McDonald’s minimal wage increase and the quick meals franchise future

Employees work at the counter of a McDonald’s restaurant in the company’s new corporate headquarters on June 4, 2018 in Chicago, Illinois.

Scott Olson | Getty Images News | Getty Images

For Tom Locke, his turning point in employee wages came back in March during a conversation with a tired store manager, Heidi, in Coventry Township outside Akron, Ohio.

Beginning of the week that MC Donalds The location she ran for his family business, TomTreyCo, had a record-breaking $ 18,000 in sales in a single day, but when he spoke to her at a booth, Locke found that despite her decades of dedication to his business, there was a staff shortage at the end of the Covid-19 pandemic have really taken their toll.

She described working a 12-hour shift, sleeping in her car for three hours instead of driving home for half an hour, followed by another full day on her feet. “I could see the stress on Heidi’s face,” Locke recently recalled. So he decided to make a change to the 45 McDonald’s locations that are part of his franchise business in cities in Pennsylvania, West Virginia, and northeast Ohio – he raised workers’ wages.

The youngest employees would make at least $ 13 an hour, and far more than what other local competitors offer for managers who would move up to $ 20 an hour.

“We were in a pretty strong financial position,” said Locke of the April decision, following consultation with his executive team and a thorough review of the models to study the cost and margin implications. “I felt if at any point we could do this to raise the salaries of all of our employees, it would be now.” he said.

Fast food payment under pressure

Fast food wage levels have been scrutinized over the past decade with the help of work-friendly policymakers and well-organized stakeholders like Fight for 15, who advocate a minimum wage of $ 15 an hour.

McDonald’s is perhaps more at the center of this criticism and controversy than any other brand, although its franchise model means that the vast majority of restaurant locations are actually operated by independent franchisees like Locke’s TomTreyCo, rather than the franchisor – McDonald’s itself. But thanks to the deeply intertwined relationship between the franchisor and franchisee, a decision to increase wages on either side of the franchise equation can have complex implications.

In May, just months after other heated disputes with franchisees over study programs and the payment of technology fees, McDonald’s announced that workers at McDonald’s 650 company-owned locations will receive an average pay increase of 10% by the end of June – entry-level employees will ever Earn $ 11-17 an hour by location, and Shift Supervisors will make $ 15-20 an hour. The company says the average wage for employees in in-house restaurants will be $ 15 an hour through 2024.

While the wage increases will only take effect in the locations that McDonald’s owns and operates, the company encouraged franchisees who run the roughly 13,000 other restaurants to do the same for their roughly 800,000 employees, causing anger and dismay among some franchise owners. The fast food giant sells 95% of its US restaurants.

What McDonald’s boss says about wages

McDonald’s is one of the restaurant chains emerging from the pandemic in a strong financial position, much like Chipotle did recently increased wages – and in this case the menu prices by 4%. And it has tried to financially support independent restaurant operators.

In one current interview at the CNBC Evolve Global Summitsaid Chris Kempczinski, McDonald’s CEO, the company’s decision to pump around $ 1 billion in liquidity into its system earlier this year after the worst of the pandemic ended – and in addition to several years of US balance sheet growth Part of an effort to turn the franchisee mindset away from worrying, “Will I be able to pay my mortgage or loan due this month? … be much more aggressive really.”

While not wanting to comment on an increased federal minimum wage, McDonald’s CEO said, “There’s no doubt that $ 7.25 is not what you should or have to pay to be competitive in the market today. … wages are rising because the economy is strong. “

Labor experts say McDonald’s move will put pressure on its franchisees.

“This will put a lot of public pressure on franchisees to do the same,” said Laura Padin, a senior labor advocate for the National Employment Law Project. “When this campaign started in 2011 or 2012,” Padin said of “Fight for 15,” a minimum wage of $ 15 was “intended as that kind of ‘pie in heaven’ target.”

The latest announcement from McDonald’s is proof of its effectiveness, Padin said. “The fact that companies are taking this initiative themselves only shows how much the movement has changed the narrative of what an acceptable minimum wage should be,” she said.

Franchise industry is pushing back

The franchise industry has made its position clear – minimum and maximum wages should be set by individual restaurant operators. “Franchisees are best placed to make wage decisions in their local communities,” said Matt Hauer, senior vice president of government relations for the International Franchise Association. He highlighted the cost differences between high-priced city zip codes and more rural locations.

The current focus on wage levels was due to a “union-driven campaign” to achieve certain organizational or political results by persuading the public that the franchise business model is in fact an enterprise model. In the public eye, he says, this is “to make a company like McDonald’s or Dunkin Donuts or Hilton Hotels one company, not a collection of many small companies doing business under a common brand.”

On July 7, 2021, in San Rafael, Calif., A sign reading “Now Hiring” is posted in the driveway of a McDonald’s restaurant.

Justin Sullivan | Getty Images

McDonald’s corporate view puts franchisees in the crosshairs of a battle that is being fought with massive competitors in a broader, low-wage landscape.

“I think what happens is you see that having a great economy is very helpful in increasing employee wages. And I think a lot of the changes that come from the wage perspective are because companies like McDonald’s have to compete for the best. ” Talent, “Kempczinski said.” If you have Walmart and Amazon, Target … all going to $ 15, that’s certainly a talent pool to compete with. “

How McDonald’s employees feel

Among workers advocating higher wages, a distinction between McDonald’s companies and franchisees can seem semantic.

“We don’t care if we work in a franchise or corporate business or not,” says Cristian Cardona, a 21-year-old who started working at a McDonald’s-operated restaurant in Orlando three years ago. “We all wear McDonald’s uniforms and we all earn a living wage.”

Cardona was first employed at $ 9.25 an hour, just a dollar more than the Florida minimum wage at the time. Then after a year he became a manager and rose to $ 11 before McDonald’s recently raised it to $ 13. “If McDonald’s companies can control how franchisees make and market their Big Macs, I know they can figure out how to pay every single worker a living wage of at least $ 15.” he said.

For Locke, the Ohio franchisee, adopting higher wages was ultimately more of a corporate than a moral choice. “I will be honest with you,” he said in a recent telephone interview. “If it wasn’t for a huge labor shortage, we might not have taken the action.”

We were just a virtual hamster on the hamster wheel: we weren’t going anywhere. The hardest part is hiring, retaining, and training great people.

Tom Locke, McDonald’s franchisee

At the beginning of the year, Locke had reduced his menu choices to improve his margins, but he was still grappling with staffing shortages. Around 250 employees would leave every month and just as many would have to be trained. In the catering industry, sales of over 100% are common.

“We were just a virtual hamster on the hamster wheel, we weren’t going anywhere,” he says. “The hardest part is hiring, retaining and training great people.”

But since his raise, which went ahead regardless of McDonald’s announcement, the following month, retention rates have skyrocketed.

To compensate for the higher costs, he has raised prices slightly, but believes that customers “expected” it, as his team has publicly communicated the higher wages for its workers. “It’s a long-term look at business as opposed to a very short-term look at business,” Locke said. “I think it’s a much better business model.”

This is an approach that shows more consistency than friction between McDonald’s companies and independent owners, and reflects the view of the McDonald’s CEO.

“We’re going to be transparent … We’re going to make absolutely long-term decisions, so let’s not intervene here and now for the short term,” Kempczinski told CNBC.

Korn Ferry 4 to lift prize cash to a minimal of $1 million per event in 2023

PONTE VEDRA BEACH, Fla. – Players trying to make the PGA Tour soon will be battling for more cash to help them along their way.

The Korn Ferry Four, the circuit just below the PGA Tour, announced to players Tuesday that prize money for tournaments will be at least $ 1 million from 2023 onwards. The minimum exchanges are now at $ 600,000, with $ 108,000 going to the winner. First place would be worth at least $ 180,000 as of 2023.

“The Korn Ferry Tour continues to play an important role in consistently providing a pipeline of future stars for the PGA Tour,” said Alex Baldwin, President of the Korn Ferry Tour.

She said the price hike would ensure the tour continues to attract the best talent, “while providing higher quality gaming opportunities”.

2 relatives

The tour said the PGA Tour Board approved the wallet increases in March 2020 and they should begin this year. This was delayed due to the COVID-19 pandemic, which resulted in two seasons (2020 and 2021) being counted as one, as well as costs related to testing and a safety plan.

The minimum wallet amount will increase to $ 750,000 next year and $ 1 million in 2023.

The final regular season event will go from $ 750,000 to $ 850,000 next year and then to $ 1.25 million in 2023, while the three Korn Ferry Tour Finals events, which will decide on PGA Tour tickets, go from 1 million US $ 1.5 million this year will rise to US $ 1.5 million in 2023.

The top 25 on the scoreboard during the regular season deserve tickets, and the three events after that offer 25 tickets for a mix of Korn Ferry Tour and PGA Tour players.