McDonald's Should Either Raise Wages Or Have Robots Flip Burgers

For years, cheap teenage labor helped McDonalds become the world’s largest food franchise, enjoying hefty operating margins that caught the attention ofWall Street. McDonald’s stock has been a stellar performer, handsomely rewarding patient investors.

But in recent years, cheap labor has turned from a tailwind to a headwind for McDonald’s.

For three reasons. First, it has constrained the company’s ability to improve the menu and services to compete effectively against newcomers like Chipotle, El Pollo Loco Holdings, Inc., Panera Bread, Starbucks SBUX +1.02%, Dunkin Brands, andYum Brands YUM +0.95%—to mention but a few.

Second, the growth of competing franchises has been placing an upward pressure on industry wages for qualified employees.

(Photo credit: Wikipedia)

Third, the company has been facing labor protests, strikes, and unfavorablelegal rulings that are changing the rules of the game altogether for the company.

McDonald’s labor woes have taken their toll on in sales and earnings growth — and caught the attention of Wall Street, which has been dumping McDonald’s stock… in sharp contrast to McDonald’s close competitor Chipotle, which has seen its earnings, revenues, and stock growing by leaps and bounds.

What’s the solution to McDonald’s labor problem? Either raise wages and benefits or install robots to flip burgers! Yes, robots. They can do far more sophisticated things these days than flipping burgers.

Installing robots to flip burgers would help McDonalds to further standardize its menu, getting rid of its labor problem for good. Robots are very good at following company manuals, do not protest, and do not file lawsuits. But they don’t come for free; they need their own maintenance; and they may turn off some customers who prefer interacting with humans rather than machines.

Raising wages and benefits sufficiently would help McDonalds attract qualified employees to mass customize its menu, while improving the quality of its service, competing effectively against Panera Bread and Starbucks – both of which have been eating its breakfast and lunch lately.

So far it is unclear in which direction McDonalds is moving. On the one side, it has introduced tuition support programs for qualified employees. On the other side it has been rolling out ordering kiosks, which replace cashiers in selected locations (e.g., Vienna, Austria).

Will robots replace cooks? It remains to be seen.