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McDonald’s Minimum Wage Raise and the Future of Fast Food Franchise – News

Employees are working at a McDonald’s restaurant counter in the company’s new headquarters in Chicago, Illinois on June 4, 2018.

Scott Olson | Getty Images News | Getty Images

For Tom Rock, his turning point in staff wages came back in March during a conversation with Heidi, a tired store manager at Coventry Township, just outside Akron, Ohio.

At the beginning of the week McDonald’s Tom TreyCo, the place she managed for her family business, recorded record $ 18,000 in sales a day, but when talking to her at the booth, Locke said he was for ten years. Despite his dedication to business, he noticed a shortage of staff. At the end of the Covid-19 pandemic, there was a really big blow.

She explained that she worked in shifts for 12 hours, and instead of going home for about 30 minutes, she slept for three hours in the car and then set foot for another day. “I saw stress on Heidi’s face,” Rock recalled recently. So he decided to make changes to the 45 McDonald’s locations that form part of the franchise business in towns and cities in Pennsylvania, West Virginia, and northeastern Ohio. He raised the wages of the workers.

The youngest staff earns at least $ 13 an hour, and managers earn up to $ 20 per hour. This far exceeds what other local competitors offer.

“We were in a fairly strong financial position,” Locke said of the April decision. It was done after consultation with his senior team and an extensive review of the model examining the impact of cost and margins. “I felt that if I could do this at any time and increase the salaries of all my employees, that would be the case now,” he said.

Fast food payments under pressure

Wage levels for fast-food workers have been in the last 10 with the help of policy makers in favor of workers and well-organized advocacy groups such as Fight for 15, which claims a minimum wage of $ 15 per hour. It is under considerable surveillance each year.

McDonald’s also means that, perhaps more than any brand, its franchise model is run by an independent franchisee like Rock’s Tom Treiko, rather than actually a franchisor for most of the restaurant locations. Nevertheless, it is at the center of its criticism and controversy — McDonald’s itself. However, due to the tightly interwoven nature of the relationship between franchisors and franchisees, the decision to raise wages on either side of the franchise equation can have complex implications.

In May, McDonald’s averaged 10% of workers at McDonald’s 650 company-owned locations by the end of June, just months after other fierce debates with franchisees over tuition programs and technical fees. Announced to see salary increases — employees earn $ 11 to $ 17 per hour and shift managers earn $ 15 to $ 20 per hour, depending on the entry level location. According to the company, the average wage for employees of company-owned restaurants will be $ 15 per hour by 2024.

Wage increases are only effective where McDonald’s owns and operates, but the company encourages about 800,000 employees to do the same for franchisees who run around 13,000 other restaurants. However, it caused anger and surprise to some franchise owners. Fast food giants franchise 95% of American restaurants.

What McDonald’s CEO says about wages

McDonald’s, like Chipotle, is one of the restaurant chains that breaks out of the pandemic with a strong financial position. Recently raised wages — As in that case, the price of the menu will increase by 4%. And I’m trying to send a message of financial support to an independent restaurant owner.

so Recent Interview at CNBCEvolve Global SummitMcDonald’s CEO Chris Kempczinski said the company’s decision to inject about $ 1 billion in liquidity into the system earlier this year after the worst pandemic has passed has been on the balance sheet for several years in the United States. In addition to growth, he said it was part of the effort. To keep the franchisee’s mindset away from worry, “Can I pay a mortgage or loan that expires this month? … This is a shift from a defensive mindset. Really more aggressive. To become “

McDonald’s CEO didn’t want to comment on raising the federal minimum wage, but “the $ 7.25 of the era is definitely not the amount to pay to stay competitive in the market. … the economy is booming, so wages are rising. “

Labor experts say the McDonald’s move will put pressure on the franchisee.

“This will put a lot of public pressure on franchisees to do the same,” said Laura Paddin, senior lawyer for the National Employment Law project of labor advocacy groups. “When the campaign started in 2011 or 2012, the $ 15 battle,” Paddin said, “considering this’empty pie’type goal.”

A recent McDonald’s announcement claims that Paddin is proof of its effectiveness. “The fact that the company itself is taking that initiative only shows how much the move about what the acceptable minimum wage should be has changed the story,” she said.

Franchise industry recedes

The franchise industry has made its position clear — wage limits and caps must be set by individual restaurant operators. “Franchisees are in a great position to make wage decisions in the local community,” said Matt Hower, senior vice president of government relations for the International Franchise Association. He emphasized the cost difference between expensive metropolis zip codes and more rural locations.

The current focus on wage levels is for “union-led campaigns” to achieve certain organizational or political outcomes by convincing the public that the franchise’s business model really belongs to the enterprise. Thanks, he says. From a public perception perspective, this aims to “turn companies like McDonald’s, Dunkin’Donuts, and Hilton Hotels into one company rather than a group of many small businesses doing business under a common brand.” It is said.

On July 7, 2021, a “Now Hiring” sign was posted on a drive-through at a McDonald’s restaurant in San Rafael, California.

Justin Sullivan | Getty Images

The McDonald’s corporate view captures the franchisee at the crosshairs of the battle fighting large competitors in a wider low-wage worker landscape.

“What’s happening is that we know that a great economy can be very helpful in raising employee wages, and because companies like McDonald’s need to compete best. I think a lot of the changes that are happening in terms of wages are happening. Talent. ” “When you have Wal-Mart and Amazon, the target … everything moves to $ 15, certainly that’s the talent pool we’re competing with.”

How do McDonald’s workers feel?

Among the workers who insist on higher wages, the distinction between McDonald’s businesses and franchisees can be felt semantically.

“It doesn’t matter if you work in a franchise store or a corporate store,” says 21-year-old Christian Cardona, who started working at a McDonald’s restaurant in Orlando three years ago. “We are all wearing McDonald’s uniforms, and we are all worth living wages.”

Cardona was initially hired for $ 9.25 per hour, which is just $ 1 above Florida’s minimum wage at the time. A year later, he became a manager and moved to $ 11 before McDonald’s recently moved him to $ 13. “If McDonald’s companies can manage how the franchise’s Big Mac is manufactured and marketed, I think they can understand how to pay every worker a living wage of at least $ 15,” he said.

For Ohio franchise operator Locke, the introduction of higher wages was ultimately a business decision rather than a moral decision. “I will be honest with you,” he said in a recent telephone interview. “If there wasn’t a significant labor shortage, we might not have taken action.”

We were just virtual hamsters in a wheel. I didn’t go anywhere. The hardest part is recruiting, retaining and training talented people.

McDonald’s franchisee Tom Rock

Earlier this year, Locke reduced his menu choices and helped his margins, but he was still suffering from a shortage of staff. Approximately 250 employees retire each month and the same number of employees need training. In the restaurant industry, sales above 100% are common.

“We were just virtual hamsters in a wheel. We didn’t go anywhere,” he says. “The hardest part is recruiting, retaining and training talented people.”

However, retention levels have skyrocketed since his salary increase, which was introduced separately from McDonald’s announcement the following month.

He raised the price slightly to offset the high cost, but I think the customer “expected” this as his team publicly announced the high wages of the workers. “This is a long-term view of the business and a very short-term view of the business,” Rock said. “I think it’s a much better business model.”

This is an approach that reflects the views of McDonald’s CEO, showing agreement rather than friction between McDonald’s corporate owners and independent owners.

“We’re going to be transparent … we’re definitely going to make long-term decisions, so let’s not get involved in the short term here right now,” Kemptinsky told CNBC. It was.

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