billion dollar Big Mac revisited

I once did a post about the minimum wage, McDonalds, and the Big Mac. I used the publicly available information at the time, and I did the math (FUN!). That was six years ago. Time flies and statistics change. How would that post read if written today?

Let's do it!

	McDonalds 2013	McDonalds 2018
Company Owned Locations	6,738	2,770
Franchise Locations	28,691	35,085

We can already see that McDonalds has shed many company owned locations in favor of franchise owned. This distributes the liability of employees to the franchisees. So there is one direct impact of the minimum wage that will affect local, small businesses to a greater degree than it will the large corporation. Raised wages will cripple the small business owner, and only trickle-up to the corporation.

Company-operated restaurant expenses ($millions)
Food & paper	3,153.8
Payroll & employee benefits	2,937.9
Occupancy & other operating expenses	2,174.2
Franchised restaurants-occupancy expenses	1,973.3
Selling, general & administrative expenses	2,200.2

They directly employ 210,000 employees as of 2018. I don't have how many are employed by francisees. So we'll have to extrapolate franchise employees. If we do, we get about 2.5 million franchise employees. Previously, only about half of all employees were US-based. So, let's say only 1.25 million franchise employees are in the US, and we will ignore the McDonald's corporate employees, because we're not sure how many are salary versus hourly. And if we say 20% of the franchise employees are salary, that gives us a cool one million employees to work with.

1,000,000 McDonalds employees in the US

$7.50 minimum wage

$15.00 desired wage

550,000,000 Big Macs sold per year

Let's do math! (FUN!)

1,000,000 x ($15.00 - $7.50) = an additional $7,500,000 to employ all McDonalds employees for one hour.
but they don't all work at the same time... let's assume there are many more part-time workers than full time... and let's estimate each worker works and average of only 20 hours during any given week... we'll estimate low, just y'know, because we don't want to be unrealistic.
$7,500,000 x 20 = an additional $150,000,000 to pay for one week of all McDonalds employees.
there are 52 weeks in a year... usually.
$150,000,000 x 52 = an additional $7,800,000,000 to pay the additional wages of all McDonalds employees for one full year.
that's 7.8 Billion additional dollars... that has to come from somewhere... like raising the price of Big Macs.
$7,800,000,000 / 550,000,000 = an additional $14.18 per Big Mac.
what are they now, like $4.39?... so a Big Mac would cost $18.57 plus tax... no fries... no shake.

We just learned a few things. In the last six years since I first wrote the "Billion Dollar Big Mac", McDonalds has undergone some changes. First, they've shed corporate employees, but overall employment has risen. Second, the price of a Big Mac has nearly doubled. Lastly, the effect of the minimum wage has only worsened.

And who does it still effect? The poor and the small business owners.

the "rich" don't pay for Big Macs... it's the working poor... it's the same people who work at places like McDonalds who then shop and eat at places like McDonalds... it's us... we have to come up with $7.8 billion dollars.

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sources:
https://rvolt24.blogspot.com/2013/08/billion-dollar-big-mac.html
https://corporate.mcdonalds.com/corpmcd/investors-relations/financial-information/sec-filings.html
http://d18rn0p25nwr6d.cloudfront.net/CIK-0000063908/94ad07bd-66c3-433c-a81e-94f1587b0ed8.pdf
https://www.reference.com/food/many-big-macs-sold-day-225cf538abc342ab

EDIT (2021-03-09):
Proof: https://www.nber.org/system/files/working_papers/w28506/w28506.pdf

Re-Blog - "The Ugly Truth About A $15 Minimum Wage"

The Service Employees International Union spent 2015 expanding its campaign for a $15 minimum wage to other industries. In recent nationwide protests, the union focused again on its original target: Fast food companies, and McDonald's in particular.

I worked for the company for three decades, and served as its USA President for 13 years. I can assure you that a $15 minimum wage won’t spell the end of the brand. However it will mean wiping out thousands of entry-level opportunities for people without many other options.

The $15 minimum wage demand, which translates to $30,000 a year for a full-time employee, is built upon a fundamental misunderstanding of a restaurant business such as McDonald’s. “They’re making millions while millions can’t pay their bills,” argue the union groups, suggesting there’s plenty of profit left over in corporate coffers to fund a massive pay increase at the bottom.

In truth, nearly 90% of McDonald’s locations are independently-owned by franchisees who aren’t making “millions” in profit. Rather, they keep roughly six cents of each sales dollar after paying for food, staff costs, rent and other expenses.

Do the math

Let’s do the math: A typical franchisee sells about $2.6 million worth of burgers, fries, shakes and Happy Meals each year, leaving them with $156,000 in profit. If that franchisee has 15 part-time employees on staff earning minimum wage, a $15 hourly pay requirement eats up three-quarters of their profitability. (In reality, the costs will be much higher, as the company will have to fund raises further up the pay scale.) For some locations, a $15 minimum wage wipes out their entire profit.

Recouping those costs isn’t as simple as raising prices. If it were easy to add big price increases to a meal, it would have already been done without a wage hike to trigger it. In the real world, our industry customers are notoriously sensitive to price increases. (If you’re a McDonald’s regular, there’s a reason you gravitate towards an extra-value meal or the dollar menu.) Instead, franchisees can absorb the cost with a change that customers don’t mind: The substitution of a self-service computer kiosk for a a full-service employee.

In higher-cost European countries, these kiosks are already the norm. In 2011, the company ordered more than 7,000 of them to replace entry-level employees. They’ve been tested successfully in a number of markets in the U.S., and now the company is even testing self-serve McCafe kiosks where a customer can prepare and customize their own coffee beverage.

Hurting young workers

If you’re tempted to shrug your shoulders at this brave new world, don’t. Over four million people in the U.S. are employed at “limited service” restaurants, a descriptor which includes companies like McDonald’s. If even one out of every four jobs was automated, that’s one million fewer job opportunities in a country where the youth unemployment rate is more than three times the overall unemployment rate. (In urban markets such as New York City and Washington, DC, the youth unemployment rate averages 30%.)

These young adults who face long spells of unemployment now are at a long-term disadvantage relative to their employed counterparts. One study released by the Employment Policies Institute found that high-school seniors with part-time work experience earned 20% more per year on average, 6-9 years after graduating, relative to their fellow students who didn’t work. Ironically, today’s minimum wage mandate for higher pay will be condemning young adults to lower-paid and less-successful futures.

I suspect that the labor organizers behind this campaign for a $15 minimum wage are less interested in helping employees, and more interested in helping themselves to dues money from their paycheck. They’re unlikely to succeed in their goal of organizing the employees of McDonald’s franchisees, but they may well succeed in passing $15 into law in other sympathetic locales. You’ll see their legacy every time you visit the Golden Arches, where “would you like fries with that” is a button on a computer screen rather than a phrase spoken by an employee in their first job.

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source:
The Ugly Truth About A $15 Minimum Wage by former president and CEO of McDonald's USA, Ed Rensi - 4/25/2016 Forbes

billion dollar Big Mac

• 1,700,000 McDonalds employees worldwide
• 800,000 McDonalds employees in the US
• $7.50 minimum wage
• $15.00 desired wage
• 550,000,000 Big Macs sold per year

thanks redstate.com for image

if we raised the wages of all US McDonalds employees (because we don't care about international employees) to their desired demanded wage of $15.00 per hour, what would we have to raise the price of the Big Mac to cover those costs?

let's do the math (FUN!)

800,000 x ($15.00 - $7.50) = an additional $6,000,000 to employ all McDonalds employees for one hour.

but they don't all work at the same time... let's assume there are many more part-time workers than full time... and let's estimate each worker works and average of only 20 hours during any given week... we'll estimate low, just y'know, because we don't want to be unrealistic.

$6,000,000 x 20 = an additional $120,000,000 to pay for one week of all McDonalds employees.

there are 52 weeks in a year... usually.

$120,000,000 x 52 = an additional $6,240,000,000 to pay the additional wages of all McDonalds employees for one full year.

that's 6.24 Billion additional dollars... that has to come from somewhere... like raising the price of Big Macs.

$6,240,000,000 / 550,000,000 = an additional $11.35 per Big Mac.

what are they now, like $2.99?... so a Big Mac would cost $14.34 plus tax... no fries... no shake.

i know... McDonalds would raise the price of everything in small amounts, not just one item... but you're obviously already missing the main point here... of course, if you've read this far, you're probably smarter then the average fast-food worker, so maybe you do see the problem.

$6.24 billion dollars has to come from somewhere... it doesn't just magically fall from the sky or spout from the mouth of a geyser... it comes from consumers... it comes from average working-class citizens like you and me... maybe not even you, because you probably wouldn't deign to enter such a bastion of capitalism like McDonalds, so maybe it's just coming from me... and people like me.

the "rich" don't pay for Big Macs... it's the working poor... it's the same people who work at places like McDonalds who then shop and eat at places like McDonalds... it's us... we have to come up with $6.24 billion dollars.

and if you are still arguing for higher wages, you are too stupid to be worth paying more than minimum wage... like the Ouroboros, you think you're getting fed by eating your own tail.

and i bet you wonder what the head tastes like.

http://unsider.deviantart.com/art/Ouroboros-Drawing-271330221

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source:
http://www.aboutmcdonalds.com/mcd/our_company.html
http://www.sec.gov/Archives/edgar/data/63908/000119312511046701/d10k.htm