McDonald’s 2012 Annual Report

Posted by PITHOCRATES - August 6th, 2013

History 101

The Benefit of a McDonald’s Franchise is getting the Benefit of their Years of Building their Brand

Recently a late-night comedy show attacked McDonald’s for being greedy.  Because they don’t pay their minimum wage workers a living wage.  Because what were once entry level jobs are now the primary support for some families.  And why have entry level jobs come to support families?  Because the anti-business policies of the current administration have destroyed better-paying jobs.  But they don’t attack that on late-night television.  They attack a company actually providing jobs in a jobless economy.

Today McDonald’s is huge.  You can find them pretty much anywhere in the world.  Which can be a welcome site for a weary traveler.  For they know they can walk into a McDonald’s wherever they are and have the comfort of a meal exactly like that at home.  Which is pretty amazing if you think about it.  And why McDonald’s is so successful.  The sight of those Golden Arches can attract a foreigner in a strange land or a construction worker on a new project in a distant city.  They know exactly what they can get at that McDonald’s.  What it will taste like.  And what it will cost.  Even if they’ve never been in that McDonald’s before.

This is because McDonald’s has very successfully built their brand.  Which is one of those intangible things.  It has great value.  But you can’t physically touch it.  Those who own a McDonald’s franchise can enjoy a thriving business.  From day one.  Without doing any marketing to get people to walk into their restaurant.  They don’t have to.  Because McDonald’s has already done it.  And continues to do it.  This is the benefit of the franchise.  You get the benefit of all those years of hard work McDonald’s did to build their brand by simply paying a franchise fee (see Restaurants and Franchises posted 8/5/2013 on Pithocrates).  It’s not cheap.   But it’s such a fair deal for both franchiser and franchisee that McDonald’s had 27,882 franchised stores in 2012 (see McDonald’s 2012 Annual Report, page 11).

Owning a McDonald’s Franchise allows you to own a Restaurant that has been Successfully in Business for 72 Years

In addition to the intangible value of the brand the franchise fee also includes rent.  For McDonald’s “owns the land and building or secures long-term leases” for the franchisee’s store (see McDonald’s 2012 Annual Report, page 11).  While the franchise needs to foot the bill for the “equipment, signs, seating and décor.”  This makes sure all stores are modern and up to date and uniform.  Helping to maintain that comfortable familiarity for the customers.  While splitting the capital costs between the franchisee and franchiser.  So both parties have a major investment in the business.  And each shares in the profits of the business.  Perhaps the best of the deal for the franchisee is getting a mentor.  And a detailed operating manual telling them everything they need to know and do.

Owning a McDonald’s franchise is costly.  But you get to step into a restaurant that has been successfully in business for 72 years.  Give or take.  Considering that half of all restaurants fail within the first five years of business this is a HUGE benefit for the franchisee.  And something well worth the franchise fee.  As evidenced by 27,882 franchised stores in 2012.  So what is that franchise fee?  And how much money does the franchisee get to keep after paying the franchise fee?

Well, if you do a little number crunching with the financials included in the 2012 annual report you can get an approximate number.  McDonald’s also has stores they own and operate.  In 2012 they had 6,598 company-owned stores.  The average per store revenue was $1,358,594 (calculated by dividing the total revenue from the company-owned stores by the number of company-owned stores).  A similar calculation gives an approximate $667,205 franchise fee per franchised store.  Subtracting the typical franchisee fee from the typical store revenue (assuming all stores have the same average revenue as the company-owned stores) gives the franchisee an annual income of $691,389.  From this income the franchisee has to pay for food, labor and overhead.  And whatever is left over is profit.

High School Kids and College Students work at McDonald’s because they need no prior Restaurant Experience

The rule of thumb in restaurants is that costs are broken down into thirds.  One third is food cost.  One third is labor cost.  And one third is overhead and profit.  So if we divide that $691,389 by 3 we get an annual food cost per franchised store of $230,463.  Ditto for labor.  And overhead (gas, electric, water, insurances, taxes, licenses, fees, waste disposal, light bulbs, toilet paper, soap, garbage bags, etc.) and profit.  Let’s look at the labor cost more closely.  To see if McDonald’s is greedy when it comes to paying their employees.

The benefit of owning a franchise is that it comes with very explicit instructions.  A McDonald’s distributor delivers prepared food ready for the grill and fryer.  As delicious as it is, though, it doesn’t take a highly skilled chef to prepare it.  As the franchisee operating manual has it down to a science.  Which is why high school kids and college students work at McDonald’s.  They need no prior restaurant experience as it is an entry level job.  Typically their first job.  Where they learn what it’s like entering the workforce.  The importance of being on time.  Following instructions.  Being responsible.  Skills that they will use in later jobs.  Which most do.  As there is a high turnover of employees at McDonald’s as there is for all fast food.  Because these are entry level jobs for unskilled workers.  Who learn the skills they need on the job.  So let’s assume a restaurant that is open 24 hours a day, 7 days a week.  Assuming an hourly rate of $8.50 and an overhead of 40% for direct labor costs (workers’ compensation insurance, unemployment taxes, health insurance, uniforms, training, etc.) the average hourly labor cost comes to $11.90.  Dividing the labor cost of $230,463 by this hourly cost gives us 15,758 annual labor hours.  Or about 53.06 hours per day.  Or 17.69 hours per 8-hour shift.  Giving us an average of 2.21 workers per 8-hour shift.

During the breakfast and lunch rush a typical McDonald’s may have between 5-8 people working.  With fewer working in the evening.  And a skeleton crew over night working the drive-thru.  So the labor fluctuates during the day to correspond to the amount of business.  Which is why there are a lot of part-time workers at McDonald’s.  Ideal for high school and college kids.  In addition the owner typically works during those busy periods to help with the rush.  And works on paperwork during the slower times.  Putting in about 12 hours a day.  If you assume an overhead rate of 18% and multiply that to the franchisee annual income of $691,389 we get an overhead expense of $124,450.  Subtracting that from the $230,463 (overhead & profit) leaves an annual owner income of $106,013.  Or, based on a work week of 84 hours (12 hours a day X 7 days a week), the owner earns about $24.27 an hour.  A rate a lot of people can earn working for someone else without the headaches of owning a business.

That late-night comedy show attacked McDonald’s for being greedy.  Saying they should increase their pay rate to a living rate.  Like picketers were asking for.  $15/hour.  A labor cost increase of 82.6%.  Or an additional $190,382 each year.  Which would bring the franchisee’s annual income from $106,013 to an annual loss of $84,369.  So are these McDonald’s franchisees greedy because they refuse to pay a living wage?  No.  They simply can’t afford to pay more than the minimum wage for these minimum wage jobs.  Unless they can get people to spend $6-$7 for a Big Mac.  They are delicious.  But are they $6-$7 delicious?  And can a low-income family afford to take the family to McDonald’s when they are charging $6-$7 per burger?  Probably not.  No.  McDonald’s is just fine.  What we need to do is to un-do the anti-business policies of this administration that is killing those higher-paying jobs.  And forcing the primary earner in some families to work a minimum wage job.  Because that’s all that is available in this jobless economy.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Britain’s Liberal Democrats propose Lowering the Voting Age to bring in more Irresponsibility into Parliament

Posted by PITHOCRATES - October 27th, 2012

Week in Review

A teenage girl goes home to live with mom after her boyfriend left her.  And her unborn child.  Another teenage girl in high school saves her allowance for cigarettes.  A high school friend dies in a DUI accident that he caused.  A high school kid overdoses on drugs he took from his parent’s medicine cabinet.  Kids make a lot of bad decisions.  A lot drink while underage.  A lot drive while drunk.  A lot use drugs.  A lot engage in casual sex that results in a pregnancy or an STD.  This is why drugs are illegal.  And why we have a minimum age to drink.  And to smoke.  To minimize the effect of their bad decisions.  Because high school kids are really, really irresponsible.  Always putting ‘having a good time’ ahead of acting responsibly.  So based on that here’s a good idea.  Let’s have these same irresponsible kids vote (see Give 16 year olds the vote, say peers by Christopher Hope posted 10/22/2012 on The Telegraph).

New legislation published on Monday would extend the right to vote to 16 and 17 year olds in all elections and referenda in the United Kingdom…

Lord Tyler, who was the Liberal Democrats’ former shadow Leader of the Commons, said: “It isn’t good enough for Scots young people to be heard, just once, on this vital question, and then ignored thereafter, and worse still that English, Welsh and Northern Irish young people will continue not having a say at all…”

He added: “What about the expected referendum on Europe? I visit sixth forms regularly, and find students there more engaged and knowledgeable about current affairs, the state of the world and the state of our country, than many of the older people I bump into here in the House of Lords. It is time to give them a say.”

Those old people in the House of Lords?  They probably are refusing to vote for more irresponsible spending.  Like more subsides for university students that they simply can’t afford.  And other government benefits.  Of course if you can replace the responsible people in Parliament (or Congress in the US) with irresponsible people you can probably keep spending money you don’t have.  And having irresponsible kids vote can make that happen.  Because they are always putting ‘having a good time’ ahead of acting responsibly.  And would love to have free college.  Including room and board.  And some spending money for after classes.  All paid for by government.  As well a lower drinking age (“if we’re responsible enough to vote at 16 we’re responsible enough to drink”).  A lower smoking age.  Even decriminalize marijuana.  And champion other pressing concerns high school kids have.

www.PITHOCRATES.com

Share

Tags: , , , , , ,

Drug Violence on our Southern Border and Catcalls in New York City are Related – Societal Decay Responsible for Both

Posted by PITHOCRATES - October 30th, 2010

The drug cartel violence crosses the U.S. border.  Beheaded body found in Phoenix, Arizona.

It’s getting a little violent on this side of the U.S. border.  The latest?  This from AP’s Amanda Lee Myers’ Arizona beheading raises fears of drug violence posted on apnews.myway.com:

The gruesome case of a man who was stabbed and beheaded in a suburban Phoenix apartment has police investigating whether the killing is potentially the most extreme example of Mexican drug cartel violence spilling over the border.

The police think the victim was stealing drugs from the cartel.  And this was a message to others who might be thinking about doing likewise. 

Decapitations are a regular part of the drug war in Mexico as cartels fight over territory. Headless bodies have been hanged from bridges by their feet, severed heads have been sent to victims’ family members and government officials, and bags of up to 12 heads have been dropped off in high-profile locations.

The crime appears confined to members of the drug trade.  It’s a little reassuring for the innocent bystanders close to the crime.  ‘Little’ being the key word.

“I’m terrified,” said [a neighbor], a 47-year-old housekeeper who lives two doors down from the apartment. “I’ve lived here for 20 years and I’ve never heard of that (decapitation) happening, and it was so close to us … Maybe they’re copying what’s happening in Mexico.”

But it hasn’t been exactly restricted to the drug trade.  There has been some collateral damage. 

While extreme violence has stayed south of the border for the most part, some of it has spilled over into the U.S.

In March, Arizona rancher Robert Krentz was gunned down while checking water lines on his property near the border. Authorities believe – but have never produced substantive proof – that an illegal immigrant, likely a scout for drug smugglers, was to blame for his killing.

In May 2009, a Mexican drug cartel lieutenant who became an informant for U.S. Immigration and Customs Enforcement was shot eight times outside his pricey home in El Paso. The lieutenant, Jose Daniel Gonzalez Galeana, was living in Texas on a visa that ICE gave him, and is believed to be the first ranking cartel member killed in the U.S.

Payan described the spillover as minimal, but said it could increase.

And what is the federal government doing to address border security?  Suing Arizona.  And putting up some signs that warn Americans about unsafe American territory.

Whistles, catcalls and lewd come-ons on the rise in New York City.  Young girls harassed near their schools.

In a serious news story about women being harassed on the streets of New York (see AP’s NYC Considers a No Catcall Zone posted on www.nbcnewyork.com on 10/29/2010), the article starts off with a most inappropriate photo.  It shows a woman’s feet in what appears to be 6-inch stiletto heels.  The kind of shoes you’d see a stripper wear on stage.  Or so I’ve heard.  One thing for certain, though, any man looking at the photo is going to imagine a smoking hot woman attached to those feet.  The kind of a woman that burly construction workers would whistle at.  And, to be fair, a woman dressed like THAT may be disappointed if they didn’t.  So it’s a rather poor choice of a photo to use with this article.  For although we know:

Whistles, catcalls and lewd come-ons from strangers are all too familiar to New York City women, who say they are harassed multiple times a day as they walk down the street.

Some men are clearly crossing the line. 

A City Council committee heard testimony Thursday from women who said men regularly follow them, yell at them and make them feel unsafe and uncomfortable. Advocates told stories of preteens and teenagers being hounded by adult men outside city schools and pleaded for government to address the problem.

And what is the city of New York doing about this issue?

Hollaback [an organization formed five years ago to stand up to street harassment] is pushing the city to commission a study, a public awareness campaign and perhaps even legislation, including “no-harassment zones” around schools to protect young women.

Madonna, Brittany Spears and Glee go too far in sexualizing young girls?

Now, what do these two stories have in common?  Although the victims aren’t responsible for the crime/harassment against them, the society that they are a part of is.

The Left wants to give condoms to our kids.  And make abortions available when a pregnancy happens.  We need to be progressive.  Kids are having sex.  We need to stop being so puritan and treat our kids as adults.  Like the television show Glee does.  In that show adults play high school kids.  And their audience is primarily high school kids and younger.  They’ve had some pretty questionable content on that show.  Madonna and Brittany Spears video parodies.  And they’ve appeared on the cover of Rolling Stone Magazine, dressed as high school kids.  But you could look up one of the girls’ skirt and see her little white panties.  And the same ‘girl’ just did a GQ photo shoot, posing inside a high school.  Again, showing her little white panties.   Of course, these kids are really adults. But they play kids. 

The Left attacks the world of Leave it to Beaver, Father Knows Best & Ozzie and Harriet.  But you gotta admit this; they didn’t objectify women.  You didn’t see any of them sexualizing young girls.  And New York City didn’t have council meetings discussing possible legislation banning catcalls around schools.

Marijuana, cocaine, heroin and crystal meth supplied by Mexico to meet demand in the United States.

They’re trying to legalize marijuana again in California.  They say it’s no big deal.  It’s no worse than drinking.  And all that talk about it being a gateway drug to the stronger stuff?  That’s just ridiculous.  Then again, that stronger stuff is crossing the border along with the marijuana.  Which begs the question, why?  Who’s using the harder stuff?  People who’ve moved on from marijuana? 

The vast majority of drugs coming in from Mexico and causing all that trouble on the border is marijuana.  There’s big money in Mexican marijuana.  And it will get bigger and bloodier if California legalizes it.  More customers.  And lower prices (legal things tend to be cheaper than illegal things).  The drug gangs will fight to expand their territory.  And fight to not lose any of their territory.  So there’s marijuana.  Also coming in from Mexico is cocaine, black tar heroin and, of course, crystal meth.  Meth is a booming business since they restricted the sale of decongestants in the states.  They have factories in Mexico creating this stuff wholesale.  And shipping it to the United States.  Why?  Because we keep saying drugs are no big deal.

Sex and drugs responsible for societal decay?

Sex and drugs.  Everybody does it/them.  We need to accept it.  Treat kids as adults.  And when there are consequences to this behavior, we play the blame game.  It’s not school condoms and abortion on demand that is making people look at girls/women as sexual objects.  It’s men acting as animals.  For girls/women it’s empowering and liberating.  But it’s primitive animal behavior for men.  Of course, women can’t be empowering or liberating sexually without men.  So men are obliging.  And they’re apparently thinking about it all of the time.  Even when working on a construction site.

And when it comes down to pointing the finger of blame for the border violence, I don’t know if we can point it at just the drug gangs.  I mean, they wouldn’t be doing what they are doing if it wasn’t for all those Americans eagerly looking to buy what they are selling.

So, when men whistle at a girl/woman, or there is a drug-gang murder on the border, society’s to blame.  And it’s important to emphasize that the individual victims themselves are not responsible.  It is the societal decay that has preconditioned the predator.   They think it’s all right.  Because everyone is having sex.  And doing drugs.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,