McDonald's boss says he's "proud" of wages as thousands of workers call for a rise

Discussion in 'Stock Market Forum' started by MalorieJX, May 28, 2015.

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    Jun 7, 2015
  1. JR Ewing

    JR Ewing Super Moderator Staff Member

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    You can bet that the entire corporation will jack up prices nationwide, lay some people off, close some locations, etc. They've got to answer to shareholders.

    JP Morgan was recently hit with a huge fine for like $5 billion because a few rogue traders were doing some bad stuff. The DOJ could have easily just punished those responsible and any who knew about it and did nothing about it, but of course it was much more profitable to big govt to fine the whole company.

    So JPM just announced that they're laying off thousands.

    http://www.streetinsider.com/Corpor...e+than+5,000+by+Next+Year+-+WSJ/10604297.html
     
    JR Ewing, Jun 7, 2015
    JR Ewing, Jun 7, 2015
    #21
    2. Jun 11, 2015
  2. petesede

    petesede Guest

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    McDonalds the corporation we invest in would not have to lay off people, nor close stores themselves. The individual franchises would be the ones reducing their workforce. Walrmart would be the opposite, Walmart would be the ones laying off people and closing stores.

    Hiking minimum wage would have really no effect on McDonald´s corporation. It is already saturated in the USA. It would somewhat affect the number of new franchises they open in those states, but it would be a drop in the bucket compared to their expansion overseas. McDs the corporation has to fight for their franchises and lobby against minimum wage hikes, but I think they have less skin in the game than most people think. IMHO, if there is some huge announcement about a minimum wage hike and McD´s stock price drops by a large amount on that news, it would be a buying opportunity since it really won´t affect earnings in a significant way for a long time.
     
    petesede, Jun 11, 2015
    petesede, Jun 11, 2015
    #22
    3. Jun 11, 2015
  3. JR Ewing

    JR Ewing Super Moderator Staff Member

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    I am told by a guy I know locally who owns a number of McD's in the area that the corp does maintain a vested interest in the locally owned franchises - this is primarily how they maintain control. Do you really think McD's is dumb enough not to get a piece of everything that has their name on it and sells their products?

    And the stores the corp continues to own 100% of would certainly be affected by doubling the min wage, which would affect the company as well at least a little. I would expect them to cut elsewhere if they are forced to start paying everyone $15-20 an hour.
     
    JR Ewing, Jun 11, 2015
    JR Ewing, Jun 11, 2015
    #23
    4. Jun 11, 2015
  4. JR Ewing

    JR Ewing Super Moderator Staff Member

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    http://en.wikipedia.org/wiki/McDonald's#Business_model

    McDonald's Corporation earns revenue as an investor in properties, a franchiser of restaurants, and an operator of restaurants. Approximately 15% of McDonald's restaurants are owned and operated by McDonald's Corporation directly. The remainder are operated by others through a variety of franchise agreements and joint ventures.[SUP][citation needed][/SUP]
    The McDonald's Corporation's business model is slightly different from that of most other fast-food chains. In addition to ordinary franchise fees and marketing fees, which are calculated as a percentage of sales, McDonald's may also collect rent, which may also be calculated on the basis of sales. As a condition of many franchise agreements, which vary by contract, age, country, and location, the Corporation may own or lease the properties on which McDonald's franchises are located. In most, if not all cases, the franchisee does not own the location of its restaurants
     
    Last edited by a moderator: Jul 8, 2016
    JR Ewing, Jun 11, 2015
    JR Ewing, Jun 11, 2015
    #24
    5. Jun 11, 2015
  5. AtlantaSports

    AtlantaSports Senior Investor

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    Working a minimum wage job sucks, and trust me, I have been there, but there is really no safe way to raise the wage at this moment.
     
    AtlantaSports, Jun 11, 2015
    AtlantaSports, Jun 11, 2015
    #25
    6. Jun 13, 2015
  6. petesede

    petesede Guest

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    so 15% of their stores would be affected by minimum wage increases. The franchises pay rent and/or a percentage of sales, so a rise in minimum wage wouldn´t affect the Corp, only the franchises for 85% of stores.

    You friend was right, McDonald´s corporation has a huge list of things it requires from the franchise stores. Like I said earlier in this thread, the Corp requires the franchises to participate in all events and promotions, it has strict guidelines on food quality and appearance of the stores that the franchise owners must follow... but none of that is really germane to this conversation. McDs Corporation owns all the cards over their franchises because the Trademark is so powerful. Other fastfood and chain restaurants are much weaker in their contracts with the franchises, which is why you see really dirty KFC restaurants.

    Other than 15% of stores which are owned by the Corp, a minimum wage hike would affect the owners of the franchises, not the Corp itself in the short term. In the long term, it is likely that less franchises will open and some current stores would close because of the hike in salaries.. but that would trickle in over years, and it would be for the USA, not worldwide.

    I think it is overblown, I think individual stores could easily absorb a minimum wage hike just by having fewer employees and the overall affect on the Corp would be almost nothing.
     
    Last edited by a moderator: Jul 8, 2016
    petesede, Jun 13, 2015
    petesede, Jun 13, 2015
    #26
    7. Jun 13, 2015
  7. JR Ewing

    JR Ewing Super Moderator Staff Member

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    It's simple common sense and business 101 that if the corp still fully owns 15% of the stores, they will make up for that $8-10 an hour extra they have to pay a good % of their workforce in those stores by cutting expenses (and increasing revenues) elsewhere - higher prices for consumers, closing some stores down, layoffs, cutting hours and benefits, etc. Particularly since they haven't been doing so hot as of late, and shareholders are a little unhappy about it.

    It's also common sense and business 101 that if those franchisees have to greatly increase their payroll expenses and have to cut elsewhere (higher prices for consumers, closing some stores down, layoffs, cutting hours and benefits, etc), this will also affect the company as a whole because the company itself maintains a vested interest in each franchise - whether it's getting a % of sales (of which the total $ amount will probably go down if some franchise restaurants close or if prices become less competitive with other companies), rent money (which will also decrease if some franchise stores close), or whatever.

    Any good privately owned business will run a tight ship - particularly when they are publicly traded and have to answer to shareholders. They can't be like the government and just shrug off every little thing that piles up and expect to remain competitive.
     
    JR Ewing, Jun 13, 2015
    JR Ewing, Jun 13, 2015
    #27
    8. Jun 13, 2015
  8. petesede

    petesede Guest

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    But you are assuming all those things are going to happen ´because they have to greatly increase payroll´.... and that assumption is not true.

    1. A big part of a stores salaries are already above minimum wage, including the manager and asst managers and other longer term employees.

    2. Many of these stores will easily be able to cut their workforce. You have 15 employees making minimum wage... afterwards you have 10 employees making minimum wage along with your other 20 employees who were making above minimum wage and thus unaffected.

    3. Salary is only a portion of the expense of having an employee... For something like fast food when you factor in training, uniforms and other expenses.. the salary portion could be as little as 70% of the cost of having that employee. Increasing the salary of an employee by 25% might only increase the real cost of having that employee by 18%

    And you are still overstating the hit on the Corp. A portion of the 15% owned by McDonalds corp are outside the USA. So a portion of the 15% of stores owned by the corp will have a portion of their employees see an increase in their salary which is a portion of their overal expense to the store, and the store will be able to, and will, reduce workforce to compensate. There are so many portions of portions that when you whittle it down, it is an insignificant hit to the Corp overall, especially considering all of their growth is overseas.
     
    petesede, Jun 13, 2015
    petesede, Jun 13, 2015
    #28
    9. Jun 13, 2015
  9. JR Ewing

    JR Ewing Super Moderator Staff Member

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    You either just like to argue or don't understand how successful companies operate.

    1) ALL wages below $15-20 an hour will go up to that level if that's what the minimum becomes.

    2) When they cut their workforce, it clearly is an effort to make up for the increased spending in payroll.

    3) An increase of 18% or 25% or whatever is still an increase. They will either make up for it elsewhere or it will add up and have some effect.

    I do not agree that all of this is "insignificant" - particularly when they haven't been doing so great as of late.


    What exactly do you do for a living? I'm assuming you must not own a business.
     
    JR Ewing, Jun 13, 2015
    JR Ewing, Jun 13, 2015
    #29
    10. Jun 14, 2015
  10. petesede

    petesede Guest

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    My water bill is like $5 per month. If it doubles next month... it is still insignficant. Yes, it is still an increase, but overall it doesn´t matter in the course of my overall expenses. Yes, increased expenses is bad, but the individidual stores can adapt just by having less employees. and the trickle up to the corporate McD´s will be negligible. And again, we are talking about a handful of states, in the USA, while most of McDs stores are not located.
     
    petesede, Jun 14, 2015
    petesede, Jun 14, 2015
    #30
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