Posted on 08/01/2013 9:26:15 PM PDT by Jim Robinson
The Huffington Post reports that McDonald’s could double its workers wages by raising the price of a Big Mac by 68 cents. It went large on the Internet on Tuesday.
Unfortunately, what it originally claimed was a study by a University of Kansas researcher turns out to be something—a term paper, maybe?—given to Huffington Post by a KU undergrad. And there are serious problems with it. The correction on its provenance came too late, though: it’s all over the internets:
McDonald’s can afford to pay its workers a living wage without sacrificing any of its low menu prices, according to a new study provided to The Huffington Post by a University of Kansas student.
Doubling the salaries and benefits of all McDonald’s employees — from workers earning the federal minimum wage of $7.25 per hour to CEO Donald Thompson, whose 2012 compensation totaled $8.75 million — would cause the price of a Big Mac to increase just 68 cents, from $3.99 to $4.67, Arnobio Morelix told HuffPost. In addition, every item on the Dollar Menu would go up by 17 cents.
Since the HuffPost doesn’t bother to publish the actual “study,” which wasn’t really a study, we can’t really tell where these numbers are coming from. So let’s back into them.
First of all, 68 cents may not sound like much, but it really means that McDonald’s would have to raise its menu prices across the board by 17 percent. That ain’t peanuts.
Second, the 17 percent number is just incorrect. It’s too low. Here’s the latest McDonald’s 10-K, which gives us a glimpse at the company’s labor costs:
(Excerpt) Read more at cjr.org ...
Has this person ever run a business? I have. And 5% would have me whooping for joy. Right now it is running about 2%. But then I am just getting started and have to dump major amounts back into the business.
Five percent is about average in a retail business.
I used to work for a major fast food franchisee, who ran about 20 fast food restaurants.
The labor costs were about 40% of the total operating cost of each store.
The profit margin was between 5 and 10% for each profitable outlet. However, of the 20 stores, 3 were consistent money losers, which had to be subsidized by the others. And about 5 were basically breaking even. The remaining profitable stores profit margin was generally between 5 and 10%.
There’s no way you could double the pay of hired help at the franchise level of a fast food business, without severe increases in menu prices. And we know increases in menu prices will reduce demand, and reduce sales volume.
It’s very easy for these protesters to protest, when they have no conception of the real world impact of what they want. If they got what they want, jobs will be eliminated and hours worked will be cut for the remaining workers. Sales will go down, as people will not go to McDonald’s as often.
They can even name the chain “PC Burgers”. And they should have a ready market with the 47% of the country who happily consume the Democrats’ BS!
Their projections were based on a student’s paper.
Go figure.
But, they could just raise prices to avoid firing anyone when sales go down.
/s
And sadly people are dumb enough to beleive stuff like this.
To prove the theory, The Huffington Post should buy a McDonalds Franchise for a Million Bucks or so (if they’re that cheap) and practice what they preach.
They will be out of Business by Christmas.
Many of the KU students never leave KU, for nowhere else is life as campus in Lawrence (Kansas) and they can pretend to be students, if they can't get a teaching gig at the University, continue to live in student housing, participate in "campus forums," sit-ins and hang out with other aging hippies.
Another University of Kansas student wrote that liberal/progressive book, "What's wrong with Kansas," and as usual it was a litany of every leftist's wet dream of Utopia and how it doesn't exist in Kansas, bwaaaa!!
If they do, I say it’s time toward a “meat is murder” protest outside to annoy them.
This craptastic analysis fails to consider one of the most elemental aspects of marketing, which is often called “price elasticity of demand”. They assume the number of Big Macs sold will be the same, regardless of price. Does anyone really think that will be the case?
Demand for some things is pretty inelastic, such as gasoline. When the price goes up, we just pay it because we judge it’s better than the alternative (such as walking, not taking a trip, etc). But Big Macs have to compete against other meal choices, and increasing the price will doubtless cause some potential consumers to make a different choice. It’s possible McDs revenue will drop enough that they’ll make less money at the higher price than presently.
Of course, none of this would be apparent to a Huff Po writer, because it’s free market capitalism.
This Huffpo bit is so stupid it hurts. If McDonald’s could raise their prices 17% across the board (not just on Big Macs like the misleading Huffpo piece seemed to say), then why wouldn’t the greedy capitalist pigs do that just to increase profits? Again, so stupid it actually causes physical pain to think about it.
Yes they would be
Fast food prices have already reached that point for me.
It really helps to drop some weight so I guess that’s good but seldom eat out now. When I do I go to a real restaurant
It simply is not worth the price any more for me
Peanut butter sandwich prices will stay the same. So will cans of soup for the office.
Why robots could soon replace fast food workers demanding higher minimum wage
http://www.freerepublic.com/focus/f-news/3048888/posts
The required price raise would actually be 3x the current prices.
Thankfully McDonald’s doesn’t sell franchises to idiots, it’s their best interest to sell to intelligent business people, and you better have enough capitol to live on for a year or two until you get past the break even point of your effort.
Even better. According to the logic of the Huffpo, we could all be rich if all businesses would just raise their prices enough. Makes perfect sense.
There can be little doubt that McDonald’s workers should be receiving six hundred dollars an hour, while the price of a Big Mac remains below three dollars.
Welcome to The Twilight Zone, run by Rod Serling’s cousin, Bozo Serling.
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