McDonald’s franchisees increase wages, roll out child and senior care benefits

UPDATE: July 13, 2021: This article has been updated to include comments from McDonald’s.

Dive brief:

  • McDonald’s franchisees are implementing increased hourly wages, paid time off and tuition coverage to attract employees amid the work crisis and boost brand reputation, McDonald’s said in a couriered statement electronic. McDonald’s will make a multi-million dollar investment to support these operator initiatives, and some operators will also offer child and senior care benefits this summer, The Wall Street Journal reports.
  • The channel began reviewing compensation and benefits offerings last year and surveyed more than 5,000 employees and 750 owner / operator organizations on which compensation changes would be most appealing. In June, the National Franchise Leadership Alliance formally approved the Employee Value Proposition to highlight their support for McDonald’s employees, McDonald’s said.
  • McDonald’s individual operators have already made changes to benefits – a Denver franchisee is spending more than $ 1 million in pay raises. Franchisees will assess how their salaries compare to their competitors in their markets this summer and also decide to expand new emergency care benefits by the end of 2021, the publication said.

Dive overview:

McDonald’s efforts to fine-tune benefits at franchise establishments could have a major impact on its system, as operators control about 95% of the hamburger giant’s 13,450 US restaurants.

The company previously announced in May that it would raise wages at company-owned establishments to between $ 11 and $ 17 an hour to compete with its QSR rivals. But throwing millions of dollars behind wage increases at franchise establishments signals both support from its operators – who have long had a controversial relationship with company executives – and recognition of the gravity of the labor crisis. in restaurants.

Employee shortages are the second biggest concern for restaurateurs after rising food costs, according to a June report from Quadrant Strategies. After a year of pandemic-induced restaurant restrictions and cycles of layoffs and rehires, many restaurant workers have left the industry for more stable jobs. The quit rate in the hotel and restaurant industry hit an all-time high of 5.6% in April, the highest of any industry. In April, the segment lost 681,000 jobs, or about 50% of new hires for the period, due to attrition.

The situation could also worsen. One Fair Wage reported in May that 76% of restaurant workers are leaving their jobs due to low wages and tips. McDonald’s is better positioned than most restaurant chains to overcome this pressure because it doesn’t operate on a tip model and has deep pockets to cover pay increases without hurting its bottom line.

McDonald’s CEO Chris Kempczinski told the CNBC Evolve Global Summit last month that “there is no doubt that $ 7.25 these days is not what you should pay … to be competitive on the market. market”. This sentiment builds on Kempczinski’s statement in January that the chain is doing “very well” in the 29 markets that raised wage rates above the federal minimum wage of $ 7.25 an hour. A four-year analysis of McDonald’s salaries found that an increase in salaries at some chain stores did not trigger any closures or job losses, and have not accelerated automation.

McDonald’s influence in the U.S. restaurant market is likely to drive more restaurant chains in all segments, and possibly independent operators, to find ways to add more competitive salaries and benefits to their balance sheets. Chipotle has already pledged to raise the average hourly wage to $ 15 an hour by the end of June, and Olive Garden increased wages in March to at least $ 10 an hour, including tips. The Darden brand has also spent $ 17 million on one-time bonuses for hourly restaurant workers, although the move likely won’t have the retention benefits of the policy changes McDonald’s is implementing.

McDonald’s investment in its employees could help stabilize its relationship with franchisee leadership. Earlier in the summer, the company announced that it was slashing technology fees it planned to charge U.S. operators by 62%, or about $ 42 million of the $ 68 million planned, after complaints from operators.

“The National Franchise Leadership Alliance is proud to support this plan, which will help McDonald’s and its franchisees remain employers of choice in today’s increasingly competitive hiring environment.” NFLA People team leader David Costa said in a statement.

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