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Comment by atoav | Hacker News Reader

I don't see it. McDonalds pays minimum wages in most european nations, yet their menu isnt that much more expensive than in the US.

Maybe they have a slimmer margin over here, but they are still profitable. That implies that the model is (in principle) just alright, but there are financial flows that will have to change in the US. Of course you don't like to pay more for the labor you use to generate profit — ideally you wouldn't have to pay anyone at all!

If you can't run you business with minimum wage labor, maybe tou are not good at doing business and should change careers instead? Because many businesses in many nations have not the slightest issue doing just that.

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Their menu may not appear much cheaper in the US, but McDonalds is much more aggressive with price discrimination here. You won't find the same promotions, value menu, and coupons in Europe.

McDonald's here pulled way back too though (last I checked before trying to eat healthier and deleting the app). Probably not the worst thing in the world to have fast food be a little more expensive.

There is generally not a big coupon culture in Europe. Most people don't bother wasting their time. People with a money problem usually collect bottles for recycling purposes.

What are you talking about?

Well, without knowing how the Corp is setup, that’s a bad example as this could easily exist: an international company can very easily be paying for high wages in one nation (ie loss leading) by low wages in another. Or staying profitable and with open doors. And so on.

Unless you’ve done an FSA class and you can explain me your thinking more, it’s worth appreciating there are a ton of levers that impact Corp finance. Same way you have performance trade offs for one algo vs the other.

It makes zero sense for McDonalds (or Starbucks or anyone else) to operate a money loosing restaurant.

Furthermore, 82% of McDonald restaurants are franchises i.e. not owned by McDonald. https://www.fool.com/investing/general/2016/04/03/what-perce...

The franchise part is interesting, although McD’s owning them or not doesn’t matter as the cash flow is what’s relevant. In this case I wonder what the terms are for franchise owners in EU vs USA and if they account for higher wage laws.

There are a number of reasons corporate entities operate certain or many stores at a loss. Very well known example is flagship locations that are locally at a loss, but earn for the brand on other ways. Example being Times Square NYC locations. This still makes sense at a franchise model, but less likely I bet.

EU isn’t a flag ship obviously, but I also didn’t say loss. Loss leading is similar, but not a perfect analogy (sure).

My earlier example still holds, even with franchisees per the term, but you should expand your bad event set to loss or low profits. On the net, being in Europe is worth it despite higher operating costs, but maybe USA operating costs need to be lower as a result.

I mean this all to say, there are so many factors involved such that it’s a false premise argument without controlling for intra-market differences.

Are you seriously arguing that yhe entire EU McDonald's market is operating at a loss? That makes zero sense.

Clearly it is possible to operate McDonald's in the EU and not burn money. Thus clearly there is a fast food business model that involves paying higher wages. Does this mean that every fast food store will remain profitable with the same hours? Probably not, but it does clearly mean that some fast food stores would be able to stay open and profitable.

No I said loss leading probably wasn’t a good analogy. Did you not read that?

However, McD EU could be less profitable, McD picks up the slack.

This is fairly straightforward financial accounting.

Which is all to say: without discussing this from knowledge of a form 10k or similar details is a very weak argument approach.

Then your whole point is pointless, the OP granted the possibility of McD EU being less profitable in their original post.

Yes, and then OP said this which is why I responded:

“ That implies that the model is (in principle) just alright”

It implies any number of things, but not that if the model works in EU it can also coexist with the same model in the US. The scenario I said is an easy and fairly common example of why they could not coexist.

Without breaking out a form 10k and a fair bit of financial statement analysis, it’s somewhat like saying that “well I get 1GB internet in NYC, it implies the model for fast internet works so we could do it in Montana tomorrow.”

To the extent that it’s important to know and discuss the actual factors involved such that the MBAs doing these decisions at McD will take you seriously, that implication is seriously flawed. Hence, why this hasn’t changed since Milton Friedman and the 80s. Ever wonder why that is? It’s because arguments made without any Corp fin awareness don’t work with the audiences with the power to change it.

I am not arguing that McD should take a particular policy. I am arguing that there are clearly functional business models for fast food under a higher minimum wage so that is not a valid excuse to avoid raising the minimum wage.

What are you trying to argue?

That when talking about a company like McD: public, multi-National...

Those functional business models are quite possibly/likely able to exist, or figure out how they exist per corporate policy, by opportunity costs other areas of the business, namely - American wages and/or American franchise terms.

I’m not sure if you’ve looked up an SEC Form 10K before, but that’s a good place to start to examine how this can look.

When McD EU, or similar, can function basically as its own corporate entity, this is even more possible.

When spanning national boundaries and regulatory space, you’re comparing an orange to an Apple by saying it works in EU, QED it should work in USA. Especially when it all flows through a choke point of SEC reporting and investor expectations/public listing in the US.

Really need to look at the financial statements to make that sort of claim, not just “it works there it can work here.”

Asserting that high minimum wage makes the fast food model untenable is a strong claim. Given that it is made in tha face of the apparant profitability of fast food in high wage minimum wage countries, then burden of proof falls on you.

So as far as I can tell, you are just trying to spread doubt without doing any work to justify that doubt.

IMHO fast food is a durable industry and while prices/locations/hours may change, it seems absolutely ridiculous to argue that there isn't a business model that will be profitable.

Yeesh… feels like a deliberately misreading of what I’m saying yet also you’re inadvertently agreeing with my point.

I have pointed out a couple known and realistic examples why wages in one country doesn’t imply they’ll work in another, under the umbrella of a single corporation.

As you say, making that implication as OP and you did is spreading a claim Without doing any work to justify that claim.

That work needed is financial statement analysis, starting with breaking open a 10K. It’s not my job to do that, as you’re the pair that made the implication in the first place.

I’m pointing out that by you not doing the work to justify the claim, there are numerous straight forward financial accounting reasons for why the claim could be wrong.

If you don’t know much FSA, that’s fine, but from that knowledge base you should know that you’re basically saying it could rain purple and it’s my job to use standard weather data to disprove why that’s not the likely answer.

If their entire European, Australian and New Zealand operations weren't profitable, why would they run them at all? They wouldn't use American profits to support them, they'd shut them down.

Mm does this make sense: Profitable is a spectrum, end of the day it all reports back through McD USA. ebtida in EU might be a bit lower than ideal because of laws changing over time. So, to make numbers, they can juice things in USA.

You are aware that when you say "they can juice things in USA", "things" stands for people?

You are aware that you can either use soft language, or discuss in the terms that are actually used, right?

What’s more important: sensitivities or understanding how the decisions actually work so you’re in the mix to change things with the audience to change it?

They can wait out ethics based arguments for decades, and they do.

The moment a community activist actually starts calling corps out on their sh*t from the perspective that’s actually used to build these policies, then the corps lose their main advantage which is ignoring calls to ethics like this which don’t work as they’re not at all related to the MBA’s incentive structure who makes that decision.

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