It turns out it was an exaggeration to describe Morelix as a “researcher”; he is in fact an undergraduate. The reference in the story has been corrected to “student,” and a correction has been appended.
But there are other problems here. Morelix’s “study” has a back-of-the-envelope quality to it. He looks at the company’s 2012 annual report and observes that its labor costs amounted to 17% of its total revenue. Therefore, he concludes, the consequence of doubling wages would be a 17% price rise–17 cents on a Dollar Menu item, times 4 for the $4 Big Mac.
There’s a let-them-eat-cake quality about Fairchild’s dismissive reference to a 17% increase in prices. Sixty-eight cents may not amount to much, and the hypothetical increase in the cost of a single meal, even adding fries and Coke, would break hardly anybody’s bank.
There are other, greater problems with the “study”. Mr. Morelix clearly does not understand how the McDonalds corporation works. As I’ve shown here before, the labor costs in the franchises aren’t reflected on the corporation’s financial statement and the corporation’s revenues are derived from multiple sources, both company-owned stores and franchise fees so there’s really not much of any relationship between corporate’s cost of labor and the price of a Big Mac.
Note that I’m not taking a position one way or another on the subject. Just trying to ferret out the truth. The income statement for an “average” McDonalds store might be a good place to start. Crew payroll presently comprises about 20% of the operating expenses of the store and net revenues are about 5.7%. My gut level reaction is that doubling crew payroll would cause the store to close.