And wouldn’t a McDonalds store in the middle of nowhere also make less money than a major city? But even at $150K net income, there isn’t much room to raise salaries.
McDonalds is the place where you can get something like a cheeseburger for a dollar without getting food poisoning. McDonalds was a high quality product at one time.
There’s no regulatory environment that prevents exploitation of the workforce, so doing so is the low risk choice. The company chose a low quality bar and competitive pressure forces them to mercilessly attack cost.
Back of the napkin math. If we assume that a McDonalds is open 16 hours a day and they have an average of 4 people every hour.
16 hours x 4 people x 7 days x 52 weeks Equals about 2400 hours a year.
How much could they raise the hourly rate of their employees and raise prices before the demand went down and still be profitable if they are only making $150K now? At what point does it not make sense to invest $1 - $3 million a year to make meager returns?
They may need to look at the business and franchise model. They have a fubar business with hundreds of SKUs. 5 Guys is able to make money on a freshly cooked burger, higher standards for quality and higher cost. Make a "McDonald's Classic" concept that cooks real food at higher prices.
Again, McDonald's makes a business decision to have a system that encourages franchisees to utilize labor at the lowest cost possible because it is the lowest risk decision for them. For the larger company, the profitability struggles of the operators aren't a world-ending problem -- they own the real estate assets, and get to be an exclusive supplier and pull their percentage of gross sales first.
From my POV, I don't care a whit about McDonald's -- as a human it's awful that people are treated the way that they are, and as a taxpayer it's awful that society as a whole gets to pick up the pieces when hard working people fail and end up dependent on social services for survival. If McDonald's business can't deliver, that's their problem. The demand for food isn't going anywhere and a competitor will fill the void.
So the people working for minimum wage would be better off if they didn’t have a job at all? If all of McDonalds employees all of the sudden were out of work - taxpayers would pay more.
What’s the percentage of people that work at McDonalds are working there as a primary income?
Isn’t kind of hypocritical that you criticize McDonald’s profitable business model but you’re okay with all of the startups - including ones that are backed by YC who are losing millions of dollars but are able to access capital?
Five Guys also costs a lot more. The people who eat at McDonalds every day couldn’t afford Five Guys.
And if the magical competitor becomes available, are they going to be able to sell food as cheaply as McDonalds?
I didn't criticize the business model. I said that I'm opposed to exploiting workers, and that addressing that problem is more important to me than preserving McDonald's present business model.
If their business model is not compatible with humane treatment and fair compensation of workers, why should we subsidize it? If the quality of McDonald's food is such that a small marginal cost increase will destroy the business, is it a good business?
Competition in the fast food space is intense, and market forces will drive prices. Perhaps the people who cannot afford a hamburger at Five Guys would be able to do so if paid a decent wage.
The only reason that money losing startups “business model” works is because they don’t have to worry about silly things like profits. They are also being subsidized by VCs who are being subsidized in part by public pensions.
Maybe if we didn’t give special treatment to VCs Capital gains, many of the tech bro’s would also be out of a job. If we want to stop subsidizing bad business models let’s start with not allowing public pensions and tax free endowments the ability to invest in VC.
