Four key takeaways from McDonald's layoffs
In recent corporate shakeups, Amazon, Meta, and Disney have all been downsizing their workforce. Now it seems that even the iconic burger chain, which has become synonymous with fast food worldwide, is feeling the pinch as McDonald's joins the list of companies announcing layoffs that will affect hundreds of employees.
As part of a much larger company restructuring, McDonald's Corp. has recently informed its employees about the impending layoffs and has temporarily closed all of its U.S. offices this week. The exact scale of the layoffs is still unknown.
The news may have come as a surprise to fast food lovers who spent a lot of money at McDonald's last year. According to McDonald's most recent annual report, the company's global sales rose by almost 11% in 2022, with nearly 6% of that in the United States.
So what's behind the layoffs and how could they impact the broader economy?
NPR's Steve Inskeep asked Adam Chandler, a journalist who wrote the book Drive-Thru Dreams: A Journey Through the Heart of America's Fast-Food Kingdom.
It's getting more expensive to sell fast food
- McDonald's plans to allocate up to $2.4 billion towards capital expenses, which will involve the construction of 1,900 additional restaurants worldwide.
- Despite raising menu prices in response to inflation last year, McDonald's customers didn't seem to notice, as foot traffic increased by 5% in 2022.
- According to CEO Chris Kempczinski, low-income customers are spending less per visit but are visiting McDonald's more frequently.
- Last year, Kempczinski had predicted a "mild to moderate" recession in the U.S. and a "deeper and longer" downturn in Europe.
Rising minimum wages aren't the problem
The layoffs at McDonald's are expected to impact corporate workers more significantly compared to frontline workers, who are more likely to earn minimum wages.
McDonald's frontline workers are less vulnerable than white-collar employees
There is a significant shortage of workers in the fast food industry. McDonald's can't afford to reduce its workforce, but there may be some corporate roles which can be "streamlined," making them more vulnerable to cuts.
The layoffs will affect small business owners
Because substantial number of McDonald's restaurants are not owned directly by the corporation but instead are franchised.
9(MDAxODcyMTgzMDEyMTgxMTY5NjYxN2I4OQ004))
Transcript
STEVE INSKEEP, HOST:
Hundreds of employees at McDonald's are losing their jobs this week. Your local cashier will still be there, but some corporate employees are out. Journalist Adam Chandler is here to talk about what this means. He is the author of a book called "Drive-Thru Dreams." Good morning.
ADAM CHANDLER: Good morning.
INSKEEP: Can I just note that McDonald's seems to be doing pretty well, selling a lot of Big Macs or grilled chicken sandwiches or whatever? Earnings were above expectations in January, so why lay off people now?
CHANDLER: Right. It's a great question, Steve. It is strange to see McDonald's performing particularly well and laying off people. However, the short answer is that they're seeking to be more nimble. You know, at one point in the 1990s, it was estimated that 1 in 8 Americans worked at McDonald's at some point in their life...
INSKEEP: Wow.
CHANDLER: ...Which is a crazy number. But behind that army of hourly restaurant workers is an enormous corporate structure with over 150,000 employees. And so that means the company tends to move very slowly when it comes to strategy and decision-making. So in theory, there's a case to be made for having fewer corporate workers. Although, not everyone sees it that way.
INSKEEP: As best you can determine, who is losing their jobs? By which I mean, is there a particular part of the corporate structure that is being thinned out or going away?
CHANDLER: That's one thing we don't know yet, Steve, unfortunately. News is still coming out about this. And the corporate offices of McDonald's have remained closed through today as they're finding out who exactly is going to be still employed by McDonald's corporate. So it is a bit of a mystery. But based on what the company is doing in terms of its direction, it looks to grow in a lot of ways and move more towards digital. So we're going to see some of the operations change. And that's going to be an interesting shift for them.
INSKEEP: All right. You got to help me out here. What does it mean for McDonald's to go digital? Do I get a virtual chat bot Big Mac? What are you talking about?
CHANDLER: We're talking about using the app and go-ahead orders on drive-throughs so that you can order far in advance of you arriving or even before you get to the speaker box at the drive-through line, things like that. Those are changes that have already happened. But they're looking to advance them as more people use apps and move toward that kind of ordering.
INSKEEP: This is really interesting to think about because I have known, as most people do, McDonald's are individual franchises, right? The restaurant is owned by some local person, perhaps, or at least someone who's not part of the McDonald's corporation. But then there's this corporate headquarters that's now thinning out and also, as you say, trying to direct business in a new way. How does that relationship work? Who tells who what to do? And who can say no?
CHANDLER: Well, that's a great question, Steve, in part because that's one of the things that many people are cynical about when they talk about this corporate layoff. The franchisees are essentially small-business owners. And they may see added pressure to the work that they do running their own stores and in their relationship with certain members of corporate who aren't there anymore. So it's going to be interesting to see how this shakes out, in part because this may change what's already proven to be a kind of tense relationship between the franchisees who run the stores and corporate, which does a lot of important work behind the scenes to make sure that everything runs smoothly and some of the marketing.
INSKEEP: Does this fit in any way with some of the layoffs we've seen in the tech industry? This is a very different industry, but you're talking about tech changes there.
CHANDLER: Right. Well, actually, no. One super-sized irony here is that McDonald's has been profitable, partly because it's easy to dine there, especially during the peak of the pandemic. And more recently, as we've been kind of tightening our belts as consumers and dealing with the steady threat of recession and inflation, McDonald's has kind of benefited from the fact that...
INSKEEP: OK.
CHANDLER: ...There's consumer caution.
INSKEEP: All right. Adam Chandler, author of "Drive-Thru Dreams." Go get yourself some fries. Thank you very much.
CHANDLER: I certainly will. Thanks so much, Steve.
(SOUNDBITE OF THE POETS OF RHYTHM'S "DISCERN/DEFINE") Transcript provided by NPR, Copyright NPR.
300x250 Ad
300x250 Ad