Local / Mom & Pop and McDonald’s Aren’t Mutually Exclusive

There’s a weird storm a-brewin’ in this debate over the minimum wage, and it’s coming in the form of people attacking McDonald’s as a “corporate giant” who “profiteers” off low-cost and low-skilled labor.  It’s important to not only understand how stupid that concept is (profiteering) but why McDonald’s is no worse than any other local establishment.

Pop quiz: What percentage of McDonald’s locations are corporate owned versus owned by individual franchisees?  I promise you that you have no idea the number here, so let me provide you with some statistics that should wow you.

  • 57% of McDonald’s locations are “conventional franchisees.”
  • 24% are foreign franchisees or some form of developmental agreement or partnership.
  • 19% are company-owned.

This should tell you something.  If you’re partaking at one of the 35,000+ McDonald’s locations, you’re most likely partaking in a franchise that’s owned by someone local to your area or a corporation of local investors that built it and run it.  Only on rare occasions are McDonald’s locations part of the “Nameless faceless large corporation” we always hear about.

You can tell people don’t understand this fact, or don’t care about it, because of the way McDonald’s is painted.  “There’s one on every corner.”  “They make billions of dollars a year.”  Nowhere do these people seem to understand that the only thing that comes from the nameless and faceless corporation, mostly, is the name and the menu.

Shocking, right?

This relates very strongly to the current discussion on minimum wages and unionization because the main crux of the “pro” argument is that workers are being exploited by a large corporation, but when you consider two things, that sounds silly.

McDonald’s would not negotiate a “contract” for workers who unionize because the contract is between workers and franchisees, not workers and McDonald’s corporate.  Unless McDonald’s operates on some spectacularly different model, wages and benefits are set by the individual owners.  Essentially, a unionized workforce would simply be turned on small business owners as a way to strongarm them into higher wages.

Because such a large portion of the stores are owned by franchisees, there may simply not be a budget to pay a kitchen worker $15 an hour plus benefits with regular raises.  We’re not talking about corporate giants here, we’re talking about the same local mom and pops that people talk about longingly when talking about how buying your things at stores pays for dance lessons or whatever other feel good crap they come up with.  This wouldn’t be the jackpot people are hoping for because the model doesn’t allow it.

So what would holding up the company do?  Well, assuming that localities pass a $15 minimum wage, you can bet that it would result in these small business owners circling the wagons and letting people go.  Already in Europe, the cashierless model at McDonald’s is more than a novelty, it’s reality.  You can bet, for sure, that there will be cuts nearly across the board because if I’m going to nearly double your salary, the ratio of work to dollar produced (productivity) will plummet.  Something has to make up at least some of that money, right?

The short-sighted argument made by many of these employees demanding higher wages is based on a desire for money and little else.  Unfortunately, many of these same people don’t realize that with minimal training, many people off the street could easily do their job.  There’s very little exclusivity in the fast food employee labor market, and that’s the market these folks are participating in.  I would love people to make $20 an hour doing their job, but I don’t believe that someone should just make more without being more productive and if you can show me how that can be done in a way that is beneficial to everyone, I’ll listen.

It’s important in this discussion to keep the reality of the model McDonald’s operates under and that having the brand name on the front door doesn’t necessarily mean that you can strongarm more money out of the owners, and that’s what makes me wonder something else.

If these companies are just bottomless pits of corporate cash, why are we asking for $15.00 and hour?  That would roughly work out to $30,000 a year.  In New York City, you can’t live on that.  You simply cannot, unless of course you’re a typical inner city New Yorker and you only spend your income on sneakers and cell phones and get your food, housing, health care, and education for free from everywhere else, so why not ask for $30 an hour?  Or $40?

The first reason is simple: the people marching, protesting, and complaining understand that their labor isn’t really worth that much and there’s a huge market for it with very little demand.  If you work a cash register for me at McDonald’s and decide you’re leaving, I can replace you with very little effort.

The second reason is more subtle: These protestors understand that there is a logical limit to how much they can be paid before they’re perceived as greedy, so even though the increase in salary may not equate to a better standard of living, they just see it as a victory because they got “more money.”  In the discussion of wages, they believe they should have the sole say in how much their labor is worth, truth about its value be damned.  Even if they only produce $7.25 worth of value with their labor, they just want “more,” regardless of that value because “Well, you can afford it.”

It’s going to be interesting to see how this plays out, but remember this article as you hear the story framed as workers versus a corporate giant.  McDonald’s the corporation is huge, but most of these people don’t work for a giant corporation, they work for your neighbor.

Disclaimer: I do not work for McDonald’s, nor do I partake in it on anything more than a rare basis.  I’m not an apologist for them or their food, but I hate economic illiteracy which is all I seem to encounter in the “pro $15” discussions these days.


Header Image via Tony Fischer on Flickr

 

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