50000 new McJobs

One of the highlights of yesterday in the US was the announcement from McDonald's of the creation of 50 thousand McJobs. Yip, the fast food, I mean casual dining giant announced that they are hiring. Slang for McJob implies that the job is a dead end one with low skills and absolutely no prospects of going anywhere. BUT. It turns out that three quarters of the McDonald's execs have actually at some stage flipped burgers. Byron's beats takes a detailed look at both the business and the hiring spree, here goes.

The plan is to increase their employee base by 50 000 adding both restaurant staff and managers in up to 14 000 locations around the U.S. This could add up to $54 million to the payroll tax as McDonalds increase their workforce by 3%.

I think this is fantastic news and a big contradiction to the high inflation naysayers who reckon high commodity prices are going to crush the likes of McDonalds and slow down the recovery. This is proof that McDonalds believe that both of these are not a worry. Such a hiring scheme could add up to $4.1bn dollars to their annual spending.

This would not be implemented if they believed things were slowing down in the United States. I'm actually looking at this as more of a proxy for the market rather than at a micro level. You know we are bullish on McDonalds as they grow globally and consumers take advantage of the great value for money service. But such a big commitment to hiring 50 000 new employees shows great confidence in the economy.

What else is interesting is that more than half of franchise owners are former burger flippers while 75% of the managers started at the bottom. This shows that advancement is an option and these new employees are not sitting in stagnant jobs. Its how capitalism works as these new employees will become permanent consumers of household goods, housing and loans.

From a company perspective and for our clients who currently own the stock we think the move is a good one. Amongst so much M&A activity doing the rounds the timing seems right (remember this is a $4.1bn a year commitment, nothing to be laughed at). It is good sign of growth for a company who recently released same store sale growth of 3.9% in February. When this report came out it was the US who lagged so this initiative is clearly a reaction to increase services in their biggest market.

Just some interesting stats about McDonalds so that you know what we are dealing with. McDonalds have more than 31 000 stores worldwide serving more than 58 million customers daily whilst employing 1.5 million people. 15% of these restaurants are actually owned and operated by McDonalds while the rest are franchised. So you would imagine that these employments relate to the operated side of the business. Nearly 1 in 8 workers in U.S have worked for McDonalds and it is the largest operator of playgrounds in the U.S.