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McDonald’s shift on the minimum wage will have little impact

Though the company’s decision to stop lobbying against hikes was notable, increases have had all the momentum for years, says RB’s The Bottom Line.
Photograph courtesy of McDonald's Corp.

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Five years ago, voters in four decidedly red states—Alaska, Arkansas, Nebraska and South Dakota—all voted to approve increases in the minimum wage.

It was the clearest, loudest signal of where the public stood on the topic: They overwhelmingly favor a higher wage, and it really doesn’t matter whether they are Republican or Democrat. That has made it difficult for the restaurant industry to push back against such increases.

“It’s tough to make progress on an issue where 80% of the public disagrees with you,” said Joe Kefauver, managing partner with Align Public Strategies.

Given that stand, McDonald’s recent decision to stop lobbying against minimum wage hikes at the state and federal level will have little impact on the overall issue, simply because the company hasn’t had much success in stopping them in the first place.

Several states in recent years have approved increases in their minimum wages. That includes McDonald’s own home state of Illinois, which earlier this year approved a measure that would phase in an increase to $15 an hour by 2025.

“They haven’t been able to impact this issue in any meaningful way for a long time,” Kefauver said. “Why would you keep banging your head against the wall?”

The decision was praised by labor groups. But it also could drive another wedge between the company and its operators at a time when tensions have arguably never been higher.

McDonald’s has seen the dynamic in its relationship with operators change in recent years, in part because of new management as well as the company’s decision to mostly get out of the business of operating restaurants.

The company has sold most of its locations to franchisees and now operates 700 of its nearly 14,000 U.S. restaurants—about 5%. It used to be 20%.

There has long been tension in the franchise relationship because franchisors depend on top line revenues franchisees generate, given that they take a percentage of revenues for royalties and, in McDonald’s case, rent. Franchisees, on the other hand, have to earn profits. They’re the ones that, for the most part, have to pay for those higher wages.

Relations with those franchisees have soured in recent years amid discounts and remodeling demands, and last year, those operators formed the first independent franchise association in the company’s history.

Many franchisees were floored when informed of the company’s intent to end its opposition to minimum wage hikes.

Kefauver was critical of the public manner in which McDonald’s made its shift. Typically, he said, such changes in lobbying are done quietly. And he noted that the company missed an opportunity to advance the discussion, particularly around the chain’s role in providing many young people with their first jobs.

“I’m most disappointed it wasn’t about the future and what’s next,” he said. “It’s a huge, missed opportunity.”

He also believes the company should have shifted its lobbying efforts earlier, when the push for higher wages was in its infancy.

McDonald’s has been the primary target of the labor movement toward higher wages. Protests have been held outside company headquarters and outside of its restaurants almost annually since the Fight for $15 movement began in 2012. That movement has largely been credited for leading the push for higher wages.

The Chicago-based burger giant, with its CEO’s directive to be a “modern, progressive burger company,” has been trying to improve its image. It started making burgers with fresh beef. It has removed antibiotics from its chicken supply and committed to moving toward cage-free eggs. Now it is working to reduce antibiotics in its beef and has vowed to find a more sustainable cup.

And it is working to increase gender equality in career advancement.

By publicly stepping away from lobbying against wage increases, the company is sending a message to the 80% of the public that wants workers to get higher pay.

“The conversation about wages is an important one,” said Genna Gent, McDonald's vice president, U.S. government relations, in a letter to the National Restaurant Association. “It’s one we wish to advance, not impede. Ultimately, progress must come from all corners of our society, and McDonald’s Corp. is committed to playing a meaningful role in the spaces we occupy.”

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