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View Diary: Bill Maher's excellent argument for a living wage (63 comments)

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  •  No, it's the more meaningful number (2+ / 0-)
    Recommended by:
    Sparhawk, VClib

    over actual dollars.  Actual dollars are the part that is meaningless as far as business is concerned -- actual dollars become meaningful when put in the context of how much net profit, as a percentage of what you spent and as a percentage of your investment, are the numbers that are meaningful.    

    Here's the deal: Business (1) with a $100,000 investment that garners $50,000 in profit in a year is far, far, far, far more profitable than Business (2) a $100 million investment that garners $3 million in profit.  If, for both of them, employee salaries are, say, 35% of costs, Business (1) can afford to double those employee costs and remain profitable.   If Business (2) is forced to double its employee costs, it will be unprofitable.   You can't look at Business (2) and say, "They make millions --- they can afford to  double employee pay."  The math doesn't work that way.  

    •  It does if you are a normal person. (5+ / 0-)

      Too many MBAs running the show.  Any business that nets $3 million is profitable.  

      I do budgets for a living myself and too many people are way too smart for their own good.  I understand what you are saying, I am saying that what you are saying is obfuscating the reality that once the sunk cost is sunk, you only look at the operating costs, so if a business makes 3 percent on a million, it is quite different than making 3 percent on 100,000  so the amount running through is key.

      Did anyone say what percentage were the workers?  You are going to make me go look this shit up and I have only had one cup of coffee.

      I know how profitable McD's are...they are the fracking gold standard, practically guaranteed to rake in the dough.

      "I watch Fox News for my comedy, and Comedy Central for my news." - Facebook Group

      by Sychotic1 on Sat Oct 26, 2013 at 08:44:07 AM PDT

      [ Parent ]

      •  This is just wrong. (2+ / 1-)
        Recommended by:
        Sparhawk, VClib
        Hidden by:
        nosleep4u
        Any business that nets $3 million is profitable.  
        It depends entirely on the size of the business -- the number of owners and their investment in the business.  

        If Exxon or Apple nets $10 million in profits a year, their investors would be in a panic and dump the stock and and the company might go out of business.  

        If my local restaurant owned by one middle-aged couple nets $10 million in profits in one year, the owners would probably sell the business and retire.  

        I am a part-owner of a business (a law firm) so I'm telling you how a business owner looks at profitability.  If a law firm of 3 owners nets $3 million a year in profits, yes that is profitable. The owners are happy, they hire (or continue to employ associates/paralegals/secretaries/accountant etc. to make their work life easier. If a law firm of 100 owners nets $3 million a year, that firm is going to dissolve.  

        Business owners do not look at it this way:

        you are saying is obfuscating the reality that once the sunk cost is sunk, you only look at the operating costs,
        Business owners  also look at return on investment. If I pay $10 million for a business, netting $1 million a year is great.  If I pay $100 million for a business, netting $1 million a year is  a disaster.
        •  this is true, but the reality is that we are (3+ / 0-)
          Recommended by:
          tofumagoo, cville townie, Tonedevil

          discussing a McDonald's franchise operation.

          It is one of the most sought after franchises you can wish to own.  The company mandates a very high liquidity from the prospective franchise owner and it takes a hefty chunk for its franchise fee.

          From what I can gather, the profit margin for McD's is 10 percent, which considered to be on the high end of profitability percents for retail.

          I read quite a few pages, and there are some fluctuations (plus the market has been all over the place over the last decade) but this seems to sum it up (from CCN Money)

          McDonald's is one of the most sought after franchises around the world today. McDonald's gets about two thousand applications for franchise owners a year. This business makes money because it already has a well known name. The franchise fee is approximately $45,000 and you also have to pay a royalty of 12.5% and 4% for advertising. The profits for this franchise may vary, but the average restaurant brings in a little over a million dollars a year. After all expenses, you are looking at a profit of about $500,000 to $600,000.

          "I watch Fox News for my comedy, and Comedy Central for my news." - Facebook Group

          by Sychotic1 on Sat Oct 26, 2013 at 09:23:19 AM PDT

          [ Parent ]

          •  Actually, I am only using McD's as (2+ / 0-)
            Recommended by:
            Sparhawk, VClib

            a proxy for a fast food company.  Because, of course, you can't pass a minimum wage that applies only to McD's.  Any law would apply to all businesses.  That's why the numbers I linked to are average for fast food restaurants, not just McD's.  If McD's is the most profitable, as your link says, that means that Burger King or KFC or Subway or Wendy's or whatever will have numbers that are less.   So, you'd have to figure the effect of a minimum wage increase on them as well, and you'd have to look at the difference on them between an increase to $9 or an increase to $15.  

            And, of course, even within a single company like McD's or Burger King or Subway, the profitability of a franchise can vary widely depending on where the franchise is located.  That's why for a McD's or a Subway or a Wendy's it is going to cost far, far, more in to get a franchise on the corner of a busy street with a lot of tourists, or lunch-time workers, than it is to get a franchise on a sleepy corner of a bedroom community.  That all goes into your return on investment numbers.  

            And I'd appreciate a link to your source, so we can see what the source of that statement is (CNN money will attribute it to someone).

            As I've said elsewhere, I think that the minimum wage probably needs to go up, but I'm not convinced that it should essentially double.  My point here is that it's not as simple as saying "the big corporation makes a lot of money, they can afford it" as Maher and some here seem to want to say.  

            •  McDonalds also has the highest franchising (3+ / 0-)
              Recommended by:
              ozsea1, cville townie, Tonedevil

              "rent" which the franchisees are crying over currently.  It was raised recently, cutting into their profits.

              It is hard to get a good figure on profitability and all the sources say that most McDs have owners with multiple locations.  Another page lists average sales at 1.3 million which seems to be in line with the above statements. and a third site lists it as "mid six figure," which is also in line with the above quote.

              profit

              I picked the above quote because it was the simplest of the statements to put forward.

              The other places have less start up costs and less franchising costs, but I am thinking they can and do make a good profit.  Franchises typically take far less risk than other food start ups which have a 50 percent failure rate where I live.  If I was going to worry about anyone, it would be indie restaurant owners.

              "I watch Fox News for my comedy, and Comedy Central for my news." - Facebook Group

              by Sychotic1 on Sat Oct 26, 2013 at 10:00:34 AM PDT

              [ Parent ]

          •  Sychotic - do you really believe that a McD (0+ / 0-)

            franchise has gross margins close to 50%? I don't. There is a big missing piece here which is likely the cost of acquiring an existing franchise or the startup expenses of a new location.

            "let's talk about that"

            by VClib on Sat Oct 26, 2013 at 07:02:27 PM PDT

            [ Parent ]

        •  HR for blatant lie (1+ / 0-)
          Recommended by:
          Tonedevil

          Net means profit.

          You're now deliberately distorting the language, and I've had enough of this hijack.

          "What could BPossibly go wrong??" -RLMiller "God is just pretend." - eru

          by nosleep4u on Sat Oct 26, 2013 at 09:59:55 AM PDT

          [ Parent ]

          •  Sigh. Not in an economic sense. (2+ / 0-)
            Recommended by:
            Sparhawk, VClib
            Net means profit.
            This may be true as a matter of GAAP accounting, but it is not true as a matter of economics.  And business owners -- successful ones, anyway -- understand economics.

            There's an economic concept called "lost opportunity cost."   In simple terms, if my investment makes a 1% return on investment in scenario 1, and I could have -- with the same level of risk -- made a 5% return on investment in scenario 2, then I have LOST money.  

            I can give you an example in my own scenario -- as a lawyer running a small business.  My asset is the 2500 hours I work a year.  Say I'm one of those 100 partners in a law firm that makes a $3 million "net profit" for the year. That means I made $30,000 for those 2500 hours.  But say I'm certain that, with no more risk, I could work out of my house, with no employees, and use those 2500 hours to generate 1000 hours of billable time at $100 an hour -- $100,000 for the same work.  That's lost opportunity cost of $70,000 for that year.  So, I lost money by working for that $30,000.  Any sane business owner understands that.  It's part of Economics 101.  

            That's why if Apple, which has a market capitalization of over $400 billion, makes a net profit of $10 million a year, its owners have not made a profit -- they have lost money. That's a return on investment of less than .01%.  An owner could have taken his investment of, say, $1 million and invested it in a T-Bill and made over 1%.  By keeping an investment in that company, that owner lost money.

            Individuals do this in their own economics.  If you have $1000 in savings (that you aren't going to need for ordinary expenses)  in an account that pays you no interest, when you could have had it in an account that pays you 3%, you are losing money.  At the end of a year, you have $1000, when -- with no additional effort or risk -- you could have had $1030.  You have lost $30.  That's  a very simple version of the economic concept of lost opportunity cost.  See another explanation here or here and here and here.

            Let me put it in even simpler terms.  Let's say you are a sole proprietor electrician, who typically charges $50 an hour for your time (which is a limited asset).  Let's say you have 10 hours available, and two possible jobs to occupy that same 10 hours -- one that will only pay you $25 (the customer says he can't afford any more than that), and one that will pay you $50 an hour.  You take job one.  In an accounting sense, you have made $250.  In an economic sense, you have LOST $250, because you should have made $500 for that same 10 hours.  Now, you may decide to take job 1 because of other factors.  But any sane business person knows that taking job 1 COSTS him $250.

            I was talking in a economic terms, not a GAAP accounting terms.

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