major US city and the software engineer didn’t have to spend $1 to $3 million and has a lot less risk. Most franchise owners aren’t “starting a business” they are “buying a job”. But a 2013 report from Franchise Business Review dug down into the numbers and came up with a net profit of $66,000 per franchise. McDonald's did much better with an average of around $150,000 per restaurant. But when you consider that a McDonald's franchise costs more than $1 million and can easily run more than $2 million, even McDonald's doesn't generate excellent average returns on investment. The fast-food franchise business is tough, and success doesn't come easy.
  - Spooky23 7y ago
    Remember with a global system, average doesn’t mean major city. It’s apples and oranges to compare to a SWE. With Chick-Fil-A, operators just get one store. They are buying a job. McDonalds franchisees usually own multiple stores and have different business interests.
    - scarface74 7y ago
      And wouldn’t a McDonalds store in the middle of nowhere also make less money than a major city? But even at $150K net income, there isn’t much room to raise salaries.
      - Spooky23 7y ago
        McDonalds is the place where you can get something like a cheeseburger for a dollar without getting food poisoning. McDonalds was a high quality product at one time. There’s no regulatory environment that prevents exploitation of the workforce, so doing so is the low risk choice. The company chose a low quality bar and competitive pressure forces them to mercilessly attack cost.
        scarface74 7y ago
        Back of the napkin math. If we assume that a McDonalds is open 16 hours a day and they have an average of 4 people every hour. 16 hours x 4 people x 7 days x 52 weeks Equals about 2400 hours a year. How much could they raise the hourly rate of their employees and raise prices before the demand went down and still be profitable if they are only making $150K now? At what point does it not make sense to invest $1 - $3 million a year to make meager returns?
        Spooky23 7y ago
        That is McDonald's problem. They may need to look at the business and franchise model. They have a fubar business with hundreds of SKUs. 5 Guys is able to make money on a freshly cooked burger, higher standards for quality and higher cost. Make a "McDonald's Classic" concept that cooks real food at higher prices. Again, McDonald's makes a business decision to have a system that encourages franchisees to utilize labor at the lowest cost possible because it is the lowest risk decision for them. For the larger company, the profitability struggles of the operators aren't a world-ending problem -- they own the real estate assets, and get to be an exclusive supplier and pull their percentage of gross sales first. From my POV, I don't care a whit about McDonald's -- as a human it's awful that people are treated the way that they are, and as a taxpayer it's awful that society as a whole gets to pick up the pieces when hard working people fail and end up dependent on social services for survival. If McDonald's business can't deliver, that's their problem. The demand for food isn't going anywhere and a competitor will fill the void.

ThrowawayR2 7y ago

Just a reminder that revenue != profit. McDonald's net income for 2017 was US$698.7 million [EDIT] which is only 13% the number cited in the above post. Don't be misled by people unintentionally (we hope) citing revenue numbers to bolster their case.