So I got some numbers from a major burger chain on Net profit (minimum wage related)

[Guest]

It's not a full disclosure but I had a conversation with someone who gave me some broad numbers.

 

The "goal" they want their franchises to achieve is 15% profit margin. But he told me I should expect something more along the lines of 12.5%. Remember this guy is trying to get me to invest. If anything, he is probably inflating the profit margin.

 

I told him "Maybe a range between 10-15%?" He goes, "Yeah."

 

So on a volume of 1 million $ the total profit is going to come in somewhere around 100 000 to 150 000. So he says!

 

 

Someone in the media who knows nothing about business needs to  explain to me again how the burger flippers need to make more money and are getting taken advantage of. 

[Jamalisms]

What you can pay and what they deserve to make are separate inputs. How well they align determines the viability of the business plan.

Sounds like Burger King business model is shit and relies on exploitation. That doesn't have anything to do with assessing fair wages for work performed.

[Starkiller]

Someone in the media who knows nothing about business needs to  explain to me again how the burger flippers need to make more money and are getting taken advantage of. 

Then perhaps someone in the business community making millions should explain why it's okay that the people he profits off of are being paid wages that don't get them above the poverty line.

[reo]

Could be a lot of factors involved as to why a specific chain isn't making but 10-12% profit including which chain it is. As I posted in that thread, McDonalds hovers around 20% profit quarterly. Could be a lot of reasons as to why McDonlds themselves is making a lot more than specific locations as well. Could be as simple as how much they charge their locations to be affiliated w/ them. I don't know the specifics of how it works.

 

But McDonalds has hovered around 20%

 

http://ycharts.com/companies/MCD/profit_margin

[Guest]

Then perhaps someone in the business community making millions should explain why it's okay that the people he profits off of are being paid wages that don't get them above the poverty line.

 

See this is where the stupid comes in. Making millions? I just showed you how the best expectation should be 15% profit margin.

 

Simple math. 1Million $ gross revenue (the "average" he purports to me), 10-15% profit margin. That's 100-150K of income for the owner.

 

Where are you getting millions from? 

[Guest]

It's not a full disclosure but I had a conversation with someone who gave me some broad numbers.

 

The "goal" they want their franchises to achieve is 15% profit margin. But he told me I should expect something more along the lines of 12.5%. Remember this guy is trying to get me to invest. If anything, he is probably inflating the profit margin.

 

I told him "Maybe a range between 10-15%?" He goes, "Yeah."

 

So on a volume of 1 million $ the total profit is going to come in somewhere around 100 000 to 150 000. So he says!

 

 

Someone in the media who knows nothing about business needs to  explain to me again how the burger flippers need to make more money and are getting taken advantage of. 

 

Speaking for the US, minimum wage would be fair if it weren't for the predatory housing system in this country that makes safe and decent housing virtually impossible to afford in some areas of the world. It would be fair if it weren't for an education system that makes higher education and upward mobility something that has massive debt on one side of the coin and privilege on the other. 

[Jamalisms]

Isn't SK saying 10-15% for franchisees but additional millions (billions?) for franchisor corporations.

[chef]

For restaurants in general, 10-15% is the norm - and that's for the successes.  As opposed to the -15%s that are the ones that shut the doors before too long.

 

A ton of profit margin is always built in the bev program, from ice tea to fine wine.  But you will only pay so much and order so many ice teas.  Most restaurants need a bar to keep the doors open.

 

 

Something that generally goes undiscussed is that food in America is basically too cheap.  Lots of it farming wise is subsidized.  Mass produced, hardly recognizable as actual food like McD's does drive food cost$/meal down to the very bottom, which forces everyone else including Jim Bob the independent burger guy to try to do the same, lowering food quality and as all the operating %s need to match up to keep the doors open, labor costs, too.   

 

 

Of course it's easy for an highly populated, affluent area like SF of NYC to support higher end places with better grub (not that this automatically equals better worker pay - sometimes its worse at the best places as jobs are treated like prizes where owners basically feel that their name on the cook's resume has so much value that the cook should be paying THEM to work there... and they almost do).  But this basic trend of higher costs driving down quality is a large impetus for the rise of food trucks, where small owner-operators can have about as much culinary freedom as they choose within the confines of a tiny rolling service kitchen.  Mix in the fact that we're all too busy to sit down for our truffled-talleggio-kim chee-frozen air foam lollipop these days, and will now just pick it up to go to same time, avoid paying extra overhead costs related to an actual restaurant, tipping servers, etc.  It's today's primary method by which food quality can elevated while keeping costs low.

 

 

So to really cut through all of it, a burger flipper at Micky D's probably should make a couple bucks more an hour, and in turn that burger should cost about a buck more.  No one stops buying gas when it goes up by 50 cents, and they won't stop buying food either. They just may have less in their pocket to buy a nicer cell phone, or sign up for 300 paid subscription services, or limit themselves to a TV a 1/4 the size of a house rather than 1/2. And the poor will still mostly be poor, but might have just enough additional cash flow to stay afloat rather than sink, a higher % of them anyway. 

 

I'm actually not huge on minimum wage laws, truly believing the system tends to adjust itself.  But the food industry has become so badly skewed in driving down costs that the economic balance has tipped.  It's not that all these food biz owners are greedy - though plenty are - it's that they typically can't absorb the hit.  Otherwise more would have raised wages as a means to grab all the best employees in efforts to strengthen their business foothold.  But if a min wage increase forces an across the board increase in food sales prices, on a level playing field, then that's how the industry imbalance gets righted. 

[chef]

Isn't SK saying 10-15% for franchisees but additional millions (billions?) for franchisor corporations.

 

 

Yeah, and basically one reason I hate chains.  You're paying for a lot of things, but a higher % isn't going to the food or wage cost.  Got to pay the franchise owner (when there is one), the corporation, the shareholders. And most of those folks would be happy to feed you dog poop if you still came in and paid for it everyday. 

 

 

 

 

There is a huge difference between independent vs corporate retail situations.  A handbag made by the Acme Comp. is more or less the same thing where you get it at an independent boutique or via Amazon, just the shopping experience is different. 

 

In a value-added situation, however, where the hands on labor that determines product quality is generally crucial in the final moments, independents can have a slightly improved chance of beating the efficiency and cost leverage advantages held by large corporations. 

[Starkiller]

See this is where the stupid comes in. Making millions? I just showed you how the best expectation should be 15% profit margin.

Simple math. 1Million $ gross revenue (the "average" he purports to me), 10-15% profit margin. That's 100-150K of income for the owner.

Where are you getting millions from?

Plenty of businesses aren't making millions. I understand that totally. And guess what... that still no argument for paying employees at poverty level wages.

[Starkiller]

Isn't SK saying 10-15% for franchisees but additional millions (billions?) for franchisor corporations.

It wasn't specifically what I was saying, as it pertains to potentially anyone at the top, but certainly in the world of fast food franchises that's a big part of the problem.

[Starkiller]

Seems to me they should pay what people are willing to work for..... but wait, in this Obama economy those are the only jobs available so yes, in this negative growth economy we do have head of households having to work at fast food establishments. Hmmmm.... Maybe the best thing to do is actually create some decent damn jobs for a change.

People are taking what they can get because it's better than nothing. But they are still living before the poverty level despite a full time job.

And where is the "free market" creating these damned jobs? I've been told that the job creators and the free market create all the jobs and the government doesn't need to do that. So where are these free market jobs?

Maybe it's time that the government starts creating jobs again directly...

[reo]

Seems to me they should pay what people are willing to work for.

 

If there was a real alternative to taking whatever job you can get at whatever they pay then I'd agree. But there's not and b/c of that all the power is w/ the corporations unless legislated otherwise w/ a minimum wage. There would always be someone out of work needing a job that's willing to do that job for less than you're making especially w/ jobs like this that require little to no training. That would drive wages down.

[chef]

Seems to me they should pay what people are willing to work for..... but wait, in this Obama economy those are the only jobs available so yes, in this negative growth economy we do have head of households having to work at fast food establishments. Hmmmm.... Maybe the best thing to do is actually create some decent damn jobs for a change.

 

 

This actually touches on what I mentioned.  The idea that skilled hands adding value at local points of sale vs manufacturing jobs that are easily outsourced is the reason that service sector jobs will continue to be the primary growth area in the job market, with a very large % near the bottom of the pay scale.

 

None of this is news.  When elected, Obama made a huge push to return yesteryear's manufacturing jobs to America.  I am not a huge Steve Jobs guy, but I loved that when Obama asked Jobs "How do we get those jobs back?", Jobs said "They're not coming back."  With a decent fed push, they did succeed in slowing the outsourcing tide and returned a few, but that was really about 5% gov't and 95% economics since following the crash it got cheaper to manufacture here again (lowered wages/benefits, tons of unemployed looking, reduced facility costs via real estate collapse) and was still costly to ship product overseas.  Combined with a few tax breaks/handouts begging coprs to return, we got a smidge back. 

 

Higher wage jobs will continue to become even more a function of an educated workplace.  Always gets back to education.  Overall economic prosperity and usually standard of living within any country is almost always in direct correlation to educational achievement for the entire populace as a function over time (meaning generations). 

 

So when you think of creating jobs, we have created lower end ones that have lower educational requirements, usually service sector.

 

For the higher end, we still do that to a decent extent.  Right now there are tons of specific high skill, high wage positions open across the country, but we do not have enough qualified people to fill them

 

It's the middle that's been torpedoed.  With manufacturing continuing it's long slow decline, and construction jobs bottoming out with the housing crash and only recently showing some life, those are the classic American "good jobs" where you get paid above your educational attainment.  But like and really with the middle class, those will both fade (with outsourcing) and be altered (reduced benefits, the continued impact of downward wage pressure from immigrants will to work for less... "pay what people are willing to work for" as you said).

 

 

It's far from all gloom and doom, but basically if you want to end up on the right side (and I mean that two ways) of what is becoming an inverted bell curve for social class, you better get educated.  And I mean in a specific, likely high tech skill - probably math/science-based,  ot underwater basket weaving.  The brain dead path to middle class prosperity is mostly done. You're not going to graduate from HS, marry your sweetheart, go work at the factory with Dad, buy a house, and retire with a pension anymore.  And that's not (directly) Obama's fault, Bush's fault, etc.  And it's not reversing course. 

[abenjami]

In the food service industry, the solution seems very simple.

 

The owner should pay his workers a fair wage and not expect customers to pay them on top of their food bill.

 

Food prices should factor that in.

 

Tipping should be eliminated.