McDonald's Streamlines Menu to Accommodate Minimum Wage Hike

Simpler Times, Fewer Costs

Newer unit on the site of the original McDonald's restaurant. San Bernardino, California. Part of the sign is still original.
Newer unit on the site of the original McDonald's restaurant. San Bernardino, California. Part of the sign is still original. | Source

Good News! - McDonald's is Simplifying and Paying Higher Wages!

The good news about McDonald's is an answer to demands for wage justice, as well as an answer to franchise owners who want change.

In fact, new company CEO Steve Easterbrook plans for United States McDonald's to become 90% franchises by early 2018, up from about 80%. he also wants to eliminate wasted dollars in bureaucracy. I know that a streamlined menu also helps.

Columbus, Ohio units all became franchises in the 1990s - 2000s and saved the company from closing down in this area. Nationwide, the company is losing a large amount of profits and current and new franchises may be the answer. The franchise owners often have the answers that McDonald's needs and they can lead the way to better food, service, and wages.

Since the beginning of April 2015, I have noticed that employees of the McDonald's units close to my neighborhood have all become very much more friendly, positive, and eager to show a sense of urgency in customer service. It is refreshing!

Some Menu Items Don't Make Any Money

Click thumbnail to view full-size
Out of sight high food costs on this one! (Not from McDonald's.)A high food cost item, certainly. Some McDonald's items look similar.Too many ingredients, too expensive for McD.
Out of sight high food costs on this one! (Not from McDonald's.)
Out of sight high food costs on this one! (Not from McDonald's.) | Source
A high food cost item, certainly. Some McDonald's items look similar.
A high food cost item, certainly. Some McDonald's items look similar. | Source
Too many ingredients, too expensive for McD.
Too many ingredients, too expensive for McD. | Source

McDonald's Must Change American Operations

For April 2015, McDonald’s Corporation reported an 11% decrease in revenue (sales) with a 30% drop in profit (almost 1/3 of profit was lost) for the First Quarter of 2015, January through March. The company closed 700 restaurants globally in 2014, because of low profits.

A long-time theory of casual and fast food dining in America since the 1950s is that a chain or a single restaurant like a "burger joint" begins with simple offerings and operations, adds menu items, upgrades uniforms and décor, pays for fancy landscaping, remodels, and adds many other elements - and then cannot afford to stay open any longer.

If I still know McDonald's as I have in the past, I estimate that their minimum wage will rise to $9.00, then $10.00, $12.00, and finally $15.00 from mid-2015 to early 2018. Some units will simply be unable to pay beyond the $12.00 to $13.00 range, however.

Crowded Cities and Crowded Menus

McDonald's had "saturated" America in the late 1990s, with the number of restaurants having reached the maximum possible (and still turn a profit) for the population of the United States. Tear-downs and expensive rebuilds began across the nation and fancier menu items were added in a campaign to capture customer dollars away from other food chains - including grocery stores. In fact, TV news programs in the late 2000s showed families comparing groceries to McDonald's Dollar and Dollar-Plus Menus and finding the groceries for a 4-person meal to be the more expensive.

In 2015, McD HQ saw what franchise owners knew for 10 years - fancier, higher food- and paper cost items that are labor intensive and require special equipment costly too much money to allow them to meet profit projections or to allow them to pay adequate wages to workers.

Smart restaurants have limited menus. That's the way we used to be.

— Richard Adams, owner of Franchise Equity Group

Menu Bloat

Many customers are also weary of the excess on the bloated 100+-item menu boards -- And for older folks, who are the fastest growing population in America, so many items are crammed onto the board that they cannot read them. This is a function of the aging human visual system in most individuals.

McDonald's resorted to having separate digital menu board inside and at the Drive Thru for breakfast and lunch/dinner, at a high expense. It was time to streamline menus and operations, just as had been trained in two management training programs!

Sales at US stores open for at least 13 months fell by 4.6% in 2014, compared with the same period in 2013 (Reference: Horovitz, Bruce. USA TODAY. McDonald's reveals the List of Menu Item Cuts. December 15, 2014).

McDonald Menu Items Likely to Become Extinct

Menu Item
Current Number of Variations
Future Number of Variations
Extra Value Meals
16
11
Quarter Pounder with Cheese
4
1
Chicken Supreme
3
1
Snack Wraps
3
1
Bacon Clubhouse Burger - suggested to be eliminated
1
0
Preservatives as an ingredient - suggested for removal.
Many
0
 
 
 
Antibiotics in chicken used in products
Several
0
Other, yet unannounced as of 5-5-2015
?
?
Reference: Bruce Horovitz

McDonald's communications person, Becca Hary, indicated for the future a "cleaner menu board" that is already in testing at locations in the continental USA.

Add Bacon!

Don't change the Big Mac! -- Unless they want to put BACON on it.
Don't change the Big Mac! -- Unless they want to put BACON on it. | Source

Streamlining the McDonald's Menu

What menu items should be eliminated?

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The 24-Hour Drive Thru are great for making money, increasing profits and making customers happy! Breakfast all night or 24/7 is even better.
The 24-Hour Drive Thru are great for making money, increasing profits and making customers happy! Breakfast all night or 24/7 is even better. | Source

What Costs Can Best Be Cut from an Individual McDonald's Restaurant?

Three major areas in which we can cut costs quickly include, in order of money to be saved:

  1. Labor Costs – This includes wage rates, the cost of the number of people scheduled per day part, health and medical insurance provided, Unemployment Insurance and Workers’ Comp premiums (both paid totally by the company), employer’s half of Social Security deduction (employee pays half out of paycheck, company pays half) benefits provided (vacation days, holidays, free/discounted meals for workers and family members, number of uniforms per person, sick days, and some others). Team Managers are included in Labor Cost, so their rates of annual pay have been closely scrutinized. In some lower revenue units, managers have been denied the right to, for example, attend Hamburger University, which issues actual college credit.
  2. Food Costs – Best practices include increasing BREAKFAST SALES and eliminating some menu items, which reduces food cost and reduces any dedicated equipment used only for those items. Some of our local franchise owners now offer breakfast all night at the Drive Thru; it is a smart thing to do. Some units offer breakfast all day long, joining such restaurants as Bob Evans in this campaign.
  3. Drive Thru – Increase DT sales. In some stores, guests notice that the Drive Thru is serviced before the inside counter is tended. In one store here, out ST was equipped with an actual KLAXON that went off after each driver sat at the window for 15 seconds. That was unreasonable and the company removed the alarm. Many stores keep the DT-only service all night long (much smarter than the alarm), which increases revenue and cuts food- and labor costs. On some major interstates, you will find DT-only stores with no indoor service at all. This is efficient for the highway and the menu is sometimes more simple than standalone full service units.

An Example of Extra Cost

When we began serving the McRib sandwich in my market area, we were required to install an additional 6-foot grill and bun toaster, a food warmer, and a stainless steel pot to keep patties swimming in warm BBQ sauce. An extra crew person or two to man both stations were required, 10:00 am - closing. A new cooking unit and pot were required for preparing the sauce. All of this proved a lot of extra cost for a product that was eliminated. By the time it was brought back, the equipment was gone.

The Unbeatable Foe - Fixed Monthly Costs That Gobble Profit

Here are examples of just some of the costs with which I struggled as a unit manager, most of them unknown to the public:

Rent and utilities account for a sizable portion of monthly costs in a McDonald's. Interest on the business (mortgage type) and equipment loans is another expense.

I wish we could save Insurance Costs, such as liability, property, theft/burglary, inventory loss through refrigeration malfunction, Unemployment, Workers Compensation, etc., but this is Difficult. Premiums are negotiated and set by the company or by the franchise group, while UI and WK are set by the government regs and number of employees. Managers can train their crews and managers to avoid accidents, but hail and high winds will damage roofs, windows, landscaping, and signs, to name a few victims.

Group health/medical insurance for fast food employees has been sky high here. In the early 1980s, our local market area McDonald's eliminated health insurance for all crew people. The backlash was enormous.

Monthly established legal fees take part of the profits.

Signage is expensive and requires monthly maintenance contracts in many markets. Landscaping contracts might be eliminated, however, if managers and crew can handle the work. HVAC and refrigeration contracts cannot be eliminated.

Three or four line items for monthly Advertising Costs/support of the Franchise Co-op (even taken from company-owned stores' profits) are fixed. This includes the costs of putting coupons online, in newspapers, and in door hangers, etc. On top of this is probably a separate representation contract with the local advertising agency.

How about depreciation and maintenance/service contracts on machines, equipment, and electronic cash registers? - No, these costs are fixed. Many costs are not within an individual manager or franchiser's control - like franchise fees, co-op fees, local or county property taxes, and some others.

Costs in my area are so high, that a franchise owner in my city who began with two small units that he purchased for about half-a-million dollars each (land, building, and equipment) experienced such losses after a decade, that the two restaurants together (land, building, play-lands, and improvements, old and new equipment, inventories, etc.) were worth only $300,000 total in the bankruptcy case. The amounts of the bills owed totaled many times that worth. It was a hopeless case.

Congratulations to McDonald's for making smart changes in 2015 - 2020!

Congratulations McDonald's and Employees!

I applaud McDonald's Corporation for streamlining their operations and franchisees for planning to pay workers higher wages!

Applause!
Applause! | Source

© 2015 Patty Inglish

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Comments 15 comments

drbj profile image

drbj 19 months ago from south Florida

I can remember when owning a McDonald's franchise seemed to be a sure road to riches. Not any more. Thanks for all this fascinating 'inside' information.


mckbirdbks profile image

mckbirdbks 19 months ago from Emerald Wells, Just off the crossroads,Texas

There are so many complex issues here. I do not think I will join in the applause just yet. I cannot remember the last time I was in a MacDonald's. It is usually a 'road trip choice'


Larry Rankin profile image

Larry Rankin 19 months ago from Oklahoma

What really needs to be done to accommodate the minimum wage hike is for the top brass to start paying themselves reasonable salaries. Of course that will never happen.


MsDora profile image

MsDora 19 months ago from The Caribbean

Streamlining the menus will be profitable both to the company and the clients, in the long run. More efficient service may also bring more customers. Best to McDonald's going forward. Thanks to you, Peggy, for the information.


Patty Inglish, MS profile image

Patty Inglish, MS 19 months ago from North America Author

drbj - Yes, I am surprised that so many have gone bankrupt and that the company has closed down hundreds. When I worked, a few Area Supervisors would require us to send home crew workers and work double shifts ourselves to cut crew labor costs at time. Then there was working until 1:00 am and being required to work again at 6:00 am... Profit was raised considerably when the entire city's McD units were sold to become franchises.


Patty Inglish, MS profile image

Patty Inglish, MS 19 months ago from North America Author

mcbirdbks - The food is indeed pretty consistent coast to coast.


Suzanne Day profile image

Suzanne Day 19 months ago from Melbourne, Victoria, Australia

This was very interesting to read this morning. I do hope that wages go up at McDonalds as it will set standards for other places. Everyone should be able to have a living wage. I think McDonalds always tries to be more than what it can be. Hamburgers work great as fast food, so why the sandwiches and breakfasts etc? If they really wanted to keep up with the McDonalds of the 1950s, they'd be more into the old fashioned diner and drive in experience as customers loved the Makkers burgers since they've been around from that period - lowering the cost of going to the movies for all would be widely applauded here (in Australia it is AU$15-AU$20 just to see a movie). Voted up and useful.


Ericdierker profile image

Ericdierker 19 months ago from Spring Valley, CA. U.S.A.

Very interesting. I had been wondering how the fast food companies would deal with the increased competition and need for wage increases. It is insightful how the franchising makes such a difference.


B. Leekley profile image

B. Leekley 19 months ago from Kalamazoo, Michigan, USA

This view from the inside look at McDonald's is interesting. It's complicated balancing the needs of workers, customers, managers, regulators, owners, and humanity. I wish McDonald's new CEO success in doing the job well.


FlourishAnyway profile image

FlourishAnyway 19 months ago from USA

All of that preparation just for the McRib? Wow! I have never eaten one but have always been fascinated at how it jumps on and off the menu.


Patty Inglish, MS profile image

Patty Inglish, MS 19 months ago from North America Author

Thank you all for so many good comments!

@FlourishAnyway - I bet the processes for McRib are streamlined now and the restaurants keep the equipment in storage the rest of the year. I think they don't have a separate McRib grill and toaster anymore! -- Probably just a pot of canned sauce, a lid, and steam-table kind of hot water bath under the pot.


Patty Inglish, MS profile image

Patty Inglish, MS 19 months ago from North America Author

@ Suzanne Day - I'd rather see the diner, too! McD began breakfast when customers complained that there was none and they wanted it. Food cost is so low, it's funny - I checked today and a Big Breakfast is about $5.00 at a cost of ingredients of under $1.00.

All the rest of the too-complex menu is a tradition of Ray Kroc -- More, more, more and seduce customers away from all the other chains. He did not want to give ANY pay raises, ever. He was all for keeping a low-wage crew via high turnover - even at corporate HQ.

I hated McD in the early-to-mid 1960s as a kid in my city. It was still an all-male crew and they sometimes refused to wait on women and girls. The first woman manager was not hired until the late-1970s in Columbus OH.


mary615 profile image

mary615 19 months ago from Florida

I have a granddaughter who has been working at McD for about four years. She is so anxious to have health insurance, but they refuse to give her more than 20 hours a week to work; therefore she does not qualify for their health insurance.

The only thing on McD's menu is their salads.

It was interesting to read this Hub.


Thelma Alberts profile image

Thelma Alberts 17 months ago from Germany

I am not really fond of eating McDonalds food. Never been but thanks for the inside informations. Have a great week ahead.


Patty Inglish, MS profile image

Patty Inglish, MS 17 months ago from North America Author

Hi, Thelma -- Maybe that is why McD's revenues have decreased recently - people are tired of the food.

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