Here's what fast food will cost with $17 an hour wages

[Doom and gloom]

Here’s Exactly How Much More Money You Will Spend on Fast Food If Workers Get $15 Minimum Wage

Seventeen cents my ass. McD's is up almost a dollar in a year on meal deals.

 

[swingline]

Solution: Don't eat fast-food meals.

 

[Baron Scicluna]

Figure a McDs has 8 hourly employees at $9 an hour. They're paying $72 an hour for the employees.

Minimum wage goes up to $15/hour. Now they're paying $120 an hour, an increase of $48.

According to the McD's website, a restaurant averages 1,900 customers per day. Say they're open 19 hours a day (close at midnight, open at 5). So they average 100 customers an hour, paying that $48/hour.

So their meal should be going up 48 cents per meal per customer. More than the 30 cents per meal cited in the study, but hardly a deal breaker.

 

[Dick Whitman]

Figure a McDs has 8 hourly employees at $9 an hour. They're paying $72 an hour for the employees.

Minimum wage goes up to $15/hour. Now they're paying $120 an hour, an increase of $48.

According to the McD's website, a restaurant averages 1,900 customers per day. Say they're open 19 hours a day (close at midnight, open at 5). So they average 100 customers an hour, paying that $48/hour.

So their meal should be going up 48 cents per meal per customer. More than the 30 cents per meal cited in the study, but hardly a deal breaker.

If it wasn't a deal breaker for some, it would cost that now.

 

[JohnHammond]

When will newspaper reporters get their $20/hr?

 

[Doom and gloom]

When will newspaper reporters get their $20/hr?

If you remember, John Kerry was at one point pushing as a senator in Obama Term I an idea to put newspapers under non-profit status. That lasted, oh, a day or so.

 

[LongTimeListener]

It won't cost that if people don't pay that.

Horror of horrors, McDonald's could make less than the $16 billion profit it took in for 2014.

 

[SFIND]

It won't cost that if people don't pay that.

Horror of horrors, McDonald's could make less than the $16 billion profit it took in for 2014.

How dare you suggest McDonald's corporate settle for only $15 billion in profit!

 

[User 11148]

If it wasn't a deal breaker for some, it would cost that now.

That seems to be rather obvious, doesn't it? Apparently obvious is lost on a lot of people.

 

[poindexter]

That seems to be rather obvious, doesn't it? Apparently obvious is lost on a lot of people.

Eh, so they can grab a bag of rice, some chicken breasts and a couple vegetables, and eat two dinners for the same cost.

Not the biggest injustice in the world.

 

[Dick Whitman]

Eh, so they can grab a bag of rice, some chicken breasts and a couple vegetables, and eat two dinners for the same cost.

And then McDonald's will have to lay those workers off. Or close.

 

[Ace]

And then McDonald's will have to lay those workers off. Or close.

Or do more with less.

 

[The Big Ragu]

1) Demand for fast food is probably as elastic as demand is for most things. At higher prices, demand will undoubtedly fall off -- squeezing margins and income.
2) You'd expect fast food restaurants, as Ace pointed out, to continue to push the trend of automating, and to the extent they can, do more with less in that environment. The ones that can't do that and be able to maintain any sort of margins, as **** pointed out, won't be able to stay in business., and the ones that can jump through those hoops due to their scale, obviously will be employing fewer people.
3) Which is why, the truth is that the actual minimum wage is (and will remain for even more people) $0.

 

[Ace]

1) Demand for fast food is probably as elastic as demand is for most things. At higher prices, demand will undoubtedly fall off -- squeezing margins and income.
2) You'd expect fast food restaurants, as Ace pointed out, to continue to push the trend of automating, and to the extent they can, do more with less in that environment. The ones that can't do that and be able to maintain any sort of margins, as **** pointed out, won't be able to stay in business., and the ones that can jump through those hoops due to their scale, obviously will be employing fewer people.
3) Which is why, the truth is that the actual minimum wage is (and will remain for even more people) $0.

You're way too pessimistic, Rags.

They can take those $17 workers, pump 'em full of HGH and steroids, mix them with some chicken parts and pink slime and they'll be fine.

 

[Starman]

If McDonald's thinks it can get people to pay $3.99 for a Big Mac instead of $3.69, they'll jack up the prices tomorrow morning. What they're paying out in wages has nothing to do with it.

 

[The Big Ragu]

You'd assume McDonald's sets prices at a spot that maximizes its profits. That is what successful businesses do. So to the extent that there are customers who want what McDonald's offers, McDonald's average price point is at the spot that attracts the optimal volume of customers relative to that average price point. That is how you maximize your profits.

Within that model, for example, it might have a "value" menu where it sells a few items at a loss, knowing that a certain percentage of people it attracts will buy higher margin items once they are in the restaurant.

They spend a lot of time trying to get these things right and they experiment a lot.

Wages are a cost input of running a McDonald's. If you have a law or regulation that mandates higher labor costs for McDonald's, of course it changes that pricing dynamic for its food. Depending on how much more that labor costs, it either makes each McDonald's unprofitable. ... less profitable but still optimally priced. ... or less profitable and less optimally priced.

Ways to try deal with that might be to raise the food prices, try to employ fewer workers, automate or do a combination of all of those things. Those solutions could work, because presumably those higher labor costs would also hit all of McDonald's competitors, too, who will have to react the same way. But the results of that regulation are going to be some combination of: 1) Fewer workers earning more, 2) Some previously employed workers who now earn $0, and 3) Customers paying more for their food -- IF McDonald's can raise prices and still remain profitable.

 

[User 11148]

Some customers will pay more. Other customers will pay a helluva lot less -- i.e., they'll pay $0.

Some employees will remain employed. Others will become unemployed. And a lot of potential employees will never be hired.

But one thing is abso-friggin-lutely certain: Jejune b.s. of the sort linked to in the original post will NEVER go out of style. Because, apparently, the world has an unlimited supply of people who think businesses won't react to a 67% increase (89% if we're talking $17 an hour) in the cost of a particular input.

 

[amraeder]

If it wasn't a deal breaker for some, it would cost that now.

Yes and no.
Part of what keeps McDonald's cost low is the fact that they have to compete with Wendy's, Burger King, etc. They can't unilaterally raise prices now because that would send some of their market share to burger King and Wendy's. When a raise of minimum wage forces everyone to raise the cost of the labor, they don't have to worry as much about that type of tradeoff. So it's not exactly analogous.

I thought it might cost them business to fast casual places like Panera, but it looks like Panera pays its workers roughly what McDonald's does, so it'd be impacted the same by a rise in labor costs.
Maybe they'd lose market share to places like TGI Fridays, who aren't impacted by the increase as much, since part of their staff isn't bound by minimum wage laws, but TGI Friday's would be impacted some (line cooks make less than $15/hr it seems) and they'd still be more expensive and not nearly as fast as McDonald's.
The biggest cost of market share might very well be just staying home. Though the amount of people for whom $0.15-$0.30 is the line where they stay home or go to McDonald's is probably very small.

While I'm for a minimum wage increase, i'm fairly hesitant about a jump to $15, for the record (I'm not sure where the golden mean is, i just worry $15 overshoots it). But I just want to acknowledge that "that'd be the cost" now is slightly simplistic, because now they'd lose more market share with a unilateral cost increase than they would if everyone's costs increased.

 

[cranberry]

Nobody expects business not to react. Business can knock itself out. Businesses should act in their own best interests. There is, however, a calculation that well-considered minimum wage laws will have a net positive impact.

I also think people have little tolerance for chamber-of-commerce whining during a period of generally stagnant wages and extremely healthy corporate profit.

 

[BTExpress]

How dare you suggest McDonald's corporate settle for only $15 billion in profit!

A lot of people own McDonald's stock. They want (well, demand) to see that stock grow.

A smaller profit, while no big deal to us looking at it on the outside, means the stock will struggle to grow. Stockholders likely won't stand for that. Nor should they. They are no less important than anyone else affected by all of this.