McDonald’s is raising wages, but 95% of its US workers will not be impacted by the change

Fight for 15 minimum wage McDonald's
Protesters gather outside McDonald’s in 2013. REUTERS/Lucy Nicholson
  • McDonald’s announced on Thursday it is raising workers’ pay at all company-owned locations.
  • Just 5% of McDonald’s US locations are owned by the company, meaning 95% will not be impacted.
  • McDonald’s encouraged franchisees to make similar investments “in ways that make the most sense.”
  • See more stories on Insider’s business page.

McDonald’s is raising wages – but only roughly 5% of restaurants will be impacted by the change.

On Thursday, McDonald’s announced that it is rolling out pay increases, averaging 10%, at all corporate-owned stores. The increases will shift minimum pay to at least $11 for crew members and at least $15 for managers.

According to the company, the changes will impact more than 36,500 employees. But, what about the rest of the chain’s more than 800,000 employees?

Because McDonald’s is a franchise, the corporate office only directly controls issues such as hiring, firing, and pay at the roughly 650 company-owned locations in the US. Meanwhile, franchisees dictate pay at McDonald’s roughly 13,000 franchise-owned locations in the US.

McDonald’s has not signaled that franchisees will be making any similar announcements, though there has been extensive discussion within the system about how best to hire and retain workers.

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“As we said in our recent System webcast, we encourage all owner/operators to make this same commitment to their restaurant teams in ways that make the most sense for their community, their people, and their long-term growth,” McDonald’s US president Joe Erlinger said in a message sent Thursday to US employees and franchisees seen by Insider.

Erlinger said in the message that the raises are intended to ensure restaurants are able to compete for employees, as well as recognize employees’ hard work.

“Together with our franchisees, we face a challenging hiring environment, and staying ahead means we must constantly renew our commitment to offer one of the leading employment packages in the industry,” Erlinger said.

Labor groups, such as the Service Employees International Union-backed Fight for $15 movement, have pushed for a $15 minimum wage and a union at all McDonald’s locations. On May 19, McDonald’s workers still plan to strike in 15 cities, calling for a $15 minimum wage.

“We know McDonald’s can afford to raise pay to $15/hr for every single employee, not just some employees at corporate-owned and operated stores,” Fight for $15 said in a statement on Thursday. “We’re ready to continue our fight to win $15 for every worker across the country. ”

Franchisees say ‘one size doesn’t fit all’ on workers’ pay and benefits

The board of the National Owners Association, a group of independent McDonald’s franchisees, discussed recent hiring struggles in a letter on Sunday, obtained by Insider. According to the letter, McDonald’s has been working with franchisees on how to offer competitive benefits, without a standardized pay raise across the system.

“We want to be the employer of first choice in our industry,” the letter reads. “The proposal allows for Owner control and discretion. One size doesn’t fit all.”

If franchisees invest more in pay and benefits, the letter says, they can balance out the costs in two ways: reducing turnover and raising prices.

“The ability to raise prices is something new,” the letter reads. “Our industry has always been competitive, and we have been in a knife fight for years regarding price. That is no longer the case. Now the winning strategy is simply being open and giving fast service. Our competitors are literally not open due to staffing shortages.”

Ultimately, the NOA board posits, a “Big Mac will get more expensive.” But, right now, customers do aren’t phased by price increases, as long as restaurants are actually able to stay open and serve food, the board said.

Franchisees are already adding new incentives as restaurants scramble to staff stores. An organizer with Fight for $15, the SEIU-backed fast-food workers movement, shared a photo with Insider of a $500 signing bonus at a McDonald’s restaurant in Fayetteville, North Carolina. Blake Casper, a franchisee in Florida, told Insider he was offering $50 for anyone who was simply willing to come in for an interview.

Casper told Insider in April that he was trying to win over workers with a number of new benefits, including referral programs and signing bonuses. He was also considering raising starting pay from $12 to $13.

“At this point, if we can’t keep our drive-thrus moving, then I’ll pay $50 for an interview,” said Casper.