Yahoo Finance Christmas at McDonald's: Get Used To It
A Big Mac and fries isn't exactly turkey and stuffing, but it's becoming part of the nation's Christmas tradition all the same.
McDonald's has urged its franchisees to open on Christmas Day, according to an internal company memo obtained by Advertising Age. "Our largest holiday opportunity as a system is Christmas Day," the memo said. Last year, stores that opened on Dec. 25 averaged $5,500 in sales, a performance the company would like to see at more of its outlets.
Is nothing sacred? Uh, not really. Traditionalists may be appalled, but the entire retail establishment is responding to the demands of a challenging economy in a fairly predictable way: By trying to come up with new ways to boost sales. The most obvious targets are days when there used to be no sales, notably Thanksgiving and Christmas.
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Consumers might wonder why retailers can't allow one or two days a year to remain sacrosanct. The reason is that pressure is immense these days to capture every possible sale. "Retailers need every dollar," says Richard Fienberg, professor of retail management at Purdue University. "If they were experiencing double-digit sales increases every year, they wouldn't open on holidays. But they're very pressed. If they don't open, the dollar will go someplace else."
The holiday shopping already crept into Thanksgiving Day, which generated controversy when retailers such as Wal-Mart and Target announced they'd open on Thursday. But threats of protests by workers who objected to working on a holiday barely materialized, and the shoppers who did turn out seemed happy to get out of the house. It seems safe to say a new Thanksgiving tradition has been born.
McDonald's is in solid shape, with $5.4 billion in profits in its most recent year, and it would remain profitable if all of its stores stayed closed on holidays. But earnings have been disappointing recently, with a recession in Europe and other factors hurting sales. Its stock price is down about 11 percent for the year, while the market as a whole is up 14 percent. That's a big performance gap, which means the pressure is on McDonald's to hike sales and profits.
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Worker-rights activists have been pushing lately for better pay and work conditions at retailers such as McDonald's and other fast-food outlets, as well as the biggest retailer of all, Wal-Mart. And there may be some legitimacy to claims that retail chains manipulate their workforce--by keeping hours low to prevent employees from reaching full-time status and claiming benefits, for example. Activists want tougher rules, such as an hourly wage of as much as $15 rather than the $7 to $10 typical at many retailers. They'd also like to see bonus pay for employees forced to work holiday hours, or the right to say no.
Nice sentiments, but don't expect much to change. Workers at the low end of the pay scale have very little leverage these days, simply because there are so many jobless workers who could easily take their place. Nor is there much support for new union-style rules that guarantee pay or dictate how companies must treat their workers. If anything, the trend is going the opposite direction. Even Michigan, once the hub of the auto-workers union, recently approved new "right to work" laws limiting union activities.
Some McDonald's critics have complained about the vast pay gap between a typical McDonald's worker earning about $8.25 an hour and CEO Jim Skinner, who brought home $8.75 million last year. CEO pay does seem wildly inflated these days, and Skinner may not deserve that much, but it's ridiculous to think that retailers should pay their workers more just because the CEO gets a fat paycheck.
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CEO's get paid to keep costs down, and if McDonald's or any company were to pay workers more than market rates, one of two things would happen: Either prices would go up, which would make consumers grumble and perhaps bolt for cheaper competitors, or profits would go down, which would prompt analysts and investors to call for a new CEO.
The real way for workers to get paid more these days is to enhance their skills, take on more responsibility and increase their value to the company. Simply asking for more money because it seems fair is unlikely to persuade anybody.
Meanwhile, Christmas at McDonald's might not be as sorry as it sounds. Feinberg points out that even with the tough economy, Americans have gotten in the habit of eating out more often, with less concern about fencing off sacred holidays. "Consumers have been frustrated over the past five years with finding few of their favorite places open for food on the holidays," he says. Maybe McDonald's will add a Christmas meal to their menu after all.
Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.
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