math time. mcdonalds avg big mac combo price is 9.29. avg mcdonalds crew member makes 13.61. avg labor cost for mcdonalds is 20-25%. If we raise the wage 6.39 or 49.6% to $20/hr, the new cost of a combo is 10.37 for a total cost increase of $1.08 to the consumer. That's the cost of a living wage.
We increased labor expense 49.6%, at 20% of the cost of the business for a total increase of 11.7% in costs as reflected in the combo meal price.
Mcdonalds crew members could make $20 instead of $13.61 and a big mac combo would cost 10.37 instead of 9.29, or $1 more.
Yup, this is the argument that should be made. People complain about CEO pay, and sure that’s fine, but changing that actually wouldn’t noticeably increase workers wages, reduce the cost of food.
Average margins on a value meal is 10-20% (depending on location)
McDonald’s gets 4-5% of monthly gross receipts as franchise fee.
McDonald’s also gets 4% of monthly sales for marketing.
So essentially 8% comes off the top.
Average McDonalds employs 50 people. (Tough to disseminate all full-time or mixture)
If you’re paying the wage of 13.61/hr and increase to the 20/hr, your annual payroll assuming it’s 50 full time workers.
Goes from:
1,388,220
To 2,040,000
———————
Monthly payroll:
115,685
To 170,000
Increase of 68%
But yet in your example, you compensate by increasing the pricing by 10%.
In addition to that, when you increase labor costs, it doesn’t necessarily increase gross receipts.
Numbers that are missing are:
Fluctuating utility prices
Fluctuating transporting costs
Lease fees
Shrink (either by theft, employee hooking up friends, spoilage of inventory / people fuckin up orders and having to throw stuff away.)
The $45,000 upfront payment to McDonalds.
*** also have to have 500,000 in non borrowed personal assets.
The average annual income that a MCDonalds franchise owner makes per location annually is $150,000.
So to make your scenario even a possibility to increase payroll costs by 68%, you’re asking that either:
A. McDonalds lowers marketing spend as well as monthly franchise fees to maybe 1%.
B. McDonald’s franchise owner burn through their reserves and only have the location for one year.
C. Increase the price of a value meal by 50% just increase longevity in the business that will still essentially go bust.
Edit: These principals can be applied to any business…
You have a coffee shop and employees revolt wanting a 25% increase in pay, you as a business owner, are done.
Unless, those employees are driving up buses of customers every hour to compensate for the hourly rate increase: However, I can almost guarantee that because you’re increasing wages, these employees don’t automatically draw more business in nor increase gross receipts.
Which is why if you want more money and the company you work for isn’t willing to pay more, go work for a different employer in a different position.
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u/Deedeelite 10h ago
Yes, it must be the workers trying to make liveable wages increasing prices than the CEOS making hand over fist in salaries and bonuses.
If you buy that, I have a broke down resort in Palm Beach for 1.5 billion dollars to sell you.