Former McDonald's CEO Drops Hard Truths on What $15 Minimum Wage Does to People Who Need Work

| APR 25, 2016 | 8:54 PM
Fast Food Workers Stage Nationwide Protests For Higher Wages

Scott Olson/Getty Images

It's no secret that Democrats (and labor unions) are clamoring for a raise the minimum wage in the United States to $15 per hour.

That vision is already a reality for workers in some cities nationwide — and soon will be for all workers across the state of state of California.

Cities in the United States with a higher-than-average minimum wage:

But not everyone's in favor of the steep wage increase, given the hardships that higher wages place on businesses already struggling to stay afloat and the fact that jobs are often lost whenever minimum wages are raised.

Among those opposing the wage hike is Ed Rensi, the former president and CEO of McDonalds. He wrote about the effect that a $15 minimum wage would have on his old company in Forbes on Monday, suggesting that:

...a $15 minimum wage won’t spell the end of the brand. However it will mean wiping out thousands of entry-level opportunities for people without many other options.

He explained why:

The $15 minimum wage demand, which translates to $30,000 a year for a full-time employee, is built upon a fundamental misunderstanding of a restaurant business such as McDonald’s"

In truth, nearly 90% of McDonald’s locations are independently-owned by franchisees who aren’t making “millions” in profit. Rather, they keep roughly six cents of each sales dollar after paying for food, staff costs, rent and other expenses.

Then he does the math, which will leave entry level workers in a bad spot:

“A typical franchisee sells about $2.6 million worth of burgers, fries, shakes and Happy Meals each year, leaving them with $156,000 in profit. If that franchisee has 15 part-time employees on staff earning minimum wage, a $15 hourly pay requirement eats up three-quarters of their profitability. (In reality, the costs will be much higher, as the company will have to fund raises further up the pay scale.) For some locations, a $15 minimum wage wipes out their entire profit.”

Rensi isn't the only current or former fast food executive speaking out about the push.

Last month, the CEO of Hardee's and Carl's Jr. told Business Insider that he is strongly considering moving toward opening automated restaurants because the cost of hiring manual labor has become too expensive.

All in all, it appears that raising the minimum wage for fast food employees to $15/hour would give a whole new meaning to the phrase, “Do you want fries with that?”

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