Fast-Food Chains Aren’t as Rich as Protesters Think
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By Rick Newman | The Exchange – Thu, Aug 29, 2013 3:25 PM EDT
Of the many social issues facing Americans today, one large controversy is finding the perfect number for minimum wage. For some time, and probably until the end of time low wage workers at fast-food restaurants particularly McDonalds in this instance, are demonstrating in a large but highly non-violent groups demanding that they deserve a pay hike of as much as 100% - to $15 an hour, just to be able to stick their toes across into the middle class threshold.
The minimum wage earning people demand more money, and argue that there's plenty of money to pay out to current and new hires, as well as without firing anyone. McDonald’s, the nation’s biggest restaurant chain, is, in fact, very profitable. Those $5.5 billion in profits last year came from revenues of $27.6 billion, giving the Golden Arches a profit margin of nearly 20%. The average profit margin of big companies in the S&P 500 index is only 8.7%, according to S&P Capital IQ. McDonald’s has been a perennial over performer, which makes it an easy target for protesters seeking a bigger slice of the pie.
But keep this in mind: Pay at most restaurants is determined by the franchise owner and not the corporate parent, which often owns a very small percentage of the restaurants under their brand. McDonald's, for example, owns just 11% of their restaurants in the U.S., so it may make more sense for the protesters to be picketing local owners rather than focusing their venom on the corporate entity.
Either way, the restaurant industry overall is a low-margin business that doesn’t have much spare cash in the till. The average profit margin for the whole industry is just 2.4%, according to Capital IQ, and that’s down from 3.2% in 2009, which is when the recession ended.
While I myself agree that there are those who really do work hard, and really deserve a pay raise, or X amount of dollars to stay financially stable or at least afloat, there are always the minority or majority doing well, not so much. Laziness but with the same attitude of wanting to be paid more. Its a sticky issue, with arguments and good points able to step out from all sides. I also keep in mind that instead of going to corporate to complain, go local to complain because there are a lot of franchise owners out there-not to say that corporate can't or won't help. We need people like this on the occasions where there really does need to be change for good, when deemed necessary.
McDonald’s has perhaps 140,000 U.S. employees, which is a small fraction of the 4 million Americans who work at fast-food restaurants. So while McDonald’s might be able to afford a bit more for workers, many industry employees work at chains that could use a little more income themselves. Maybe they should all angle for a job at McDonald’s.
