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Nuvendil on 25 May 2016
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WolfpackN64 said:
Nuvendil said:

OK, we are just retreading ground I covered a couple pages ago but I'll go on :P

When you go and do all the math, the increase would reduce their net income - their bottom line -to less than $600 million dollars by the best.  Yeah they make 25 billion, but that all but a bit over 7 billion gets eaten up in costs of operations and payroll right now.  McDonalds is a massive company, running that is exorbitantly expensive:  utilities, maintenance, cost of supplies, construction, shipping, and of course payroll. Taxes and interests take that to around 4.5 billion.  That's the companies bottom line.  The hike in payroll costs would bring that to less than 600 million.  And that's before raising pay even further for shift managers and such.  Or factoring in the impact from closing franchises which would be imminent.  The company could easily go into the red with the current setup.

And again, employees DO eat up the majority of payroll by a country mile.  The total disclosed executive compensation for McDonalds is  currently 24.36 million.  This total factors in the CEO, CFO, and the three other most compensated officers.  Like I said, the executive level IS highly paid, but it is ultimately insignificant compared to the total payroll costs and the proposed payroll hike.  

And as I also said in that previous post, McDonalds could survive but it would require enormous changes to the company, many unpleasant.  Jobs would be cut, franchises shut down, prices would be raised, etc.  It would be exorbitantly costly and could indeed destroy the company depending on how fast the payroll hike hit.  Cause it's not just the changes, it's maintaining their consumer base through the transition.  But yes, if the change came closely it would be entirely possible for them to survive.  But it wouldn't be fun, thousands of franchises currently doing middling business would become unsustainable quickly.  

This isn't to say I think minimum wage is fine, it is too low.  This is to say that a FEDERAL minimum of $15 is too high and that people really don't do the research and thinking to realize how huge this is for these companies.  In some areas (California, for example) $15 makes absolute sense.  Cost of living is high enough and the economy strong enough to support it. South Carolina?  North Carolina?  Texas?  Probably something around $10 to $12 is better.  The US is enormous with hundreds of millions of people, different taxes in different states, etc.  Regions vary in economic strength and cost of living.  The federal minimum wage has to take that into account.  

And all this is to say nothing of the absolute havok a $15 federal minimum wage would bring on the small business sector.  

Ok, I do understand your concern. At least we're agreeing the minimum wage should be higher than what it is now. It would seem to me though, that McDonalds model of cheap chain-operated fastfood is in itself unsustainable.

In Belgium, we have had a rise of "quality burger restaurants", which are more expensive, but prepares much better food. We even have some "local fast food" concepts that are catching on. In my home town, we have a Burger King-like fast food place called the Ketchup. You can get a burger with fries for 5€ (about 6€ if you take a medium soda). That's more expensive that the McDonalds here, but the burgers and fries in the Ketchup are bigger, better and all in al more filling. I can get a hamburger at McDonalds for 1€, but to actually have a satisfying meal, you'd come at about the same cost as the Ketchup, while the latter provides better food and higher wages.

It seems the competition is really starting to cut into McDo's, but it might just as wel be that their business model is starting to rot in this day and age.

Well - and this is going to sound terrible - McDonalds operates based on the idea of the "come and go" employee as I call it.  They neither are interested nor care to pursue having really long term employees.  They are entirely aware of the fact most who come there are also not interested in staying.  They're highschool students, college students, people in between jobs.  They basically capitalize on the idea of fluidity in the workforce, that at any given time there are people in between jobs.  It sounds exploitative and to a degree it technically is BUT it is a model that provides jobs and product that wouldn't exist otherwise.    It allows McDonalds to be the size it is and employee as many as it does.  Without that system, many of the people working for McDonalds would simply be unemployed because the very reason they work for McDonalds is they haven't found something else yet.  How you feel about this is your business.  I'm mixed myself cause I see the benefits, but also the problems.  

Now, as for some of your other posts about executives and higher managers and their pay, don't underestimate their job's difficulty, importance, and the rarity of their ability. I know executives in just midsizded companies.  It's stressful, time consuming, complicated, and a couple of mistakes can make the whole thing go to shit.  CEOs of large companies don't work 40 hours but the decisions they do make are very high stakes and very complicated.  There are a few big CEOs who can set it and forget it, but most can't.  Afterall, anything goes wrong they can very quickly be voted out.  

And I said it already, but most people cannot - can. not. - fill a CEOs or other executives shoes.  50 to 80% of businesses (statistics vary based on many definitions including what businesses are counted) fail within 5 years.  And the more complex the business in mind, the more failure prone it is.  But the point is the majority of small businesses fail in short order, 90% of the time because the people running it simply can't run a business.  Cause it's hard.  Not saying every CEO should make 10 mil, but there's a reason skilled executives make good money.  They are few and hard to come by.

Also, businesses keep sizable rainy day funds for good reason.  Major recensions, scandals, fines, lawsuits, and other unexpected costs need to be able to be covered directly.  You don't want to be begging for loans every time something bad happens, that's a short road to the busines  graveyard.