How McDonald’s Has Continued To Play an Important Role in the Franchise Industry’s Wage Conversation

As the fourth largest employer in the entire world, McDonald's has always been a significant part of the wage conversation. Now, as tensions heat up due to the COVID-19 pandemic and a major labor shortage in the restaurant industry, McDonald’s is continuing to impact the trajectory of the country’s minimum wage.

How McDonald’s Position Has Changed Over the Past Year

In 2019, McDonald’s announced it would no longer lobby against a federal minimum wage. Since then, the corporate team has remained somewhat neutral on the subject. 

In January, for example, McDonald's CEO Chris Kempczinski said the legacy burger franchise was doing "just fine" in the 29 states that have already increased minimum wage rates beyond the federal level of $7.25. This comment came in response to the reintroduction of the Raise the Wage Act, which seeks to raise the minimum wage to $15 an hour. 

Kempczinski's comments also came after a four-year analysis by a team of economists who found “higher McDonald's wages in applicable markets have not led to closures, job loss or increased automation.” 

Despite these comments, McDonald’s is still part of the National Restaurant Association and the International Franchise Association, both of which lobby against a raised federal minimum wage.

Why McDonald’s Is Different Than Other QSR Chains

During its Q1 earnings call on April 29, McDonald's USA President Joe Erlinger said the company is looking into evaluating the wage minimum at company-owned restaurants. But since McDonald's is about 93% franchised, most labor decisions are decided by independent owners, which creates an added layer of complexity when it comes to implementing a $15 minimum wage systemwide. 

For example, franchisees' ability to raise their minimum wage may depend on whether or not they can increase menu prices. In Canada, which raised its average minimum wage by nearly 11% from 2017 to late 2019, Kempczinski said that McDonald’s franchisees found success by passing those costs over onto the menu.

Most of the chains that have committed to a systemwide $15 wage recently, including Starbucks and Chipotle, are 100% company-owned. 

Why Employees Have Had Enough

Now, it appears McDonald’s employees are tired of waiting, with employees in 15 cities planning to strike on May 19, a day before the company's annual shareholder meeting, according to Vice. 

This strike comes as a culmination to a year fraught with employee complaints. Since McDonald’s workers have been deemed essential and put at high risk for contracting COVID-19, several strikes have been held throughout the past year demanding higher wages. 

"Our first responsibility is to our hardworking restaurant crew, and we respect and appreciate their dedication to serve millions of customers daily,” McDonald’s said in an emailed statement to 1851 Franchise. “It's the responsibility of federal and local governments to set minimum wage, and we're open to dialogue so that any changes meet the needs of thousands of hardworking restaurant employees as the 2,000 McDonald's independent owners/operators who run small businesses."

How the Labor Shortage Could Impact the Minimum Wage

The strike also comes as the restaurant industry faces a massive labor shortage. McDonald's is one of several chains struggling to hire enough workers to keep with the pent-up consumer demand. 

According to a One Fair Wage report released last week, the top reason restaurant workers are leaving their jobs is due to low wages and tips. While raising the minimum wage could theoretically incentivize these employees to return to work, many restaurant operators argue they can’t afford to increase labor costs right now. The NRA wrote that the Raise the Wage Act was "the wrong proposal at the wrong time for the restaurant industry."

With such a massive presence in the restaurant industry, McDonald’s response to the upcoming strike and minimum wage decisions moving forward could significantly alter the bigger conversation and impact how other brands operate.