TIME Companies

Burger King Founder Says Higher Wages Could Kill Off ‘Dollar Menus’

“I see a lot of $10 hamburgers arriving on the scene,” David Edgerton says

Burger King co-founder David Edgerton says fast food workers pushing for higher wages could spell the end of the “dollar menu,” and usher in an era of higher-quality, more expensive convenience restaurants.

Edgerton, 87, spoke to TIME on Wednesday as fast-food workers around the world staged protests and strikes—some at Burger King locations—as a part of the “Fight for $15” campaign, which calls for a $15 per hour minimum wage and the right to unionize.

“What’s going to happen, really, is you’re going to see less and less of the quick and dirty kind of places,” said Edgerton, who founded the fast food giant with James McLamore in 1954 and now serves on the board of Avantcare, a company that makes nutritional products to help treat addiction. “You’re not going to be able to run these places [paying workers] $15 an hour or whatever it will be.”

The push for higher wages will be reflected in menus, Edgerton said. A few companies will stick to making “a small cheap hamburger,” he said, but most fast food chains will experience “a slow and gradual” shift toward pricier menu options.

“You’re not going to get these dollar hamburgers anymore that both Burger King and McDonald’s had,” he said. “I see a lot of $10 hamburgers arriving on the scene.”

Wednesday’s demonstrations, which organizers say are taking place in 200 cities and 30 countries, are the biggest since fast-food workers began campaigning in 2012. Some companies have already promised to pay their workers more: Walmart has said it will raise wages to $9 per hour this year and to $10 in 2016; T.J. Maxx, Target and McDonald’s have also said they would raise wages to $9 per hour, but for McDonald’s, the hike will only directly affect 12% of workers.

Burger King operates slightly differently than its rivals. The chain was purchased by private equity firm 3G Capital in 2010 and now, all but 52 of its restaurants are owned and run by franchisees, according to Bloomberg, meaning it has little say in what its workers are paid.

Edgerton believes fast food workers will see increased wages as a result of their demonstrations, but he doesn’t think they’ll achieve the $15-an-hour rate they’re asking for. “They’re not really going to get $15, but they’ll set [the goal] high enough that there won’t be any doubt about $13 or $12,” Edgerton said. “That’s a wild figure, whoever got that thing going.”

Organizers chose to demonstrate on Tax Day because many fast-food employees say they can’t make ends meet without public aid. When asked how he would handle the protests if he were still in charge of Burger King, Edgerton said he would try and “educate” the workers.

“I’d certainly try to get them into a situation where they can be educated about the total picture,” he said. “They’re in there thinking we’re just screwing them on the price and blah blah blah and making all kinds of money.”

TIME Economy

Low Wage Workers Are Storming the Barricades

Activists Hold Protest In Favor Of Raising Minimum Wage
Alex Wong—Getty Images Activists hold protest In favor of raising minimum wage on April 29, 2014 in Washington, DC.

A few weeks back, when Walmart announced plans to raise its starting pay to $9 per hour, I wrote a column saying this was just the beginning of what would be a growing movement around raising wages in America. Today marks a new high point in this struggle, with tens of thousands of workers set to join walkouts and protests in dozens of cities including New York, Chicago, LA, Oakland, Raleigh, Atlanta, Tampa and Boston, as part of the “Fight for $15” movement to raise the federal minimum wage.

This is big shakes in a country where people don’t take to the streets easily, even when they are toiling full-time for pay so low it forces them to take government subsidies to make ends meet, as is the case with many of the employees from fast food retail outlets like McDonalds and Walmart, as well as the home care aids, child caregivers, launderers, car washers and others who’ll be joining the protests.

It’s always been amazing to me that in a country where 42% of the population makes roughly $15 per hour, that more people weren’t already holding bullhorns, and I don’t mean just low-income workers. There’s something fundamentally off about the fact that corporate profits are at record highs in large part because labor’s share is so low, yet when low-income workers have to then apply for federal benefits, the true cost of those profits gets pushed back not to companies, but onto taxpayers, at a time when state debt levels are at record highs. Talk about an imbalanced economic model.

A higher federal minimum wage is inevitable, given that numerous states have already raised theirs and most economists and even many Right Wing politicos are increasingly in agreement that potential job destruction from a moderate increase in minimum wages is negligible. (See a good New York Times summary of that here.) Indeed, the pressure is now on presidential hopeful Hillary Clinton to come out in favor of a higher wage, given her pronouncement that she wants to be a “champion” for the average Joe.

But how will all this influence the inequality debate that will be front and center in the 2016 elections? And what will any of it really do for overall economic growth?

As much as wage hikes are needed to help people avoid working in poverty, the truth is that they won’t do much to move the needle on inequality, since most of the wealth divide has happened at the top end of the labor spectrum. There’s been a $9 trillion increase in household stock market wealth since 2008, most of which has accrued to the top quarter or so of the population that owns the majority of stocks. C-suite America in particular has benefitted, since executives take home the majority of their pay in stock (and thus have reason to do whatever it takes to manipulate stock price.)

Higher federal minimum wages are a good start, but it’s only one piece of the inequality puzzle. Boosting wages in a bigger way will also requiring changing the corporate model to reflect the fact that companies don’t exist only to enrich shareholders, but also workers and society at large, which is the way capitalism works in many other countries. German style worker councils would help balance things, as would a sliding capital gains tax for long versus short-term stock holdings, limits on corporate share buybacks and fiscal stimulus that boosted demand, and hopefully, wages. (For a fascinating back and forth on that topic between Larry Summers and Ben Bernanke, see Brookings’ website.)

Politicians are going to have to grapple with this in the election cycle, because as the latest round of wage protests makes clear, the issue isn’t going away anytime soon.

Read next: Target, Gap and Other Major Retailers Face Staffing Probe

Listen to the most important stories of the day.

MONEY income

CEOs’ Hourly Pay Is Staggering

Minimum wage may have jumped slightly for some workers, but CEOs' salaries, measured by the hour, leave low-wage workers' pay in the dust.

TIME Labor

Why McDonald’s Wage Hike Won’t Help Most Of Its Employees (Yet)

McDonald's
Justin Sullivan—Getty Images A sign stands outside of a McDonald's restaurant on Feb. 9, 2009 in San Francisco, Calif.

Just 12% of McDonald's employees could see a bigger paycheck

Facing declining sales and a growing protest movement against its labor practices, McDonald’s announced Wednesday it’s boosting hourly wages for hundreds of thousands of workers. But the change won’t actually affect most of the men and women who wear a McDonald’s uniform.

McDonald’s employees affected by the pay raise will see their hourly earnings rise to at least $1 above the local minimum wage, a rate that will work out to an average pay of at least $10 per hour by the end of 2016. However, the raise only applies to U.S. locations that are owned and operated by McDonald’s itself.

Most of the world’s Big Macs are made at franchised restaurants, properties that McDonald’s owns or leases but hands over to independent businesspeople to operate in exchange for rent and a 4% cut of the restaurant’s sales. Franchised restaurants make independent hiring choices and set their own wages. Because of this business model, just 12% of the 750,000 workers at U.S. McDonald’s locations will qualify for the wage boosts — or the paid vacation time the fast food chain is also implementing.

The announcement, which new McDonald’s CEO Steve Easterbrook called an “initial step,” drew the immediate ire of Fast Food Forward, a union-backed group that’s been organizing a series of one-day fast food worker strikes that started in 2012. The group is planning fresh protests for Thursday, decrying McDonald’s pay increase as a “PR stunt.”

“McDonald’s needs to step up to the plate,” Fast Food Forward director Kendall Fells said on a conference call with reporters Wednesday, noting that the vast majority of workers weren’t receiving raises. “We’re going to show McDonald’s that this movement won’t stop until we get what we deserve.”

That McDonald’s chose to make a public statement about its new wage policy illustrates how quickly discussions about low-paying jobs have shifted recently, says Dave Sherwyn, a law professor at Cornell University’s School of Hotel Administration. That change in the public conversation has been largely driven by those pro-union groups, who, as much as they accuse McDonald’s pay raise of being little more than a savvy public relations move, have themselves done more to raise publicity than actually threaten the daily operations of the country’s fast food chains.

“This is a pretty unique situation,” says Sherwyn. “I can’t imagine if McDonald’s, Burger King or anyone had done this five years ago, they would have made a big announcement about it. It just wasn’t in the public conversation.”

MORE Fast-Food Strike Progress Measured in Pennies, Not Dollars

The spotlight will now be thrown on the franchise owners, who will be watched closely to see if they follow the lead of McDonald’s corporate office. That’s partially because the strikes have helped more consumers learn how McDonald’s franchise structure works, something that might not have been clear to your everyday customer just looking for a Big Mac with fries.

“The franchise arrangement, not obvious to everyone, will now be more obvious,” says Jefferson Cowie, a professor of labor history at Cornell University. “Pressure will boil up from below, putting pressure on the franchises to follow suit with the corporate policy on wages.”

McDonald’s wage increase comes just as the company’s legal obligations to its franchisees are coming under intense scrutiny. The National Labor Relations Board began hearings this week to determine whether McDonald’s should be considered a “joint employer” along with franchise owners. Such a designation could make McDonald’s responsible for hiring practices, wage levels and labor violations at individual restaurants, fundamentally upsetting its lucrative franchise-based business model — a model shared by many of its rivals, too. About 60% of all U.S. fast food restaurants are franchise establishments, according to a 2007 study the U.S. Census Bureau. If the labor board rules McDonald’s is a joint employer, it could spell the end of the franchise system as we know it.

 

TIME Innovation

Five Best Ideas of the Day: April 2

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

1. McDonald’s is raising wages for 90,000 employees. That’s a good start, and a strong message to other fast food outlets.

By Shan Li and Tiffany Hsu in the Los Angeles Times

2. “It must be right:” The human instinct to trust the authority of machines can be dangerous when life is on the line.

By Bob Wachter in Backchannel

3. As college acceptance letters roll in, women should ask about sexual assault prevention on campus.

By Veena Trehan at Nation of Change

4. When corporate values clash with policy in conservative states, big business has a powerful veto tool.

By Eric Garland in Medium

5. Amazon’s Dash button isn’t a hoax. It’s a step toward a true “Internet of Things.”

By Nathan Olivarez-Giles in the Wall Street Journal

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

MONEY Fast Food

Most McDonald’s Workers Still Won’t Get a Pay Raise

The fast-food chain announced a raise for some of its workers, joining other large retailers in raising pay without a federal push.

TIME Labor

A Surprising Historical Parallel for Seattle’s Minimum Wage Fight

Seattle Mayor Signs Bill Raising City's Minimum Wage To 15 Dollars An Hour
David Ryder—Getty Images Seattle Mayor Ed Murray (C) celebrates with supporters aafter signing a bill that raises the city's minimum wage to $15 an hour on June 3, 2014, in Seattle

How peddlers can help us understand franchise owners’ struggle with the city

Starting Wednesday, many of Seattle’s workers will enjoy a higher minimum wage – but some businesses have tried (unsuccessfully, thus far) to keep their employees out of that group. Claiming that Seattle’s wage law unfairly defines franchise owners as large employers, a lawsuit – led by the International Franchise Association (IFA) and franchisees from the hospitality, healthcare and marketing sectors – sought to stop, or at least slow, the change.

The plaintiffs’ objection: by being defined as large employers, franchises will be required to raise employees’ wages more quickly than if they had been categorized as small businesses. The latter designation, they say, is more appropriate, given the scant numbers employed by most individual franchises, as opposed to the far larger numbers employed by their parent corporations. Though a district judge ruled against the plaintiffs in March, the IFA has vowed to continue its fight.

A number of media outlets were quick to tar this lawsuit as mere money-grubbing by ‘Big Fast Food.’ And so it might be. The IFA, for instance, has been accused of defending franchisors’ interests at the expense of its franchisee members.

An unlikely comparison from American history, however, suggests a more sympathetic reading of the franchisees’ predicament – if not their representatives’ recent lawsuit. The subject of this comparison? Nineteenth-century America’s army of traveling peddlers: men (and occasionally women) who sat at the vanguard of America’s consumer-goods revolution. One part entrepreneur, one part working-poor, peddlers mediated between urban merchants and rural consumers at a time when the former were typically too risk averse to develop their own marketing and sales operations.

Comparing franchise owners and peddlers may, at first, seem an unlikely analogy (journalist Timothy Noah, writing for Pacific Standard, has suggested sharecroppers as a closer equivalent). But, on closer inspection, the two turn out to have much in common.

First, both groups mainly exist to insulate higher-ups from risk. For example, should an individual franchise location fail, corporate HQ may lose its cut of the franchise’s revenues, but it doesn’t have to answer for the cost of the franchise itself. That’s on the owner and her creditors. The same was true for peddlers, who paid for their wares before they left for the countryside. If demand proved weak, it was the peddlers’ problem, not their suppliers’.

Second, both franchise owners and peddlers were often lured into their trades with outsized promises of wealth. Franchising corporations – in fast food and beyond – are notoriously cagey about the profits franchisees can expect to reap. While sales literature is quick to publicize million-dollar revenues, it’s far more circumspect about owners’ average income. The statistics suggest why. Even at top-grossing franchises, many owners default on their loans. And even those who stay afloat take home an average income of only $50,000. This, of course, is nothing to sneeze at – especially in comparison with fast-food workers’ salaries. But it hardly puts owners in the top 1% of wealth holders.

Peddlers’ prospects were equally disappointing. While a handful went on to commercial fortunes, the majority languished just beyond the grasp of poverty. A rain-soaked and wind-beaten existence, peddling was a young man’s game – far richer in reputation than in reality. Many entered the profession in search of a promised career as a merchant, but instead found sore backs and tired limbs.

Third and finally, franchise owners and peddlers have served as lightning rods for economic anxieties not of their own making. Consider how the Seattle franchise owners’ suit has been seen as a machination by McDonald’s corporate HQ. Never mind that franchise owners typically have minimal control over wage levels, let alone marketing strategy or product design. This still hasn’t spared them from blame for the sins of their bosses.

Peddlers faced similar problems. Though merely pawns in the larger economic transformation sweeping nineteenth-century America, peddlers were often blamed for its most disruptive effects. Stuck with a broken clock or a wooden nutmeg (carved knock-offs that peddlers were reputed to sell in place of the genuine article), poor consumers were quick to vilify salesmen rather than their unscrupulous suppliers. As such, peddlers earned a reputation as tricksters and cheats, while the suppliers responsible for these frauds continued to masquerade in the garb of respectability.

In 1837, for instance, Ohio peddler John Bartholomew wrote to tell his supplier that the clocks he had received contained “very rusty” wires and parts “Swelled So that they will no [sic] run until I whittle & Smooth the wheels.” And yet, it was peddlers themselves who were cursed, in the words of one customer, as “dam profiteers” and even threatened with violence (the same irate customer pronounced that peddlers, according to New England peddler James Guild, “ought to have a good whipping by every one that sees you”).

This is not to suggest that peddlers were the worst victims in these transactions. That distinction goes to hardscrabble farmers who sold their tiny surplus for a few small luxuries – only to discover these products were not what they seemed. So, too, in Seattle’s minimum wage fight, franchisees face brighter prospects than uninsured fry cooks who daily risk third-degree oil burns for less than a living wage.

But that doesn’t mean that franchise owners’ claims warrant no consideration. By being included under the Seattle labor law’s definition of a large employer, franchisees are on the hook for an $11 minimum wage starting April 1, as opposed to the $10 they would owe if counted as small businesses. This may not sound like much of a difference, but for franchises with 20 half-time workers, it means around $20,000 in increased annual labor costs. That’s hardly a deal-breaker for a major corporation or even for the handful of owners with dozens of locations in their portfolio – but it’s a serious pinch for small franchisees averaging $50,000 in take-home income and more than a half-million dollars in debt.

A real solution to America’s wage problem therefore needs to take account of franchisees’ grievances. Just as consumers’ complaints against peddlers were inseparable from peddlers’ exploitation by their suppliers, justice for franchise staff demands justice for franchise owners. This, of course, is no easy task – but should minimum wage increases proceed without reference to franchisees’ concerns, they’ll merely succeed in gutting the middle, rather than redressing America’s larger edifice of inequality.

The Long ViewHistorians explain how the past informs the present

Sean Trainor is a Ph.D. Candidate in History & Women’s Studies at Penn State University. He blogs at seantrainor.org.

TIME Companies

Target Will Raise Minimum Wage to $9 Per Hour

Shopper Laura Steele leaves a Target store in Toronto, Ontario, Thursday, January 15, 2015. Target announced that they will be ceasing operations in Canada affecting about 18,000 jobs. (Photo by Kevin Van Paassen Bloomberg)
Getty Images Shopper Laura Steele leaves a Target store in Toronto, Ontario, Thursday, January 15, 2015.

The second largest retailer in the U.S. is following Walmart's lead

Target, the second-largest retailer in the U.S., will lift its minimum wage to $9 an hour in April.

The move comes just one month after Wal-Mart said it would raise its starting wage to $9 per hour this spring and $10 next year, giving around 500,000 workers a raise.

Though Target said it would not comment on employee wages, Dow Jones reported and Reuters confirmed the bump Wednesday.

The move will be cheered by labor groups who have been pushing the company to offer higher pay. Women’s advocacy group UltraViolet recently ran a web campaign that pointed potential customers towards competitors. One banner ad read, “Did you know there’s a Walmart near you that pays higher minimum wage than Target?”

Federal minimum wage has been $7.25 per hour since 2009. Democrats have proposed raising it to $10.10, but many Republicans believe it would be detrimental to businesses.

[Reuters]

MONEY Food & Drink

5 Reasons Why McDonald’s Will Win in 2015

McDonald's golden arches signs
Kristoffer Tripplaar—Alamy

McDonald's may not look so hot now, but it's in great shape to beat the market in 2015.

It’s so easy to kick a mustard- and ketchup-colored clown when it’s down, and McDonald’s MCDONALD'S CORP. MCD -0.78% has certainly earned the dissing.

It’s coming off of five consecutive quarters of negative comps, and lately it’s been blasted for everything from the quality of its grub to operational snags.

Instead of piling on, let’s take a look at a few of the things that either have been going right or should start to go right for McDonald’s this year.

1. Domestic comps are growing again

The market wasn’t impressed when McDonald’s announced that global comparable sales decreased 1.8% in January. It’s just something that the market has grown used to since the chain’s fundamentals began to slip in late 2013. However, the entirety of that decline was the result of fallout in Asia as a supplier scare in China and brand perception issues in Japan weighed on the overall performance.

The world’s largest burger chain held up better closer to home. Sales in the U.S. rose 0.4%, with an even better 0.5% year-over-year uptick at the register in Europe. Boo birds will argue this still means sales aren’t keeping up with inflation, but let’s frame this correctly. This is the first month in more than a year that McDonald’s has posted comps that are north of breakeven.

2. The new CEO could be a game changer

The Don Thompson era is coming to a close, and now the board is tasking Steve Easterbrook with turning the chain around as its new CEO. Yes, he’s an internal hire. That may not seem very exciting at a time when McDonald’s needs to think outside of the Happy Meal box, but he seems like the perfect candidate.

Easterbrook helped turn around the chain’s operations in Europe before moving back to head up the restaurant’s marketing department. He seems to have a firm grasp on the right message to woo back customers, and January’s bounce could be the first sign.

3. Higher wages could benefit McDonald’s

Consumer-facing chains are under fire for their low wages, and it wouldn’t be a surprise if we see restaurant operators start to pay more this year. This will naturally inflate prices, but McDonald’s may have a technological advantage in the form of automation.

McDonald’s and its franchisees have been investing in machines that perform many mundane tasks. Smoothie machines get going at the press of a button. Updated drive-thru windows have soda fountain carousels that sort out cups and fill them with beverages as they are ordered. Smaller chains can’t afford these high-tech automations, but it also means that McDonald’s will be able to get by with fewer employees in the future.

4. The improving economy will raise all chains

Have you noticed the drive-thru lane at your local McDonald’s getting longer in the morning? I have. With job creation on the rise again we’re seeing more rushed commuters hitting the road, taking lunch breaks, and having more money at the end of the day to take their families out to dinner.

This is a trend that should be beneficial to all chains. McDonald’s will be there.

5. The fundamentals are strong

McDonald’s may not seem cheap for a mature and slow-growing company. The stock is trading at 19 times this year’s expected earnings and a still steep 18 times next year’s target. However, there’s something to be said about a company with a predictable stream of fat royalty payments from franchisees. Net profit margins at McDonald’s hovered around a juicy 20% for several years before last year’s stumble, according to S&P Capital IQ data.

Along the way we have a company donning a chunky yield of 3.5% with a history of annual hikes dating back to when it started paying out dividends 39 years ago. McDonald’s may not look so hot now, but it’s in great shape to beat the market in 2015.

TIME cities

Seattle Bus Fares Are Now Based on Your Income

Mass transit officials have long offered discounts to certain commuters—seniors, veterans and government employees, to name a few. On Sunday, Seattle added people from low-income households to the list.

Under a new program, commuters with household incomes less than two times the federal poverty line pay only $1.50 for most trips on the region’s buses, light rail trains and street cars. The county estimates that the program could save workers who commute during peak hours more than $900 per year.

Seattle, like cities across the country, has seen a growing income gap between its highly-educated residents with high incomes and poorer residents. The commuter program is one of many efforts to assist those on the lower end of that spectrum. The city’s highly-publicized $15 minimum wage, another such effort, takes effect in April.

 

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