Sometimes.... Liars do Win

The ex CEO of McDonalds, Ed Rensi, was just exulting today about the fact that McDonalds is introducing Kiosks to replace some of their workers. He was patting himself on the back for predicting that this would be the result of efforts to raise the minimum wage to 15.00 an hour. In Mr. Rensi’s world the efforts of McDonalds employees to receive a living wage is steeped in ignorance, ignorance of the basic fact that McDonalds owners are barely scraping by as it is.

This is the kind of fatuous nonsense that is becoming commonplace in the US media. Rensi is probably no worse than most large corporate CEO’s. Unfortunately most US corporate CEO’s live in a world that has nothing to do with the reality that the rest of us face. Last year, the current CEO of McDonalds took a 368% pay raise, up to 7.91 million dollars a year. While I am sure that has put his family in dire straights financially, let’s hope that he can manage to pull himself out of the poorhouse at some point in the future; I am sure the Kiosks will help.

Leaving all that aside for a moment, let’s look at what the franchise owners of McDonalds make on average. The average McDonalds franchise in this country brings in $1,782,000 per year. After paying salaries and expenses this figure is whittled down to $761,400. Here is where the kicker comes in, the rent and fees paid directly back to McDonalds corporate office are $391,500 on average. In other words, out of the net income for the franchise owner, well over half goes directly back to McDonalds corporate office. This explains two things; why the current CEO was able to take a 368% pay raise this year and why Rensi is brutally dishonest when he claims that McDonalds can’t afford to give its employees a living wage. This makes him both a despicable liar and a human parasite living off of the honest hard work of a lot of people scraping by on sub poverty wages.

The average franchise owner makes a net profit of $153,900 dollars off of each McDonalds restaurant they run. Obviously, there is a lot of work involved in running such an operation, not to mention that initial expense of purchasing a franchise. Most McDonalds franchises wind up costing close to a million dollars each to purchase so it takes several years for an prospective owner to make his investment back. Again… this initial fee goes directly back to the McDonalds corporate office to inflate Mr. Rensi’s and many other corporate officers bottom line directly. It’s a hard life for Mr. Rensi and his ilk so I am sure you can understand his exultation when explaining why it is simply ridiculous to suggest that McDonalds employees should actually make a living wage.

A Purdue School of Hospitality study found that McDonalds could raise the minimum wage to $15 an hour for all McDonalds employees by raising the price of a Big Mac by $0.17. Of course if people had to pay $4.16 instead of $3.99 for their Big Mac Mr. Rensi might have to cut back on the number of summer homes he has or limit his raises to a paltry 300% per annum. It would be beyond our ability to contemplate the suffering this would entail for him and his family.

Perhaps there is another way to increase the pay of the workers at McDonalds without introducing such grotesque torture to the corporate officers of McDonalds. I neglected to mention that the average franchise owner of McDonalds happens to own six franchises. Therefore, the $153,900 per restaurant actually adds up to an average income of $923,400 per owner. While this may seem like a decent salary it actually chump change compared to the $7,910,000 that the CEO made. We couldn’t possibly cut into the $923,400 the average owner makes to give their own workers a living wage. After all, our income tax system is currently set up so that most McDonalds workers get an earned income tax credit now that allows them to avoid paying any federal income tax at all. In case you might be wondering who pays for that privilege just look at your next check stub under the heading Federal Income Tax and you will see where it comes from. That’s right….. earned income tax credit is a convenient way of letting US payroll taxpayers subsidize corporations like McDonalds. Add in the food stamp and other federal assistance programs that McDonalds encourages their employees to apply for so that they can afford to eat and pay basic substinence bills and you begin to see why corporate and franchise owners make such a good living.

As you can plainly see, both the corporate officers of McDonalds and the franchise owners are already barely getting by. We obviously must come up with another way to finance a living wage for McDonalds workers if such a thing is to actually become a real possibility. The average worker at McDonalds makes somewhere between $8.49 and $10.29 an hour depending on if he is a crew worker or a shift manager. If they were able to work 40 hours a week (which none of them do because then they would become eligible for health care benefits) they would make between $17,243 and $21,403 a year working full time. Of course, most conservatives would have us believe that most McDonalds employees are just kids making pocket change even though the real numbers tell us that over 70% of these employees are actually “full time” employees working 28-32 hours a week.

Let’s forget the $15 an hour thing for a moment and think big; really big. What if I told you that I could double the salary of every employee working at McDonalds without adversely affecting either the poor CEO barely scraping by on his $7.91 million a year OR the wretched average six franchise owner trying to subsist on $923,400 a year. How would I do that you ask? It’s really not that complicated.

The average crew payroll for a McDonalds franchise is $540,000 a year. In order to double everyone’s salary who works there I would have to come up with an extra $540,000 per year in net sales for each McDonalds. Since the average net sales figure is $2,700,000 this would actually mean we would need to see a 20% increase in net sales. Just for the sake of simplicity, this would require a 20% increase in prices across the board. This would mean a Big Mac Meal would go from $5.99 to $7.18. Two cheeseburgers would go from $2.00 to $2.20. I don’t know about you but I think I could live with that the next time I go to McDonalds. Let’s take a look at what this would actually do for everyone, not just the employees at McDonalds.

There are currently 14,259 McDonalds in the US. Each one has approximately 27 employees that would, under my plan, see an immediate doubling of their salary. If we do a mean average and say that the average employee earns $19,323 now and would under my plan make twice that ($38,646) we would simultaneously put most of them above the poverty line AND make them a taxpayer again as this would put them above the earned income level that currently pays no taxes.

In other words 384,993 people would suddenly have $19,243 a year extra to spend. This means that $743,922,000,000,000 would be available as expendable income next year for McDonalds employees if we are willing to pay $7.18 for a Big Mac Meal AND Mr. Rensi would be able to keep his private jet fueled up for those European vacations he has come to expect. Of course, he would probably just prefer to keep paying dirt wages to his employees AND replace most of them with automation technologies while he blames all those greedy employees making $17,000 a year for demanding something approaching a real living wage.

The truth is that $7,910,000 per year just isn’t enough for the Rensi’s of the world; not when they can see replacing their $17,000 dollar employees with machines that they don’t have to pay anything after they are initially purchased. Imagine how many more franchises they can sell if they can manage to double the average franchise owners salary by eliminating employees in favor of automated machines.