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The New Normal
McDonald’s Franchisees Are Feeling the Heat
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  • Kevin

    This brings up the issue of wages and employability of the low skill workforce McDonalds and its franchisees recruit, as well as how the can absorb demands (especially from many local governments) for higher wages for these workers.

    If you look at job qualifications and want ads, you’ll see that almost all employers for most positions want people with experience (even 1-5 years), not new graduates (HS, college, etc.). This means that schools are doing a very poor job of preparing their students for the workforce. Schools ought to focus on making sure their graduates are eligible for many, if not most, jobs. If workers are only employable (above minimum wage perhaps) with a year or three of OJT, schools really ought to figure out what employers think graduates are learning on this OJT and teach it to their students – this is particularly true of lower skill potential employees who will fail to be hired by anyone without this experience. With various local and some state ordinances pushing up the minimum wage, over time this skills threshold for new workers is only going to be higher – if schools want to help their graduates they will figure out how to boost the value their graduates ring to an employer.

    • JR

      I’m afraid you are too optimistic. To me it brings up the issue of how in the next few years, a few decades at most, the overwhelming majority of the low skill workers employed by McD et al will not be just unemployed, but would rather be unemployable. Higher minimum wage laws are accelerating this trend for sure, but even without those laws, the trends seem to be pretty clear.

  • Kevin

    This could also be part of the decline in entrepreneurialism more generally. Recent decades have seen a decline in new business startups and the economic dynamism they bring. (Perhaps brought about by the rise in regulation strangling the ability of small businesses to generate an acceptable return.) if the returns to small businesses are declining while the profitability of large concerns remains the same or rises we might expect to see a move,ent away from the franchise model and towards chains directly owning their restaurants.

    Of course if the profits of McDonalds are down across the board, then this might just be a fight between the parent and the franchisees for the scraps of a diminishing pie.

    • f1b0nacc1

      I suspect that what you are seeing is a growing divide between the parent which knows it can buy off/capture the regulators or at least live with their excesses, and the franchisees, who have no such luxury. Ultimately the parent will ‘win’ that fight, but it will be a pyrrhic victory at best. The franchisees are more worried about regulators getting their corrupt claws into their businesses (look at the latest power grab by the NRLB, for instance) with the acquiescence of the parent, if not their outright collusion.
      At the end of the day though, I suspect that all of this becomes irrelevant. Replacing fast food workers with robots is now possible, in a very few years (certainly by the end of the decade) it is practical, and within a decade (likely much sooner, especially if the current minimum wage insanity continues) it becomes a no-brainer. The overall capital cost for replacing cashiers at a fast food joint is now about $50K, and likely to drop by at least half in the next 3 years. Kitchen staff is a bit more complex, but not much, and will follow suit shortly.

  • Anthony

    “…or consumers get tired of burgers and fries….” Given sector margins – i.e., fast food restaurants – last sentence provides fundamentals. Changing consumer tastes ( shifting increased interest in health and well being and “fresh foods”) as well as brand (McDonalds) identification make profit for both franchisees and Corporate more paradoxical pursuing traditional business practices.

  • Dan Greene

    Sounds like it was pulled out of Atlas Shrugged. Almost time to head for Galt’s Gulch.

  • 45BJ

    Well, they can raise the prices and thereby losing the america’s waist as an added bonus.
    Or they can shut down but don’t expect taxpayers to indirectly subsidize McDonalds by giving SNAP or welfare for
    their employees.

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