Kempczinski also noted that in many states, sit-down restaurants are allowed to pay servers as little as $2.13 per hour, a federal minimum set in 1991, with tips making up the rest of their pay.
“So right now, there’s an uneven playing field. If you are a restaurant that allows tips or has tips as part of your equation, you’re essentially getting the customer to pay for your labor and you’re getting an extra benefit from no taxes on tips,” Kempczinski said.
If they can’t pay minimum wage then they weren’t a functioning business to begin with. Tipped employees aren’t just paid $2/hour, they are still legally required to make minimum wage. If the tips don’t bring them up to minimum wage the restaurant has to cover the difference.
Yes, I know this, though a lot of businesses don’t actually do that.
That’s not my point though, limiting your competition by raising expenses to a higher level for smaller businesses would help McDonalds. There isn’t much hope for him to get the minimum wage lowered to make it “fair”, what CEO of such a public company would want to make that stand. By pointing out the unfairness would be to make it more expensive for his competition that don’t have to play by the same rules would help McDonald’s by hurting the local Mom and Pop or smaller restaurant chains. by hurting his competition. He gets to appear to take the high road by pointing out others should be held to the same higher standards and do the right thing. McDonald’s is already making it work at the higher wage because of how big they are, but their competition for food options probably won’t be able to do the same.
This is similar to how WalMart, Home Depot and etc expanded back in the day. Pay more, lower operating costs per sqft of retail space and less expensive prices than the mom and pops. This runs the smaller competition out of business because they can’t keep up and now WalMart/Home Depot or whatever has a much bigger piece of the local market as there are few options for consumers to spend their money with.
Mcdonald’s has gotten much more expensive in the last several years while also losing customers but he can’t lower expenses so he is trying to raise the operating costs for everyone else since he knows McDonald’s can survive for longer at the higher expense then almost anyone else.
Excellent points. Thank you for sharing! :-)
I understand you’re point, what I was calling out is that what McDonald’s suggests technically shouldn’t be a new burden on restaurants, but you’re probably right that it would be because how broken tipping is in America.
Also, this approach is actually the opposite of what Walmart did to expand. Walmart used its large size to force better wholesale deals and/or operate at a loss to undercut prices that mom and pop stores couldn’t compete with. Walmart is known for cheaper prices than the competition.
McDonald’s approach is more like regulatory capture. Once youre a big player you try to get more burdensome laws passed that make it harder for new competition and/or smaller businesses to thrive. Currently we’re seeing similar things in the online space with things like age verification laws.