US Fast Food Strikes

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The Great Hippo
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Re: US Fast Food Strikes

Postby The Great Hippo » Wed Jul 31, 2013 5:22 pm UTC

Tyndmyr wrote:I've already pointed out that corporate profit margins are sufficiently slim that distributing all profit in wages would get us to maybe $9/hr. Not $15. And then the corporation would tank, and people would end up unemployed.
...wait, is this how you think an intelligent wage-raising campaign would honestly work? Just gut the corporation and distribute the money to the workers?
Tyndmyr wrote:There is absolutely not enough money in McDonalds to do this and stay in business. You may wish to actually read the earning statements and do the math before jumping to conclusions.
If what you're saying is 'McDonalds cannot double every low-level employee's salary and eat the cost without going out of business', I'd say that you are probably right! If what you're saying is that 'McDonalds can't raise low-level employee's salaries without going out of business', I'd say you're wrong.

The latter is what I was contending; that we've entered this bizarro landscape in the dialogue where there's no more wiggle room; where we imagine that every inch of ground has been seceded to the employees and any raise in their salaries will need to somehow be equalized on the ground level or the corporation will burn to the ground.
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Re: US Fast Food Strikes

Postby CorruptUser » Wed Jul 31, 2013 5:23 pm UTC

Tyndmyr wrote:
Subisides need to be axed on general principle, yes. Distorts the market.


Public education is a subsidy. Really want that to disappear?

Yes subsidies distort the market. There are times when the market needs to be distorted. The requirements for a market to, by itself, arrive at the optimal output are somewhat strict.

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Re: US Fast Food Strikes

Postby Thesh » Wed Jul 31, 2013 5:36 pm UTC

CorruptUser wrote:If the problem is a demand issue (which yes, I believe it is), wouldn't it be easier to fix the problem via massive spending/investment in infrastructure that will reduce long term costs rather than attempting financial wizardry?


Yep; like I said, I don't think raising minimum wage is going to fix our economy. However, raising minimum wage combined with massive infrastructure spending is an even better way to fix the problem. minimum wage < infrastructure spending < minimum wage + infrastructure spending

I should also note that economic growth in the 2000s was pretty weak (even before the recession), despite full employment, and there is good cause to believe that one of the major factors in that was income inequality, and that if we don't address income inequality then we will likely have future economic instability (even if our economy could be 50% investments, if the investors panic and cut back like they did in 2008, the effects would be even more severe).

Plus, let's face it, what's the point of economic growth if 95% of the population doesn't see increases in income?
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Re: US Fast Food Strikes

Postby Heisenberg » Wed Jul 31, 2013 5:45 pm UTC

Tyndmyr wrote:The market has a spread of businesses with different models, targetting different sectors of the market. We are talking about fast food. They compete on price.

And of course, average wages for a primarily californian chain are not going to be the same as average wages for a nationwide or international chain. Why would you simply compare them as if they would be?

In-N-Out is a fast food chain that competes with fast food chains (and wins, they make more profit per store than a McDonald's, despite not offering breakfast). In addition, they pay about $3 per hour more than their rivals in California.

If you want something more national, look at Five Guys, who operate in 40 of the 50 states and are expanding rapidly. They pay around $9 per hour and have additional bonuses available for their workers.

There actually are benefits to paying your workers more, and some fast food companies are able to be successful and competitive while paying above minimum wage.

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Re: US Fast Food Strikes

Postby cphite » Wed Jul 31, 2013 6:21 pm UTC

Heisenberg wrote:
Tyndmyr wrote:If one company buckles and starts paying $15/hr, they have to raise prices enough to go into a death spiral of losing sales and thus, needing even more money. More likely, they start saving money by firing workers. $0 an hour sucks.

Apart from your statement being easily disproven by the success of a west-coast burger chain, you seem to be saying that even if a company did want to raise wages, they couldn't do it alone because of the competition. So really you're advocating for a government mandate to increase wages by a dollar or two across the board; that way competition can be maintained and workers can be paid an honest wage, right?


What your link proves is that In-N-Out has found a way to pay higher wages and stay profitable; that doesn't necessarily mean that your neighborhood McDonald's can absorb an immediate doubling of their payroll costs.

In-N-Out is a regional franchise; all of their locations are within a days drive of their distribution centers, which keeps their costs down. They are also not franchised; which means that costs are shared by the entire company; so if one store is falling behind, they have the support of the whole company. Their stores tend to be in areas where the median income is higher.

McDonald's is a completely different business model. They are all over the place, and depend on food being shipped much more widely. Most of their stores are franchises; which means that if a store can't stand on it's own, it closes. It has many more stores in lower-income areas.

The point is, when you're looking at different companies you have to look at the entirety of their operations; not just at what they do on the consumer end for example selling burgers. In-N-Out can afford to pay it's people more because of how it operates; in order for McDonald's to do the same, they would essentially have to become more like In-N-Out which includes closing restaurants, which eliminates jobs automatically.

We should also put an end to the millions of dollars in subsidies McDonald's gets from the government for "training" workers. They take a per-head bonus from the government, and as such have a strong incentive to treat employees as shittily as possible in order to facilitate high turnover. This is bad for the workers, who have no job security and are treated poorly; bad for the company, who gets a bad reputation for having unskilled and untrained workers; and bad for the customers, who are more likely to get mishandled, undercooked, and diseased food. It's bad for the government as well, who shouldn't have to pay McDonald's a dime.


Yes, it's true that these companies get money to help cover the costs of training, but it's still a cost. I've seen people make this argument a number of times, I've yet to see anyone actually offer evidence that the managers of these companies are actually seeing a benefit in high turnover, much less that they're using this as a reason to mistreat people. High turnover is costly despite the subsidies.

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Re: US Fast Food Strikes

Postby addams » Wed Jul 31, 2013 6:53 pm UTC

Iulus Cofield wrote:When did food service become an unskilled, non-career job? What makes a job non-career? How is the deserved wage of any job determined?

Good Morning;
I have been inside fast food Joints.

They are not what they used to be.
Once Upon a Time, it was not That long ago!

I was Hungry. I had money on my person.
I walked up to a Burger Shack.

I asked for Food.
It was quiet, for Fast Food.

The man told me part of his Story.
He needed a break.

He did not Want to sit on his Ass and Do Nothing.
If That Man had wanted to Sit on His Ass and Do Nothing,
He could have!

He, somehow, asked for a Job Flipping Burgers.
He was having a good Time. He made a Good Burger.

He told me, And; I believed him.
He told me he was an Engineer.

He had been working inside a Nueclear Powerplant for a While.
No! He was not Sceeved Out by the Boogie Man, Radiation.

His Head was Tired. Each and Every Day, It Mattered! Big!
Sure; I guess they check each other's work. He had to Really Do Math.

I don't know exactly What he did When and Where he came from.
I do know, He was On Vacation. That Vacation was Not A Two Week Romatic Get-a-Way.

It is not so strange, In The Sane World for People to have a Six month to One year Vacation On Top of the usual Six Weeks or So.
He was doing a Reentry Program of his Own Design, Maybe. He wanted to Do Something! He, just, had to find a Way for himself.

He had Traveled within The EU.
A citizen, in good standing in Sweden can walk into a Burger Shop in some little Wind Swept Village in Ireland and get a Job Flipping Burgers.
He was a bit Over Qualified for the Position. The man made a good Burger. I watched him cook.

In Taco Bell/Kentucky Fried Chicken/Who Knows What it will Swallow Tomorrow, Mega Stores.
There is a Military On Guard and Responsive Feel.

It is Fun to be a part of a Team that is Getting Things Done.
Those people are in a bit of a Half Emergency, most of the Time.

That Should be a well Paid Job! The Nuclear Engineer might not have liked working There.
If Someone Made him Work There. Well...That could never happen. Still.....................

What are The Skills required for work at The Fast Food Outlet?
I think I could learn most of the Jobs. I would need Ear Protection.
It is So Loud in There.

What kind of Lives do Our People live? One woman from That Taco Bell/KFC had worked there for Seven Years and Liked it.
She seems to have a happy and full life.
On her breaks she Googles her friends and family.
They make arrangement via digital Telephone Screen.

She was Not a Nuclear Engineer. She was a Mom, Wife, Sister, Head Cook and Bottle Washer and for 6hrs Four days a Week she is a What?
She works Back in The Kitchen. She may be working with Boiling Oil!

City People Need KFC. That place is Busy!
People drive for Miles and Miles to get KFC.

I have listened to People fresh in from The Road.
I find it Charming. There is a Party Waiting.

The party will begin when The KFC arrives.
That party was A Woman, Her Mom, An Old Friend of the Family and (?)

It was a fun and Breathless Moment for that group.
They drove for Hours to get KFC.

How charming is That? It is possible to raise a Chicken or a Group of them.
It takes some Time.

Then kill them. That is a hard day.
City people are not All bad.

Yes. I know it is weird.
To eat KFC and play with a pet chicken. Weird.

It is an idyllic life for Some.
The US has a strange Relationship with Fast Food Outlets.

Taco Bell and KFC are Home Cooking for some people.
The stuff I have been told. I had some experience with it.

I had been out of the Country. It was a long time, I did not want to come back.
Once I was back, I had a moment to Think. What do I want? Taco Bell.

I ate at Taco Bell a lot. I was enjoying The Food.
Some Taco Bells are better than others.

The only Real Difference is The Staff.
Some are Delightful. Some are Surly.

Real California Mexican Food is Close to Taco Bell.
Sort of. Texas Mexican Food is not like California Mexican Food.

Who works at Taco Bell?
I think the managers can make it a Fun Place where it is a Team working well within their capacities.
One surly guy that thinks he is Too Good to be working on a Team to feed the People would have to do What?

The Managers have to find a way to help him Fit In.
If they fire him for being surly his life would be Too Hard?

Surly Employees vs Guilt for causing some Asshole to suffer.
That is such a difficult decision for a Manager to Make.

We are derelict in our Duty, if we can not Help One Another.
Even The Surly. Who Knows?
That surly hard to get along with Guy may want more Education.

A people and a nation as large, wealthy and powerful as the US thinks it is,
Should be able to support its People while they 'Find Themselves'.

Some people are Not Lazy. Some people have hard Jobs.
Some people are Content, enough.

Simple Lives with friends and family.
The Happy Woman at Taco Bell is one of those Stay at Home Moms.

She works for extra money to Spend with her Friends and Family.
The American Ideal?

Mom has friends and works in town.
The children are adults or near adults.
They are finding their way Together.

A young man or woman on Their Own living on Taco Bell Wages may face a very different life from the life of a Woman working for Spending Money.
That is True for the Young Person living at home with Mom and Dad and Only the Good Lord Knows Who.

If the people of the US can not live in Dignified Peace Working, Loving and Living.
Then there really might be Something Wrong.

Were these jobs designed to be Spending Money jobs?
For the Self Righteous Capitalist Family.

Here Kid! Earn Your Keep!
You want Fancy Stuff. Earn it!

Hey! Managers Learn by Managing.
like our president. W.

That was a strange time in History.
Who decides what minimum wage is?

How is it possible to make it Fair?
If an organization pays a Woman with a Primary Other Income Less it is Not Nice.

It is probably illegal. And; Should be.
How to make the World More Fair?

I Like the Citizen's Wage.
It is so very possible.

It is the kind of thing Wealthy People already deal with.
Well; Not filthy rich. And; There is fun.

If like the advantaged, All people got enough to be OK into their account each Month and Yes! it must be Broken into small units.
Then everyone would be all.....ok, " I'm Bored."

Some people have a Knack for making money.
If they have Some, they will have more.

Other people are not like that.
If they have money they will live along, ok.

For the nation to provide for the welfare of The People
is right and proper.

If the Workers want a Change; Listen To Them!

Most want to work. Some really do Like it.
They get to see friends on both sides of the counter.
Life is, just, an exchange of electrons; It is up to us to give it meaning.

We are all in The Gutter.
Some of us see The Gutter.
Some of us see The Stars.
by mr. Oscar Wilde.

Those that want to Know; Know.
Those that do not Know; Don't tell them.
They do terrible things to people that Tell Them.

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Re: US Fast Food Strikes

Postby The Great Hippo » Wed Jul 31, 2013 6:59 pm UTC

In retrospect, I was replying to this:
CorruptUser wrote:Walmart has 2.2m employees, assets of $200b and a profit of $17b. They make less than 1% profit on their assets. That barely more than they would get if their assets were liquidated and they sat on long term bonds or something.

Walmart simply won't eat all of the extra costs of a higher minimum wage. They might not continue to make $8000 profit per worker, but higher wages will come out of someone's wallet. McDonalds makes $3000 per worker, they are even less in a position to raise wages without raising prices.
--which was a generic 'we cannot raise wages without raising prices' statement, but this was a reply to another post which specifically cited the '15$/an hour' price-hike. It wasn't my desire to argue that it's easy for McDonalds to increase their wages to 15$/an hour without some extraordinary restructuring of their business model -- rather, I only contested that McDonalds is in a position where they cannot possibly raise employee wages without raising prices. I apologize for not properly communicating that!

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Re: US Fast Food Strikes

Postby Brace » Wed Jul 31, 2013 7:26 pm UTC

Corporations themselves are an entirely artificial structure only made possible by government intervention. I think it's interesting that when government intervention is mentioned, the scale is sort of zeroed out for wherever the economy currently stands in terms of it. Only additional interventions are bad. Current interventions apparently aren't interventions at all. I get tired of equivocations and hypocrisies. Most of the people in this country who claim to speak for the market are really plutocrats who support stealing from the poor and giving to the rich. They see that the market rewards the rich, and conclude that's what the market is, and so anything that further rewards the rich* is perceived as supporting the market. They're mercantilists at heart, and many things worse than that, but they know how to appropriate philosophy and rhetoric and high sounding tropes borrowed from intellectuals better than anyone. You can't kill them, because they'll just grow back, but they probably still deserve to die. It's inspiring to hear people talk about the Great Northern Railway and James J. Hill, or about Red Adair or these other sorts of capitalist heroes, but then you realize whose lips the praise is coming from and the world is twice as sick because of it.


*(and punishes the poor, because these people only understand positive dichotomies; when constructing a narrative, which is the natural form of all of their thinking, they fundamentally can't understand a thing without a positive opposite)
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Re: US Fast Food Strikes

Postby Heisenberg » Wed Jul 31, 2013 8:05 pm UTC

cphite wrote:What your link proves is that In-N-Out has found a way to pay higher wages and stay profitable; that doesn't necessarily mean that your neighborhood McDonald's can absorb an immediate doubling of their payroll costs.
Doubling payroll is a hypothetical by someone who did little analysis. The thread is about the strikers, who certainly don't expect their wages to double, and would be happy with a dollar or two more an hour.
cphite wrote:In-N-Out is a regional franchise; all of their locations are within a days drive of their distribution centers, which keeps their costs down.
Cost really has nothing to do with their decision to stay regional. You'll find shipping costs are astonishingly low, and represent a tiny fraction of the budget of most businesses. In-N-Out doesn't ship far because they're weird about their lettuce.
The point is, when you're looking at different companies you have to look at the entirety of their operations; not just at what they do on the consumer end for example selling burgers. In-N-Out can afford to pay it's people more because of how it operates; in order for McDonald's to do the same, they would essentially have to become more like In-N-Out which includes closing restaurants, which eliminates jobs automatically.
I really don't have to look at the entirety of their operations. If the major chains are making bad business decisions, that's not my fault. It's possible to run a fast food chain and actually treat workers well. Subway, Burger King, Wendy's and McDonald's have all chosen not to run their companies that way.

It's not that they can't pay workers $9 an hour, it's that they've chosen not to.

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Re: US Fast Food Strikes

Postby Thesh » Wed Jul 31, 2013 8:13 pm UTC

Another thing to consider is that if they are going to raise prices, they can raise prices a little more on top of it and offer a better quality of food. If crap food for low prices isn't working, try half-way decent food for slightly higher prices. If your business cannot change with the markets, then doesn't the free market philosophy suggest that you deserve to fail?
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Re: US Fast Food Strikes

Postby CorruptUser » Wed Jul 31, 2013 8:17 pm UTC

The people buying McDonald's aren't demanding better food. McDonald's exists because people want cheap greasy food.

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Re: US Fast Food Strikes

Postby Thesh » Wed Jul 31, 2013 8:22 pm UTC

I think it's more the convenience that people are drawn to; it's fast. You can make a cheaper, greasier burger at home, but it's not as convenient.
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Re: US Fast Food Strikes

Postby Tyndmyr » Wed Jul 31, 2013 8:41 pm UTC

Heisenberg wrote:
Tyndmyr wrote:The market has a spread of businesses with different models, targetting different sectors of the market. We are talking about fast food. They compete on price.

And of course, average wages for a primarily californian chain are not going to be the same as average wages for a nationwide or international chain. Why would you simply compare them as if they would be?

In-N-Out is a fast food chain that competes with fast food chains (and wins, they make more profit per store than a McDonald's, despite not offering breakfast). In addition, they pay about $3 per hour more than their rivals in California.

If you want something more national, look at Five Guys, who operate in 40 of the 50 states and are expanding rapidly. They pay around $9 per hour and have additional bonuses available for their workers.

There actually are benefits to paying your workers more, and some fast food companies are able to be successful and competitive while paying above minimum wage.


I have a five guys near me. If McDonalds charges the same prices as five guys, nobody chooses McDonalds. Well, except for the caveat that Five Guys is a sit down restaurant, but that's a mere result of you comparing apples and oranges.

You cannot expect all business models to be interchangeable. You cannot switch everyone who is competing on price to competing on other things, because price is important. The world does not consist just of people who shop at botique shops and eat only at sit down places. Some players in any market compete on quality, some on price, and various steps on the market exist. Trying to force everyone into one band is doomed. One of them is going to die.

And again, $9/hr is not $15/hr. The sheer unacheivablity of the goal is largely because of how large the gap is. If they struck going for a starting wage of $8/hr, well, yeah, a deal might be possible.

CorruptUser wrote:
Tyndmyr wrote:
Subisides need to be axed on general principle, yes. Distorts the market.


Public education is a subsidy. Really want that to disappear?

Yes subsidies distort the market. There are times when the market needs to be distorted. The requirements for a market to, by itself, arrive at the optimal output are somewhat strict.


Yes, actually. While it's a far more justifiable distortion than this one, there are some serious problems with public education in this country. However, I suspect that strays rather far from the primary topic here, so I won't get into details. It is sufficient to agree here that the distortion introduced by paying for training in this area is not a desirable one.

The Great Hippo wrote:
Tyndmyr wrote:I've already pointed out that corporate profit margins are sufficiently slim that distributing all profit in wages would get us to maybe $9/hr. Not $15. And then the corporation would tank, and people would end up unemployed.
...wait, is this how you think an intelligent wage-raising campaign would honestly work? Just gut the corporation and distribute the money to the workers?
Tyndmyr wrote:There is absolutely not enough money in McDonalds to do this and stay in business. You may wish to actually read the earning statements and do the math before jumping to conclusions.
If what you're saying is 'McDonalds cannot double every low-level employee's salary and eat the cost without going out of business', I'd say that you are probably right! If what you're saying is that 'McDonalds can't raise low-level employee's salaries without going out of business', I'd say you're wrong.

The latter is what I was contending; that we've entered this bizarro landscape in the dialogue where there's no more wiggle room; where we imagine that every inch of ground has been seceded to the employees and any raise in their salaries will need to somehow be equalized on the ground level or the corporation will burn to the ground.


Some margin for bargaining always exists. However, it is fairly narrow. Even a fairly minor increase would have an outsized impact on profits. They don't have any margin to decrease prices further, and they are stagnating at current price levels. This isn't bad as is, but tossing another 25 cents an hour at their employees would actually be a really big deal. It would significantly shift their earnings, outlook, and it would utterly dominate other news about the company financially. It'd be costly. Not runious, perhaps, but very costly for such a small shift.

And yet, we have people demanding their pay double. It is the degree of seperation from reality that results in the "that's impossible" response. They're bargaining for something they cannot possibly receive...or get anything even close to. This is particularly bad with organizations like Detroit 15. Setting that goal, in Detroit of all places, and fixating on it to the extent of naming your organization after it...obviously you're going to get derision.

Brace wrote:Corporations themselves are an entirely artificial structure only made possible by government intervention.


This isn't strictly true. Corporate involvement in the US predates our government. In particular, the East India Company grew to the point where it became a law unto itself, and thrived in areas without government intervention. Hell, it basically came to rule india. Corporations are not different from governments, really. It's all a power structure, and in any sufficiently large power structure, it takes on a de facto life of it's own. Corporations are no more artificial than governments. Power structures always arise naturally...anarchy of the sort without any power structures is not a state that persists. The label of "corporation" is mostly an arbitrary legal definition to describe this manner of power in a way such that government can try to keep it distinct from itself(the success of which is dubious at best).

Thesh wrote:Another thing to consider is that if they are going to raise prices, they can raise prices a little more on top of it and offer a better quality of food. If crap food for low prices isn't working, try half-way decent food for slightly higher prices. If your business cannot change with the markets, then doesn't the free market philosophy suggest that you deserve to fail?


First off, there's nothing immoral about demanding additional wages. I just felt that needed to be clarified...it's simply that the demands are not realistic. If you go into a negotiation, you want to know what, exactly, you can get.

McDonalds isn't going to fail, here. Neither will they try to reposition themselves as the high quality option. This would be particularly difficult for them, they have a very large, solid reputation built on being exactly what they are now. People are not going to suddenly see McDonalds as a destination for fine dining.

Nah, what'll happen is they'll mostly ignore the demands, make a few trivial concessions maybe that are fairly low cost, and life marches on. The workers are no better off. Worse off, likely, because they are striking for something they cannot get. And, if I am wrong, and McDonalds DOES fall...then that is still not a desirable outcome for the person who works there. It's a lose/lose move.

Thesh wrote:I think it's more the convenience that people are drawn to; it's fast. You can make a cheaper, greasier burger at home, but it's not as convenient.


There's actually a shift that way on the very low end of the buying range. It's a concern for their dollar menu strategy. Their cheap pricing still works for now, but they're seeing some people opt to stay home and make inexpensive food instead of going out. This may well reverse once the economy well and truly recovers, though.

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Re: US Fast Food Strikes

Postby Iulus Cofield » Wed Jul 31, 2013 8:42 pm UTC

I'm not sure McDonalds really qualifies as cheap anymore outside of their dollar menu. If you get a combo meal, you're like a buck away from a sit down restaurant's lunch entree in price.

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Re: US Fast Food Strikes

Postby folkhero » Wed Jul 31, 2013 8:55 pm UTC

One reason the In-N-Out has more profit per store than McDonald's is because there are a lot fewer In-N-Out stores than McDonald's stores and not just because In-N-Out is regional. I doubt that there is a city in the country that has more In-N-Out locations that McDonald's. There may be a few towns that only have one of each but otherwise they all have a lot more McDonald's. People are willing to drive farther to an In-N-Out than a McDonald's, when I am traveling through a city that has an In-N-Out I usually consider stopping to eat there, I never do that with fast food places that have location where I live. It's a premium product in the world of fast food burgers. Now part of that is because of the higher paid workforce for sure, but to take advantage of that you need fewer locations, more spread out. If McDonald's wanted to go the In-N-Out route they would have to close down a huge number of stores and lay off a lot of people to do so. Even then I would be a colossal task for them to successfully rebrand as a premium fast food location. Meanwhile Burger King or Wendy's or J in the B would expand to fill the gaps McDonald's left open in the not-very-premium fast food market.
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Re: US Fast Food Strikes

Postby Tyndmyr » Wed Jul 31, 2013 9:20 pm UTC

Iulus Cofield wrote:I'm not sure McDonalds really qualifies as cheap anymore outside of their dollar menu. If you get a combo meal, you're like a buck away from a sit down restaurant's lunch entree in price.


They do have some more expensive stuff, yeah. Their strategy of late has been very value meal centric(and so has some of the other fast food joints), though. The recession made price competition a lot tigher in the value fast food market...we may see prices creep a little higher once everything gets back to normal on the low end of the chart, though.

Right now, they're all focused on trying to lure you in with the cheap stuff, and upsell you on something pricy when you're there. Look at, say, the current Monopoly promotion. Tickets are heavily biased towards getting you to grab a big mac or something.

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Re: US Fast Food Strikes

Postby Heisenberg » Wed Jul 31, 2013 9:41 pm UTC

Tyndmyr wrote:Well, except for the caveat that Five Guys is a sit down restaurant, but that's a mere result of you comparing apples and oranges.
Your Five Guys has a wait staff? Weird. The one I went to for lunch today is a fast food restaurant that sells burgers and is evidence that fast food places can pay above minimum wage and still make money.
Tyndmyr wrote:And again, $9/hr is not $15/hr. The sheer unacheivablity of the goal is largely because of how large the gap is. If they struck going for a starting wage of $8/hr, well, yeah, a deal might be possible.

Oh good. A modest raise is exactly what the protesters want. The $15 number was, as you pointed out, some crazy number made up by a guy with a spreadsheet.
folkhero wrote:One reason the In-N-Out has more profit per store than McDonald's is because there are a lot fewer In-N-Out stores than McDonald's stores and not just because In-N-Out is regional.
This doesn't make sense. If McDonalds' business model isn't scalable, then they should stop scaling it.

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Re: US Fast Food Strikes

Postby nitePhyyre » Thu Aug 01, 2013 4:01 am UTC

Thought I would post this before bed: Errors in McDonald's Wage Analysis HuffPo is retracting their article about the wage increase only changing the price $0.68. The new article replacing the old one is worth a read. It talks about why they got it wrong, and proceeds to interview some different experts and analysts who (hopefully) dodn't get it completely wrong.

A doubling of wages at McDonald's would almost certainly involve some layoffs, asserts Dean Baker, co-director of the Center for Economic and Policy Research and a HuffPost blogger. At the same time, more workers would stay in their jobs longer, Baker added.

Experts generally assume that roughly one-third of the cost of increased wages gets passed on to consumers, with much of the rest of cutting into profits, Baker said. Regardless, McDonald’s is so vast and lucrative that it could easily survive a major wage increase, Baker added.

“The idea that it’d put McDonald’s out of business, there’d be no way,” said Baker.
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Re: US Fast Food Strikes

Postby Lucrece » Thu Aug 01, 2013 5:16 am UTC

Iulus Cofield wrote:I'm not sure McDonalds really qualifies as cheap anymore outside of their dollar menu. If you get a combo meal, you're like a buck away from a sit down restaurant's lunch entree in price.



It's, what like 6-7 bucks for a full medium sized meal? It's still pretty cheap.

You also need to figure in the matter of conveniency. In a sit-down restaurant your food won't be ready faster than a McDonald's. Sit down restaurants also don't have drive-by's.

And in the case of Burger King, some around my area even do delivery now.
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Re: US Fast Food Strikes

Postby folkhero » Thu Aug 01, 2013 6:38 am UTC

Heisenberg wrote:
folkhero wrote:One reason the In-N-Out has more profit per store than McDonald's is because there are a lot fewer In-N-Out stores than McDonald's stores and not just because In-N-Out is regional.
This doesn't make sense. If McDonalds' business model isn't scalable, then they should stop scaling it.

Who said anything about it not being scalable? McDonald's need lots of location because most people won't travel all that far to get a meal there. In-N-Out are the ones who aren't as scalable since if you pack the stores tighter, they will compete with each other because of people's willingness to drive a greater distance for a more premium product. I was saying the McDonald's wouldn't be able to maintain their current scale IF they moved to a model more like In-N-Out, not that they are having problems with scale with their current business model (which includes low paid employees).

The fact that they aren't as profitable as In-N-Out on a per store basis doesn't mean that they are failing; they have way more stores overall, so they're still doing okay. While it's easy to think of fast food joints as being all pretty much the same, there are substantial differences in price, quality and selection between McDonald's and more upscale fast food burger joints like 5 Guys or In-N-Out. Just because something works for one fast food place doesn't mean that it will work for another, very different fast food place.
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Re: US Fast Food Strikes

Postby jareds » Thu Aug 01, 2013 6:54 am UTC

Heisenberg wrote:
Tyndmyr wrote:Well, except for the caveat that Five Guys is a sit down restaurant, but that's a mere result of you comparing apples and oranges.
Your Five Guys has a wait staff? Weird. The one I went to for lunch today is a fast food restaurant that sells burgers and is evidence that fast food places can pay above minimum wage and still make money.
[...]
folkhero wrote:One reason the In-N-Out has more profit per store than McDonald's is because there are a lot fewer In-N-Out stores than McDonald's stores and not just because In-N-Out is regional.
This doesn't make sense. If McDonalds' business model isn't scalable, then they should stop scaling it.

Are people really arguing against the empirically obvious fact that fast food restaurants can pay better than McDonald's and still make money? Of course not. They are arguing that McDonald's cannot pay significantly more without changing its business model and moving into a different market niche within fast food. "Fast food" covers quite a range of products.

I haven't been to Five Guys, but based on this article, they charge a premium price (within fast food) and are thus not any sort of evidence that McDonald's could pay workers signficantly more without raising prices significantly.

In-N-Out does have pretty low prices, but I was thinking the exact thing that folkhero wrote before I ever read his post. There is only one In-N-Out and around five McDonald's within ten miles of me, and my impression is that the In-N-Out is super-busy (and, on a relative basis, slow) compared to a McDonald's, which is how they get more revenue per store and per employee. The claim is not that McDonald's low-end business model doesn't scale to the density of restaurants they have--it obviously does. Rather, the claim is that In-N-Out's business model doesn't scale to the density of McDonald's. At the very least, I don't know why we'd expect In-N-Out to work at McDonald's restaurant density. If you just replaced every McDonald's with an In-N-Out overnight, In-N-Out would have to deal with lower per-restaurant revenue unless this caused total consumer fast-food spending to increase significantly.

You can rationally insist that McDonald's and its low-end competitors raise wages and prices (hopefully accepting the consequence that this will reduce fast-food demand and fast-food jobs, but I won't insist on this).

You can rationally insist that McDonald's and its low-end competitors emulate In-N-Out, eliminating a slew of restaurants and jobs to reach a point where per-restaurant revenue at low prices supports higher wages.

You can, I suppose, rationally insist on some strategy that you claim will increase fast food consumption in order to support higher wages at the restaurant densities and prices of McDonald's and its low-end competitors.

What you can't do is stomp your feet and insist that McDonald's and its low-end competitors pay as much as Five Guys or In-N-Out without (1) reducing the number of workers so that this can be done on the current total revenue of the low-end fast-food industry or (2) obtaining the increased total revenue for the low-end fast-food industry that would be implied if every low-end fast-food restaurant had In-N-Out/Five Guys per-restaurant revenue.

(Of course, you can also rationally insist on wage increases that could come from reduced profits without restructuring anything, like maybe 50 to 75 cents an hour.)

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Re: US Fast Food Strikes

Postby EMTP » Thu Aug 01, 2013 8:54 am UTC

Or you could just require the higher wages and not care fuck all about how the corporates maintain their bottom line. Try it and see.
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Re: US Fast Food Strikes

Postby jareds » Thu Aug 01, 2013 9:48 am UTC

EMTP wrote:Or you could just require the higher wages and not care fuck all about how the corporates maintain their bottom line. Try it and see.

Indeed, I would hope it was obvious that the possibilities I outlined were not mutually exclusive and that the standard of "rationality" I was using for that post would not require you to distinguish between them or "care fuck all" about the consequences to McDonald's.

However, if one does not care fuck all about how McDonald's maintains their bottom line, why would one care to argue that they definitely can do so by pointing to Five Guys? (This is a rhetorical question. I am aware that you weren't the one to argue that.) Why do I care about such poor arguments? Because it's kind of disturbing how much people like to believe that their political preferences don't involve any trade-offs.

With specific regard to "not caring fuck all", I believe political decisions should be consequentialist in some form, and thus find your attitude kind of disturbing as well. That's not to say I think the consequences of significantly raising the wages of fast food workers would be bad, but that's mostly because the reduction of fast food consumption could easily be a net social good helping outweigh the loss of fast food jobs, so I don't know. Of course, you'll be inclined to reply that you only said that I could not care fuck all about "corporate bottom lines", but it's difficult to reconcile not caring fuck all about the difference between the possibilities I outlined with caring fuck all about employment, since the consequences to employment differ.

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Re: US Fast Food Strikes

Postby Tyndmyr » Thu Aug 01, 2013 11:47 am UTC

Heisenberg wrote:
Tyndmyr wrote:Well, except for the caveat that Five Guys is a sit down restaurant, but that's a mere result of you comparing apples and oranges.
Your Five Guys has a wait staff? Weird. The one I went to for lunch today is a fast food restaurant that sells burgers and is evidence that fast food places can pay above minimum wage and still make money.


If we're going to get technical, it's a fast casual restaurant. No drive through, good seating. Another place with the same general style is Chipotle.

This isn't the same as the traditional drive through model that McDonalds, Wendy's and Burger King share. It's one step up the chain, generally, in terms of perceived quality. Drive through and quality food isn't typically paired in US culture.

Tyndmyr wrote:And again, $9/hr is not $15/hr. The sheer unacheivablity of the goal is largely because of how large the gap is. If they struck going for a starting wage of $8/hr, well, yeah, a deal might be possible.

Oh good. A modest raise is exactly what the protesters want. The $15 number was, as you pointed out, some crazy number made up by a guy with a spreadsheet.


He didn't make up the number. I've already referenced Detroit 15, an organization behind the striking, that, as the name suggests, is demanding $15/hr for fast food workers in Detroit.

Yes, the dude with the spreadsheet is crazy, but he didn't invent the crazy.

folkhero wrote:One reason the In-N-Out has more profit per store than McDonald's is because there are a lot fewer In-N-Out stores than McDonald's stores and not just because In-N-Out is regional.
This doesn't make sense. If McDonalds' business model isn't scalable, then they should stop scaling it.


Their model scales fine, obviously. They have a crapton of McDonalds out there. However, it may not scale equally well with various changes to it...certainly, not all business models scale equally well. Rising wages will mean additional costs in terms of administration, warehousing, etc. That could certainly impact ability to scale.

I've never been to an In N Out, but I've met some people who are fans of the place, and they appear to be, well, very big enthusiasts of the place. It certainly makes sense that they would be more willing to drive further. Certainly, I find myself willing to drive into Baltimore when I want to visit a high end steak place, but would not do the same for Outback. Thus, Outback is frigging everywhere, while Capital Grille is not. It seems a solid rule of thumb that higher end, more expensive places, tend to be separated further than their cheaper counterparts.

EMTP wrote:Or you could just require the higher wages and not care fuck all about how the corporates maintain their bottom line. Try it and see.


And if the answer is "they can't", are you ok with the outcome? Not caring and not bothering to investigate before negotiating does not help your position. Keep in mind that one solution is obviously "fire a bunch of workers".

I do find it interesting that among the experts they consulted, one came to the exact same conclusion as me. Their "opposing" side stated only that McDonalds could survive a significant wage increase, not a doubling. That isn't necessarily contradictory, depending on what you consider significant. Usually, that starts far lower than double.

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Re: US Fast Food Strikes

Postby Chen » Thu Aug 01, 2013 11:49 am UTC

EMTP wrote:Or you could just require the higher wages and not care fuck all about how the corporates maintain their bottom line. Try it and see.


Unless the way they maintain their bottom line is to fire half the people working there to double the remaining people's wages. An exaggeration in proportion perhaps, but I don't necessarily think having some portion of the workforce get a somewhat increased salary while the others get a salary of $0 is a a better outcome than what we have now.

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Re: US Fast Food Strikes

Postby Ormurinn » Thu Aug 01, 2013 12:06 pm UTC

Arguing that fast food workers should be paid (vastly) more than their labour is currently worth in the open market is the equivalent of asking the entire rest of society to subsidise them.

What makes fry cooks this important?

Why should we privelige the fast-food worker over the pensionner whose income is partially dependent on mcDonald's share price and dividend, or the customers who are directly impacted by the price increase?

Why should we accept a higher rate of unemployment in order to improve the position of those who already have jobs?
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Re: US Fast Food Strikes

Postby CorruptUser » Thu Aug 01, 2013 12:47 pm UTC

Because the labor market for shit jobs is, in most areas, an oligopsony or a monopsony, and if done correctly in rare cases, it's possible to increase employment via minimum wages?

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Re: US Fast Food Strikes

Postby Ormurinn » Thu Aug 01, 2013 1:17 pm UTC

CorruptUser wrote:Because the labor market for shit jobs is, in most areas, an oligopsony or a monopsony, and if done correctly in rare cases, it's possible to increase employment via minimum wages?


Then why not treat the disease rather than the symptom?

Eliminate those market distortions, rather than clunkily patching the problem in a way garuanteed to cause unintended consequences?

I'm behind the union 100% in their own struggle - but having a statutory minimum wage sucks for those who are too unskilled to be worth employing at the minimum rate.
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Re: US Fast Food Strikes

Postby Kulantan » Thu Aug 01, 2013 1:29 pm UTC

Because those aren't exactly easy "distortions" to fix. Its pretty much the universal state of employment. Plus the evidence for a link between an increased minimum wage and increased unemployment is pretty unconvincing.
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Re: US Fast Food Strikes

Postby Heisenberg » Thu Aug 01, 2013 1:47 pm UTC

jareds wrote:Are people really arguing against the empirically obvious fact that fast food restaurants can pay better than McDonald's and still make money? Of course not. They are arguing that McDonald's cannot pay significantly more without changing its business model and moving into a different market niche within fast food. "Fast food" covers quite a range of products.
Tyndmyr claimed that significantly increasing wages would necessitate a price hike that would send any fast food restaurant into a "death spiral." In-N-Out Burger clearly disproves this claim by its very existence.
jareds wrote:I haven't been to Five Guys, but based on this article, they charge a premium price (within fast food) and are thus not any sort of evidence that McDonald's could pay workers signficantly more without raising prices significantly.
Five Guys is slightly more expensive, so that's fair.
jareds wrote:If you just replaced every McDonald's with an In-N-Out overnight, In-N-Out would have to deal with lower per-restaurant revenue unless this caused total consumer fast-food spending to increase significantly.
I would eat roughly 5 times as much fast food as I do now, if that were the case. (Of course, on a long-term study, I would also die sooner, so there's that. :D )

As for what McDonald's optimal strategy should be to make money while paying higher wages: I suggest making food that doesn't taste like shit, but hey, I'm not a business guy. It's been argued that it would be impossible to raise wages and stay in business. That is clearly not true. That is the only point I care to make and defend, apart from the objective deliciousness of the In-N-Out Burger.

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Re: US Fast Food Strikes

Postby Ormurinn » Thu Aug 01, 2013 2:03 pm UTC

Kulantan wrote:Because those aren't exactly easy "distortions" to fix. Its pretty much the universal state of employment. Plus the evidence for a link between an increased minimum wage and increased unemployment is pretty unconvincing.


Rubbish.

I've worked "shit jobs" most of my life - there are a ton of providers of them. In fact, I'd suggest that there are more buyers of unskilled than skilled labour. Competition in fast food is fierce - to bring it back to this case, how many fast food outlets are there within three miles of you?
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Re: US Fast Food Strikes

Postby Kulantan » Thu Aug 01, 2013 2:48 pm UTC

Ormurinn wrote:Rubbish.

I've worked "shit jobs" most of my life - there are a ton of providers of them. In fact, I'd suggest that there are more buyers of unskilled than skilled labour. Competition in fast food is fierce - to bring it back to this case, how many fast food outlets are there within three miles of you?

Ok, lets not get distracted by an argument about how many of the near by places are McDonald's or Subways and what number is or isn't and oligopsony. Instead lets ignore large cities or the compressed living conditions of the UK where you can easily walk to the next town. Lets look at the US (the subject of the thread). How do you un"distort" an oligopsony/monopsony in the less populated area. 'Cause in terms of sorting out the problem fo people not earning enough to live on, its hard to think of a less "distorting" fix that works even in those circumstances.
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Re: US Fast Food Strikes

Postby Ormurinn » Thu Aug 01, 2013 3:04 pm UTC

Kulantan wrote:
Ormurinn wrote:Rubbish.

I've worked "shit jobs" most of my life - there are a ton of providers of them. In fact, I'd suggest that there are more buyers of unskilled than skilled labour. Competition in fast food is fierce - to bring it back to this case, how many fast food outlets are there within three miles of you?

Ok, lets not get distracted by an argument about how many of the near by places are McDonald's or Subways and what number is or isn't and oligopsony. Instead lets ignore large cities or the compressed living conditions of the UK where you can easily walk to the next town. Lets look at the US (the subject of the thread). How do you un"distort" an oligopsony/monopsony in the less populated area. 'Cause in terms of sorting out the problem fo people not earning enough to live on, its hard to think of a less "distorting" fix that works even in those circumstances.


I doubt Oligopoly/Monopsony conditions actually exist in the case of unskilled labour except in very specific circumstances like mining towns tbh.

But ok, assuming they exist for restaurants/fast food joints, the best way to un-distort that would be to cut regulations that hamper the opening of new restaurants, enabling enough labour purchasers to emerge to break the monopsony/oligopsony. If that were insufficient, then extending easy lines of credit to prospective small businesses, or reducing fuel/road taxes to encourage commuting would be an option. You could also cut taxes on both employees and employers, so they had access to more of their own capital to invest.

All of those options work better than banning me from selling my labour below a certain price floor
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Re: US Fast Food Strikes

Postby addams » Thu Aug 01, 2013 3:30 pm UTC

Ormurinn wrote:
Kulantan wrote:
Ormurinn wrote:Rubbish.

I've worked "shit jobs" most of my life - there are a ton of providers of them. In fact, I'd suggest that there are more buyers of unskilled than skilled labour. Competition in fast food is fierce - to bring it back to this case, how many fast food outlets are there within three miles of you?

Ok, lets not get distracted by an argument about how many of the near by places are McDonald's or Subways and what number is or isn't and oligopsony. Instead lets ignore large cities or the compressed living conditions of the UK where you can easily walk to the next town. Lets look at the US (the subject of the thread). How do you un"distort" an oligopsony/monopsony in the less populated area. 'Cause in terms of sorting out the problem fo people not earning enough to live on, its hard to think of a less "distorting" fix that works even in those circumstances.


I doubt Oligopoly/Monopsony conditions actually exist in the case of unskilled labour except in very specific circumstances like mining towns tbh.

But ok, assuming they exist for restaurants/fast food joints, the best way to un-distort that would be to cut regulations that hamper the opening of new restaurants, enabling enough labour purchasers to emerge to break the monopsony/oligopsony. If that were insufficient, then extending easy lines of credit to prospective small businesses, or reducing fuel/road taxes to encourage commuting would be an option. You could also cut taxes on both employees and employers, so they had access to more of their own capital to invest.

All of those options work better than banning me from selling my labour below a certain price floor

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Re: US Fast Food Strikes

Postby Tyndmyr » Thu Aug 01, 2013 4:16 pm UTC

Heisenberg wrote:
jareds wrote:Are people really arguing against the empirically obvious fact that fast food restaurants can pay better than McDonald's and still make money? Of course not. They are arguing that McDonald's cannot pay significantly more without changing its business model and moving into a different market niche within fast food. "Fast food" covers quite a range of products.
Tyndmyr claimed that significantly increasing wages would necessitate a price hike that would send any fast food restaurant into a "death spiral." In-N-Out Burger clearly disproves this claim by its very existence.


Context is important here. I'm talking about McDonalds, Wendys, Burger King, etc. Yknow, the places where the pickets are happening. It is a general state of affairs for fast food resteraunts. The existence of unusual, smaller players in non-nationwide markets isn't really the same thing.

jareds wrote:I haven't been to Five Guys, but based on this article, they charge a premium price (within fast food) and are thus not any sort of evidence that McDonald's could pay workers signficantly more without raising prices significantly.
Five Guys is slightly more expensive, so that's fair.


Burgers at my local McDonalds start at a buck. Burgers at my local Five Guys start at $3.89.

Now sure, the five guys burger is definitely better, but they are not just slightly more expensive.

As for what McDonald's optimal strategy should be to make money while paying higher wages: I suggest making food that doesn't taste like shit, but hey, I'm not a business guy. It's been argued that it would be impossible to raise wages and stay in business. That is clearly not true. That is the only point I care to make and defend, apart from the objective deliciousness of the In-N-Out Burger.


That is, effectively, the "reposition to compete on quality" argument, and I refer you to the previous discussion of why that's not viable for them.

Kulantan wrote:
Ormurinn wrote:Rubbish.

I've worked "shit jobs" most of my life - there are a ton of providers of them. In fact, I'd suggest that there are more buyers of unskilled than skilled labour. Competition in fast food is fierce - to bring it back to this case, how many fast food outlets are there within three miles of you?

Ok, lets not get distracted by an argument about how many of the near by places are McDonald's or Subways and what number is or isn't and oligopsony. Instead lets ignore large cities or the compressed living conditions of the UK where you can easily walk to the next town. Lets look at the US (the subject of the thread). How do you un"distort" an oligopsony/monopsony in the less populated area. 'Cause in terms of sorting out the problem fo people not earning enough to live on, its hard to think of a less "distorting" fix that works even in those circumstances.


Well, the issue is that unskilled labor really isn't monopolized...the issue is that it isn't scarce.

I saw a stat today(NYT, I think), that claimed a 75% annual turnover rate in fast food. Don't know if it's accurate, but it is high. The problem isn't that they are locked into a specific low paying job due to a monopoly, it's that the market price for all the jobs of that nature tend to pay poorly.

So far, reporting is that the strikes have generally not actually closed down the places they are striking outside. It's more of a protest. Unionization appears unlikely, and of questionable benefit if it happens.

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Re: US Fast Food Strikes

Postby Heisenberg » Thu Aug 01, 2013 4:29 pm UTC

Tyndmyr wrote:Burgers at my local McDonalds start at a buck. Burgers at my local Five Guys start at $3.89.

Now sure, the five guys burger is definitely better, but they are not just slightly more expensive.
Right, which is why I informed you of In-N-Out Burger, which is price-competitive with the shittier fast food places.
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Tyndmyr wrote:The existence of unusual, smaller players in non-nationwide markets isn't really the same thing.
In-N-Out has over 200 stores. The fact that they're not an international conglomerate does not undermine the viability of their business model. Frankly, if there was one store on the planet that offered $1.50 burgers and paid workers $10 an hour, that would undermine your argument that any fast food place that raised wages would enter a death spiral of price increases and sales reductions.

It is possible to do. I have seen the Promised Burger and it is delicious.

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Re: US Fast Food Strikes

Postby addams » Thu Aug 01, 2013 4:38 pm UTC

That is God Awful News.

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Tyndmyr
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Re: US Fast Food Strikes

Postby Tyndmyr » Thu Aug 01, 2013 5:48 pm UTC

Heisenberg wrote:]
Tyndmyr wrote:The existence of unusual, smaller players in non-nationwide markets isn't really the same thing.
In-N-Out has over 200 stores.


Yeah, and McDonalds has over 34,000.

In relation, they are small. You cannot assume that a given business model will automatically scale up over 170 times, because the vast majority of businesses don't.

I'm seeing a lot of people dealing poorly with large numbers. A lot of people are assuming that just because a business is big, they will automatically have enough money for whatever, without doing the math. Likewise, this comparison would be ludicrous on it's face if you compared a single store to a chain of 170....but if the numbers scale upward, people don't think about it as much.

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folkhero
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Re: US Fast Food Strikes

Postby folkhero » Thu Aug 01, 2013 7:20 pm UTC

In-N-Out might be price competitive, but they aren't selection competitive. They are a burger place that sells burgers, fries, drinks and shakes. That's how they keep prices low, they only really make three things in a handful of variations, so they can make those things fast. Compare to McDonalds which also makes breakfast, chicken nuggets, onion rings, salads, McRibs, Happy Meals, wraps, a line of coffee drinks, etc.. It should be clear that McD and I-N-O aren't really competing for the same markets, though there is surely some overlap.

In-N-Out has a good business model and a good hamburger sandwich, that doesn't mean it's one that McDonald's could realistically adopt. They would have to rebrand as a premium fast food place. Good luck with that, they're one of the most recognizable brands in the world and everyone knows what they're about. In order to take advantage of their new premium status, they would have to cut down the number of locations to keep from competing with themselves. This would mean laying off lots of employees, which doesn't strike me as a big win for the workers. So why would they even want to give up their niche in which they are the best in the world, in order to try to compete in a similar, but quite distinct niche in which their size and brand recognition will actually work against them? So that they can lay off a bunch of people, but feel better about the wages they pay the few workers that remain?
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Thesh
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Re: US Fast Food Strikes

Postby Thesh » Thu Aug 01, 2013 7:30 pm UTC

If the minimum wage is raised to the point where people can actually make a living, and McDonald's can't survive while paying those wages, then that's when they need to change their business model. I'm not going to expect them to change their business model voluntarily, however if their business model requires paying people below a living wage then so be it. People being paid a living wage is, to me, far more important than whether or not they can continue to survive by selling shit food. If they can't survive, then they need to change their business model or someone else will pop up with a business model that can survive.
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