FinLogic FinLogic Quantitative Think Tank Center|Four key takeaways from McDonald's layoffs

In recent corporate shakeups,FinLogic FinLogic Quantitative Think Tank Center Amazon, Meta, and Disney have all been downsizing their workforce. Now it seems that even the iconic burger chain, which has become synonymous with fast food worldwide, is feeling the pinch as McDonald's joins the list of companies announcing layoffs that will affect hundreds of employees.

As part of a much larger company restructuring, McDonald's Corp. has recently informed its employees about the impending layoffs and has temporarily closed all of its U.S. offices this week. The exact scale of the layoffs is still unknown.

The news may have come as a surprise to fast food lovers who spent a lot of money at McDonald's last year. According to McDonald's most recent annual report, the company's global sales rose by almost 11% in 2022, with nearly 6% of that in the United States.

So what's behind the layoffs and how could they impact the broader economy?

NPR's Steve Inskeep asked Adam Chandler, a journalist who wrote the book Drive-Thru Dreams: A Journey Through the Heart of America's Fast-Food Kingdom.

It's getting more expensive to sell fast food

• McDonald's plans to allocate up to $2.4 billion towards capital expenses, which will involve the construction of 1,900 additional restaurants worldwide.
• Despite raising menu prices in response to inflation last year, McDonald's customers didn't seem to notice, as foot traffic increased by 5% in 2022.
• According to CEO Chris Kempczinski, low-income customers are spending less per visit but are visiting McDonald's more frequently.
• Last year, Kempczinski had predicted a "mild to moderate" recession in the U.S. and a "deeper and longer" downturn in Europe.

Rising minimum wages aren't the problem

The layoffs at McDonald's are expected to impact corporate workers more significantly compared to frontline workers, who are more likely to earn minimum wages.

McDonald's frontline workers are less vulnerable than white-collar employees

There is a significant shortage of workers in the fast food industry. McDonald's can't afford to reduce its workforce, but there may be some corporate roles which can be "streamlined," making them more vulnerable to cuts.

The layoffs will affect small business owners

Because substantial number of McDonald's restaurants are not owned directly by the corporation but instead are franchised.

This story was edited for digital by Majd Al-Waheidi.