The Economics of the Fast Food Industry

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Huge Profits and Salaries for the Owners

In order to best maximize their profits, the big fast food giant's created the franchise system. This system allows the companies to maintain overall control of the product, and give them a guaranteed rate of return, while at the same time allowing local owners to create a low-wage work force best suited to local conditions. For us, as workers, that means our immediate employers are often small business owners, and franchise owners who plead poverty when we demand higher wages.

At present 2,708 of Pizza Hut’s 4,496 stores are franchises. The rest are run directly by corporate headquarters. In Western Washington the franchise for Pizza Hut has been given to Emerald City.

Pizza Hut is the world’s largest pizza chain, with over 7,500 stores in the US alone. The parent company, Yum! Brands Inc, (previously called Tricon Global Restaurants) also owns A&W, Kentucky Fried Chicken, Long John Silvers, and Taco Bell. According to a company press release, it is: “the world’s largest restaurant company in terms of units with approximately 33,000 restaurants in more than 100 countries and territories.”

In 2003 Yum! Brands Inc’s gross earnings on US operations were $5.6 billion dollars, and its US profits were $812 million. In the first 6 months of 2004 they opened 537 new stores.

The CEO of Yum! Brands Inc. is David C. Novak. In 2002, he earned a salary of $996,154. But that was not all. He also earned in that year: a bonus of $2,625,000, other compensation of $427,500, and received stock options worth $4,029,534. That’s a total of over $8 million for one year’s work.

If that money were used to increase the current wages of the roughly one thousand workers employed in the 61 stores in western Washington, it would be enough to pay them $15.16 an hour, 20 hours a week, for a full year! If the company’s $812 million in profits were redirected in a similar way, the same would hold true for over 100,000 workers.

According to a 1997 survey in Nation’s Restaurant News, the average corporate executive bonus (not their wage) was $131,000. In 1995, at McDonald’s the annual take-home pay for a manager was $150,000 a year for each restaurant owned. This was seven times the earnings of a crew member working full time, at minimum wage.

Under a scheme set up through the Work Opportunity Tax Credit, the fast food chains have for years claimed at tax credit of up to $2,400 for each new low-income worker they hired. It was supposedly an incentive to give young workers on the job experience. This brazen example of corporate welfare has continued despite an investigation by the U.S. Department of Labor in 1996, which concluded that 92% of these workers would have been hired anyway.

Fast Food chains spend about $3 billion each year on television advertising: enough money to pay 75,000 workers $40,000 a year to build hospitals, schools or any number of productive activities which would actually benefit society. Low Wages, Few Benefits for Workers

The fast food industry hires around 3.5 million workers and pays minimum wage to a higher percentage of its employees than any other industry in the US. The only group that earns a lower hourly rate is migrant farm workers.

Roughly 90% of the nation's fast food workers receive no benefits and are scheduled to work only as needed. There are few if any possibilities for advancement. Assistant managers, a misname designed to entrap workers who are looking to build a career at these chains, are also exploited, often forced to work 50, 60 or 70 hours a week, sometimes off the clock, with no serious opportunities for promotion. Of the 20 or so assistant managers I worked with in my two years at Pizza Hut only one was promoted. All of them were diligent workers who in many cases performed the duties of our store manager (if not more), yet received little more than minimum wage.

In 1998 employee benefits accounted for a miserable 2.5% of total...
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