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Yea sure, but you ignore that Chipotle and McDs have magnitudes larger supply chain optimizations, cash reserves, and operate in high and low cost markets such

Yea sure, but you ignore that Chipotle and McDs have magnitudes larger supply chain optimizations, cash reserves, and operate in high and low cost markets such that there is more margin to keep the business afloat when there is a squeeze.

seanmcdirmid 5y ago
> Yea sure, but you ignore that Chipotle and McDs have magnitudes larger supply chain optimizations, cash reserves, and operate in high and low cost markets such that there is more margin to keep the business afloat when there is a squeeze. Aren't most McDonalds franchises? You definitely see individual owned stores going out of business.
- jwagenet 5y ago
  Franchisees still benefit from the supply chain. Even if individual stores wouldn't be subsidized by the company, they benefit from brand recognition and already operating at the price floor for food you dont make yourself.
- MangoCoffee 5y ago
  >Aren't most McDonalds franchises? his point still stand. https://boxaroundtheworld.com/mcdonalds-supply-chain-management/ https://boxaroundtheworld.com/mcdonalds-supply-chain-managem... "McDonalds is a fine example of how vertical integration can keep costs down and profits up. They grow their own beef through contracted producers, process their own meat, create their own spices and mixes in factories that they contract, grow their own potatoes and other vegetable through contracted producers, transport their goods on their own. McDonalds owns the land that their restaurants are situated on, so they do not have to deal with leases and landlords. They have taken control of their supply chain nicely." edit: a mom and pop operation can't compete with McDonalds. McDonalds can increase employees wages thus force others to do the same even if mom and pop doesn't have a vertical integration like McDonalds. by increase wages, it force smaller operators to cut staffs or shut down. McDonalds can keep their competition down.
- kcplate 5y ago
  > You definitely see individual owned stores going out of business. Where? In my five+ decades on this planet I have never seen one close. Might see them shift to new nearby location, newer building…but never seen one close. The only way I see an individual store going out of business is if community around them dies. I seriously doubt that a McDonalds in a populated area would close. You would have people lining up to buy the franchise.
  - lytrplytprytr 5y ago
    "McDonald’s Is Closing Hundreds of Its Walmart Restaurants" -WSJ article from this year
    - genewitch 5y ago
      Is this because of Walmart or poor franchisees, though. The McDonald's in a nearby hospital closed in the last 5 years. Perhaps the franchisees in those cases were a little optimistic.
      - joe-collins 5y ago
        > The McDonald's in a nearby hospital closed That reads like a headline from The Onion.
      - kcplate 5y ago
        It’s likely because the space was more valuable to Walmart for retail needs than as a McDs. It was an experiment and it turns out that people probably just went to the McDonald’s down the street. By the way, the McDonald’s in our local hospital has been in operation 24/7/365 since the late ‘70s. It’s a symbiotic relationship I guess.
    - kcplate 5y ago
      Sorry but equating a satellite restaurant experiment to actual restaurants is a false equivalency. Ask yourself how many of those Walmart McDonalds had a McDonald’s within a mile of the Walmart and whether or not they are still operating. There was a Walmart with a McDonald’s in my town that closed, however the McDonalds in its parking lot is still going strong.
Arainach 5y ago
To paraphrase the meme: Materials costs go up: Well, that's the cost of doing business, raise prices a bit Rent goes up: Well, that's the cost of doing business, raise prices a bit Labor costs go up: Business go crazy and threaten their employees
- cercatrova 5y ago
  It's because you can't control materials or rent costs, but you can control (morally or immorally) your employees, simply because you have power over them.
  - aspenmayer 5y ago
    This is hilariously wrong in the case of McDonald’s. They are a real estate arbitrage corporation that leases space to franchises and gives sweetheart self-dealt deals to its wholly owned stores.
  - ALittleLight 5y ago
    I think it's more likely that most people are employees and so are familiar with how employers try to negotiate down labor costs and are not as familiar with how businesses try to negotiate down the cost of materials. I doubt business owners just shrug at rising materials costs, they probably try to negotiate those down too.
    - cercatrova 5y ago
      They do but it's harder to do so. Two businesses that trade are usually not in such an extreme dichotomy of power differential as an employer and employee; a business is usually at the same level of power as its trade partner, so were it to demand too low of a price of materials, the trade partner would take their business elsewhere. Contrast this to a labor market, where a laborer needs work to survive and thus it already has a lower level of power than its employer, even before any negotiation takes place.
      - 5y ago
cma 5y ago
> such that there is more margin to keep the business afloat when there is a squeeze. Chipotle's margin increased after the change. They didn't tap into margin using prior excess to stay afloat.
megablast 5y ago
And that is why those places already charge a lot more than McDonald’s.

seanmcdirmid 5y ago

> Yea sure, but you ignore that Chipotle and McDs have magnitudes larger supply chain optimizations, cash reserves, and operate in high and low cost markets such that there is more margin to keep the business afloat when there is a squeeze. Aren't most McDonalds franchises? You definitely see individual owned stores going out of business.

jwagenet 5y ago
Franchisees still benefit from the supply chain. Even if individual stores wouldn't be subsidized by the company, they benefit from brand recognition and already operating at the price floor for food you dont make yourself.
MangoCoffee 5y ago
>Aren't most McDonalds franchises? his point still stand. https://boxaroundtheworld.com/mcdonalds-supply-chain-management/ https://boxaroundtheworld.com/mcdonalds-supply-chain-managem... "McDonalds is a fine example of how vertical integration can keep costs down and profits up. They grow their own beef through contracted producers, process their own meat, create their own spices and mixes in factories that they contract, grow their own potatoes and other vegetable through contracted producers, transport their goods on their own. McDonalds owns the land that their restaurants are situated on, so they do not have to deal with leases and landlords. They have taken control of their supply chain nicely." edit: a mom and pop operation can't compete with McDonalds. McDonalds can increase employees wages thus force others to do the same even if mom and pop doesn't have a vertical integration like McDonalds. by increase wages, it force smaller operators to cut staffs or shut down. McDonalds can keep their competition down.
kcplate 5y ago
> You definitely see individual owned stores going out of business. Where? In my five+ decades on this planet I have never seen one close. Might see them shift to new nearby location, newer building…but never seen one close. The only way I see an individual store going out of business is if community around them dies. I seriously doubt that a McDonalds in a populated area would close. You would have people lining up to buy the franchise.
- lytrplytprytr 5y ago
  "McDonald’s Is Closing Hundreds of Its Walmart Restaurants" -WSJ article from this year
  - genewitch 5y ago
    Is this because of Walmart or poor franchisees, though. The McDonald's in a nearby hospital closed in the last 5 years. Perhaps the franchisees in those cases were a little optimistic.
    - joe-collins 5y ago
      > The McDonald's in a nearby hospital closed That reads like a headline from The Onion.
    - kcplate 5y ago
      It’s likely because the space was more valuable to Walmart for retail needs than as a McDs. It was an experiment and it turns out that people probably just went to the McDonald’s down the street. By the way, the McDonald’s in our local hospital has been in operation 24/7/365 since the late ‘70s. It’s a symbiotic relationship I guess.
  - kcplate 5y ago
    Sorry but equating a satellite restaurant experiment to actual restaurants is a false equivalency. Ask yourself how many of those Walmart McDonalds had a McDonald’s within a mile of the Walmart and whether or not they are still operating. There was a Walmart with a McDonald’s in my town that closed, however the McDonalds in its parking lot is still going strong.

Arainach 5y ago

To paraphrase the meme: Materials costs go up: Well, that's the cost of doing business, raise prices a bit Rent goes up: Well, that's the cost of doing business, raise prices a bit Labor costs go up: Business go crazy and threaten their employees

cercatrova 5y ago
It's because you can't control materials or rent costs, but you can control (morally or immorally) your employees, simply because you have power over them.
- aspenmayer 5y ago
  This is hilariously wrong in the case of McDonald’s. They are a real estate arbitrage corporation that leases space to franchises and gives sweetheart self-dealt deals to its wholly owned stores.
- ALittleLight 5y ago
  I think it's more likely that most people are employees and so are familiar with how employers try to negotiate down labor costs and are not as familiar with how businesses try to negotiate down the cost of materials. I doubt business owners just shrug at rising materials costs, they probably try to negotiate those down too.
  - cercatrova 5y ago
    They do but it's harder to do so. Two businesses that trade are usually not in such an extreme dichotomy of power differential as an employer and employee; a business is usually at the same level of power as its trade partner, so were it to demand too low of a price of materials, the trade partner would take their business elsewhere. Contrast this to a labor market, where a laborer needs work to survive and thus it already has a lower level of power than its employer, even before any negotiation takes place.
    - 5y ago

cma 5y ago

> such that there is more margin to keep the business afloat when there is a squeeze. Chipotle's margin increased after the change. They didn't tap into margin using prior excess to stay afloat.

megablast 5y ago

And that is why those places already charge a lot more than McDonald’s.