Fast-Food Finance

Bill Tatro
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Posted: Aug 30, 2013 12:01 AM
Fast-Food Finance

With Labor Day just around the corner, our jobs discussion speeds up with intensity, clarity, and a much more solid grasp of the situation — or not.  In any event, we’ll continue the conversation in conjunction with a topic which you might find very appetizing, namely fast-food.  

By vociferously demanding an increase in their wages, fast-food workers from McDonalds, Wendy’s, and Burger King, recently staged an intense one-day strike involving 60 U.S. cities.  Inspired by the president’s plea for a $9.00 minimum hourly wage in his 2013 State of the Union Address, the “fast-food folk” are calling for wage increases in excess of 50%.  Yet, the “fast-food folk” may not be aware that this is nothing new for the president.  As a matter of fact, in his initial presidential campaign in 2008, Obama was asking for a $9.50 minimum wage.  Thus, it would appear that the president is clearly moving in the wrong direction.  But don’t let me complicate the situation with diminutive details and insignificant facts.  

I’m not fully aware of the internal pricing configurations of McDonalds, Wendy’s, and Burger King, however, I am fully aware that when it comes to the food that they all provide, we refer to it as fast-food — quick nourishment that’s meant to be satisfying, somewhat nutritious, served quickly (think drive-thru), and inexpensive.  Over the past few years, in order to accommodate declining customer incomes and dwindling restaurant sales, the “value menus” have been added — just imagine a double-cheeseburger for $1.00.  Nevertheless, how are the profit margins maintained by dropping the prices so low?  Do they ask the employees to cut their wages?  That’s certainly possible.  Or, do they try to make up for less margin with higher volumes?  The answer is probably yes.  

Operating a fast-food restaurant is an extremely tough business, and it’s made even tougher when the associated corporation is publicly traded, which forces the corporation to answer to its shareholders.  

On the other hand, regarding their entire annual income, advocates will strongly contend that “fast-food folk” usually spend greatly within their local communities.  Therefore, a dramatically increased wage would be “a really good thing.”  However, as any large corporation or rational person recognizes, if the costs go up, the prices must reflect that increase, or the business will go “out of business” (except, of course, the United States government.)  

Therefore, by all means, increase the wages of the “fast-food folks” to dramatic double-digit hourly levels, and then see who screams the loudest when the same folks try to take their families out for dinner — attempting to order burgers, fries, and drinks, from a value menu which no longer exists.  I’m sure they’ll be very surprised to encounter the maître d who says, “Would you like a table for five by the band, and by the way, will that be cash or credit?”   



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