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.
Furthermore, 82% of McDonald restaurants are franchises i.e. not owned by McDonald. https://www.fool.com/investing/general/2016/04/03/what-perce...
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.
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.
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.
“ 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.
What are you trying to argue?
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.”
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.
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.
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.
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.