How McDonalds will screw Labour. $MCD, $WEN, $BKW, $YUM, $DNKN, $KKD #QSR

Union activists are making a noisy splashy push to unionize food service workers at Quick Service Restaurants. (QSR) The claim is wages are too low. Correct; the work does not pay very well. The further claim is big quick service restaurants can afford to pay big bucks. Disputable; but also way off the point.

Quick service restaurants are factories deployed close to consumers. Factories need materials, labour and capital equipment. As the cost of labour increases, the cost of capital becomes more attractive. We are in a low-interest rate high wage environment. Capital will trump.

QSR has grown by adding locations, expanding hours and growing the menu. Growth was never driven by labours input. As long as it stayed cheap, it stayed in. When labour gets too expensive it will be factored out.

Don’t believe me? Look at any factory environment which has increasingly turned to robotics to improve productivity. Labour has not kept up. So sad so sorry. In many extreme cases factories left and went off shore.

Labour understands one model and one model only. Organize and then leverage your power at the negotiating table. They have never understood competition and probably never will. They are  fighting yesterdays battles.

Right now technology is working over time to replace disgruntled low productivity workers.

The labour issues may become the silver lining for many quick service restaurants seeking the next thing.

Moral of the story. Stay in school, acquire skills, develop a positive can do attitude and add value. The world is Darwinian and will eventually weed out the inadequate.

In the mean time if I was running Quick Service Restaurants I would be worried about the nutritional quality of my offering. Health consciousness is growing stronger every day.

George Gutowski writes from a caveat emptor perspective.

Why Labour Costs are not Black Swan Events for #QSR $MCD $BKW $WEN $YUM

A lot of noise coming from unions about organizing low wage employees at Quick Service Restaurants. Quick math shows the industry cannot pay $15 plus rich benefits. Will creeping unionism hurt Quick Service?

Answer: No

Quick Service Restaurants are factories and subject to much process engineering. If wages become a problem watch for more or revamped machinery and processes and less labour. This will cause existing workers more job loss.

Part of the organizing dynamic is many QSR employees have become trapped because competitive better paying jobs are not as available. As the economy improves ever so slowly this rationale should dissipate. Previous efforts to organize were hampered by huge turn over rates. Corporations can drive those rates and turn employees in many ways. Cutting back hours and closing a few locations is one. Selective termination of union activists while dirty pool is another.

Wal-Mart has been known to close stores that unionized and everyone is out of work. QSR can easily close locations and laugh it off.

In the mean time a few headlines here and there but this will not be a factor in a buy hold or sell decision.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter @financialskepti