The Chain Gang

Former McDonald’s CEO Predicts a $15 Wage Will Trigger Massive Layoffs

Protesting themselves out of jobs?
Protesting themselves out of jobs?

Former McDonald’s CEO Ed Rensi, the chain’s top dog in the ‘90s, has come out as the industry’s latest $15-wage doomsayer, writing in a column for Forbes yesterday that if activist cities and labor organizers get their way, the consequences will be dire not for McDonald’s as a company, but for the 840,000 hapless workers employed by the Golden Arches. “I can assure you that a $15 minimum wage won’t spell the end of the brand,” he writes. “However it will mean wiping out thousands of entry-level opportunities for people without many other options.”

Rensi explains what that will look like, and to his credit (possibly because he’s left the industry), he makes the chains look extremely cold and self-interested. A typical Mickey D’s franchisee does $2.6 million in annual revenue, which, after operating costs and all of McDonald’s sundry fees are deducted, leaves them with about $156,000 in profit. Rensi claims paying workers $15 an hour will erase at least three-quarters of that profitability, and leave only one viable option to franchisees who want the money back:

Recouping those costs isn’t as simple as raising prices. If it were easy to add big price increases to a meal, it would have already been done without a wage hike to trigger it. In the real world, our industry customers are notoriously sensitive to price increases. (If you’re a McDonald’s regular, there’s a reason you gravitate towards an extra-value meal or the dollar menu.) Instead, franchisees can absorb the cost with a change that customers don’t mind: The substitution of a self-service computer kiosk for a full-service employee.

Then, in case people think he jests, he brings the scaremongering home:

In higher-cost European countries, these kiosks are already the norm. In 2011, the company ordered more than 7,000 of them to replace entry-level employees. They’ve been tested successfully in a number of markets in the U.S., and now the company is even testing self-serve McCafe kiosks where a customer can prepare and customize their own coffee beverage.

He concludes by adding that the Fight for 15 crowd has an ulterior motive of finally unionizing McDonald’s gargantuan workforce. They’re “unlikely to succeed” in that goal, Rensi predicts, but he’s more than ready to credit them with the more dubious achievement: “You’ll see their legacy every time you visit the Golden Arches, where ‘would you like fries with that’ is a button on a computer screen rather than a phrase spoken by an employee in their first job.”

[Forbes]

Ex-McDonald’s CEO Says $15 Wage Will Cause Layoffs