JANUARY 2021 - HOW MCDONALD'S UTILIZES FRENCH PUBLIC SUBSIDY PROGRAMS TO BOOST PROFITS AND HARM WORKERS AND THE FRENCH STATE - REACT

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JANUARY 2021 - HOW MCDONALD'S UTILIZES FRENCH PUBLIC SUBSIDY PROGRAMS TO BOOST PROFITS AND HARM WORKERS AND THE FRENCH STATE - REACT
JANUARY 2021

       HOW MCDONALD’S UTILIZES FRENCH PUBLIC SUBSIDY PROGRAMS TO BOOST PROFITS
                     AND HARM WORKERS AND THE FRENCH STATE
JANUARY 2021 - HOW MCDONALD'S UTILIZES FRENCH PUBLIC SUBSIDY PROGRAMS TO BOOST PROFITS AND HARM WORKERS AND THE FRENCH STATE - REACT
McProfits
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                                                                                                                                                                                                          Table of contents

                                                                                                                                        INTRODUCTION  � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 04

                                                                                                                                        • MCDONALD’S HIGH PROFIT, LOW WAGE MODEL                                                                                                   ������������������������������������������������������������������������������������������������                                                                            08
                                                                                                                                             - McDonald’s: The Global Restaurant Leader  � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 09
                                                                                                                                             - McDonald’s France, a significant profit driver for the McDonald’s Corporation  � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 14
                                                                                                                                             - McDonald’s low wages and limited profit-sharing  � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 16

                                                                                                                                        • MCDONALD'S RELIANCE ON PUBLIC EMPLOYMENT-SUPPORT MECHANISMS TO INCREASE PROFITS  � � � � � � � � � � � � � � � � � 22
                                                                                                                                             - Conversion of the Tax Credit for Competitiveness and Employment into a
                                                                                                                                               reduction in social contributions: An even more profitable mechanism for McDonald’s  � � � � � � � � � � � � � � � � � � � � � � � � � �                                                                                                                                                                         23
                                                                                                                                             - More tax benefits for McDonald’s low-wage model � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �                                                                                        27
                                                                                                                                             - McDonald’s increases profits by hiring under state-aided employment contracts  � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �                                                                                                                                                           28
Founded in 2010, ReAct’s mission is rooted in a shared principle: the primary reason for both social and envi-                               - State-supported pandemic programs and post-crisis stimulus plan: McDonald’s wins  � � � � � � � � � � � � � � � � � � � � � � � � � � � � �                                                                                                                                                                      29
ronmental injustice lies in the dominance of large companies’ interests over the people’s interests. That is why                             - Bonus-malus system favors McDonald’s precarious model  � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �                                                                                                           32
ReAct organizes workers and communities who face these injustices to build power and the capacity to defend                                     > McDonald’s High Staff Turnover  � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �                                                 33
the rights and interests of the majority from narrow corporate interests. ReAct supports the development of
                                                                                                                                                > Permanent Contracts are not meaningful at McDonald’s  � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �                                                                                                         35
democratic organisations using community organizing methods and helps connect these organizations at local,
state and international levels. ReAct believes that these types of civic and union organizations are a prerequisite                     • MCDONALD’S JOB CREATION MYTH  � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 37
to help workers and other affected people develop skills for direct, non-violent action aimed at exposing and                                - McDonald’s failure to live up to its French job commitments  � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �                                                                                                           37
challenging the harmful practices of multinational corporations.                                                                             - Behind McDonald’s job creation myth, McDonald’s workers face
                                                                                                                                               understaffing and poor working conditions  � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �                                                                     40
Since 2016, ReAct has supported both trade union and civil society organizations calling out McDonald’s poor                                 - McDonald’s reaps benefits from partnerships with French authorities at all levels � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �                                                                                                                                                          43
practices in a variety of areas including worker mistreatment, the use of corporate subsidies, and poor environ-                                > McDonald’s partnership with the French state  � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �                                                                                 43
mental practices. As part of these efforts, ReAct has conducted in-depth research based on a variety of sources
                                                                                                                                                > Regional Partnerships  � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � �                        44
including McDonald’s financial and corporate filings and other publicly-available data as well as through exten-
sive interviews with McDonald’s workers, industry experts and other stakeholders. ReAct’s activities both amplify
                                                                                                                                        RECOMMENDATIONS  � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 46
the global “Fight for $15 and A Union” campaign, launched in 2012 in the US where McDonald’s is headquarte-
red and augments the campaign’s work carried out in over thirty countries around the world, with the support
of allied national and international trade unions and civil society organizations. ReAct is grateful to the US trade                    ENDNOTES  � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 49
union Service Employees International Union (SEIU) and to attorneys Anne-Marie Pecoraro and Rodolphe Bois-
sau for research support for this report.                                                                                               APPENDIX 1: McDonald’s France SAS Revenue Sources  � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 61
                                                                                                                                        APPENDIX 2: McDonald’s in France - Organization Chart and Ownership Structure � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 63
                                                                                                                       © Shutterstock

                                                                                                                                        APPENDIX 3: Analysis of McDonald's restaurant revenues and profits in France  � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 64
                                                                                                                                        APPENDIX 4: E
                                                                                                                                                     stimate of the "Crédit d’Impôt Compétitivité et Emploi" received
www.projet-react.org                                                                                                                                by McDonald’s France and McDonald’s restaurants  � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 69
JANUARY 2021 - HOW MCDONALD'S UTILIZES FRENCH PUBLIC SUBSIDY PROGRAMS TO BOOST PROFITS AND HARM WORKERS AND THE FRENCH STATE - REACT
-                                                                            McDonald’s has been criticized for its conduct du-          system relies on low wages and precarious jobs, as

                                     Introduction                                                                       ring the ongoing health crisis. In France, when the
                                                                                                                        coronavirus lockdown was imposed by the French
                                                                                                                        government, McDonald’s refused to completely
                                                                                                                                                                                    well as on high rents that the corporation charges its
                                                                                                                                                                                    franchise restaurant operators around the globe.22

                                                                                                                        shutter all restaurants, despite the risks faced by         With this backdrop, this report examines the ways
                                                                                                                        its workers. And across the globe, workers have             in which McDonald’s handsomely benefits from
     COVID-19 has shaken the global economy, disrupting commerce in every industrial sector and cau-
                                                                                                                        raised the alarm about the lack of personal protec-         French corporate support to generate significant
     sing widespread anxiety as unemployment and uncertainty rise. At a time when the French State and
                                                                                                                        tive equipment, the inability to socially distance and      profits without providing the number of jobs to
     its citizens are facing incredible challenges to limit the effects of the pandemic-induced economic
     crisis, some companies, professional associations and corporate lobbies have promoted measures                     about the intense pressure to work despite unsafe           which it publically commits. In addition, the report
     that increase the burden on workers and the pressure on public resources. For example, some have                   conditions, prompting workers to strike and take            details how the company, despite its profits, denies
     called to increase the workweek,1 reduce employers’ contributions to the social safety net, or reduce              other actions to raise these concerns publically.           paying employee profit-sharing to many of its restau-
     the VAT.2 Others are expressing aspirations for a new project of society,3 with some critiquing the                                                                            rant employees and fails to improve the low-wage,
     conduct of companies during the pandemic and requesting actions from corporations in return for                    These recent worker actions draw attention to just the      part-time and precarious nature of McDonald’s jobs.
     state-support programs.4 While others are calling for broader changes to increase the level of tax, so-            most recent examples of the ways that McDonald’s            At a time when politicians and broader civil society
     cial and environmental justice by questioning the rationale and mechanisms that allow for corporate                exploits its global workforce. For instance in the US, a    groups are calling on the government to require com-
     tax breaks, state aid and private-public partnerships, given the uncertainly of whether these programs             majority of McDonald’s workers must rely on govern-         mitments and demonstrable progress on meeting
     actually benefit the French people.
                                                                                                                        mental aid to survive on the low wages they earn.16         those commitments from corporations in return for
                                                                                                                        The "Fight for $15 and a Union" campaign, launched          tax-payer funded corporate support, the McDonald’s
     These debates should be centered on the conduct           the technology sector.8 In terms of employment, the
                                                                                                                        in 2013, has already enabled 22 million workers to be-      case is an example of how corporations take advan-
     of large multi-national corporations, often domiciled     fast food giant is the second largest global private
                                                                                                                        nefit from minimum wage increases in several states         tage of the system, furthering tax and social injustices.
     in other countries like the United States, who extract    employer with more than two million employees.9
                                                                                                                        and cities,17 but the campaign continues to press to im-
     massive profits from French public resources to the       And France plays a special role In McDonald’s glo-
                                                                                                                        prove wages in other parts of the country. In addition      Specifically, the report delves deeply into the com-
     benefit of largely-foreign shareholders. These monies     bal domination, wielding significant market power
                                                                                                                        to wages, the campaign has successfully highlighted         pany’s profitability and distribution of dividends, and
     are syphoned from French corporate subsidiaries of-       in the country. France is McDonald's second lar-         McDonald’s mismanagement of health and safety,              the significant contribution that the various types
     ten via tax avoidance schemes without distributing a      gest market in terms of sales, falling just behind the   its failure to address the prevalence of sexual haras-      of French restaurants – whether corporate-owned,
     fair share to French workers or to the State, and wi-     United States.10 And in France, the company employs      sment and the lack of worker representation in its          50/50 joint ventures or franchised – make to the
     thout ensuring safe and sustainable working condi-        more than 75,000 in its nearly 1,500 restaurants.11      home country.18 In the United Kingdom, workers have         corporation’s global success. Over the past ten
     tions or complying with environmental regulations.
                                                                                                                        denounced McDonald’s use of zero-hour contracts
     As the world’s largest restaurant chain, McDonald’s

                                                                                                                                                                                                                                            © NnoMan
                                                               Yet, despite the company’s financial success, Mc-        and low wages.19 Across the globe, McDonald’s wor-
     conduct in France has drawn particular scrutiny from
                                                               Donald’s employees across the world report unsafe        kers have boldly come forward to publically describe
     the French authorities, the media and its workers, both
                                                               and precarious working conditions in return for low      a pervasive culture of sexual harassment at McDo-
     about the company’s conduct during the height of
                                                               wages.12 In France, McDonald’s workers have been         nald’s, highlighting the lack of concrete measures to
     the coronavirus outbreak as well as in previous years.
                                                               denouncing deteriorating working conditions, inclu-      end this abuse in the burger giant’s workplaces, lea-
     Workers, trade union federations and NGOs have re-
                                                               ding imposed part-time work, work speedups, health       ding multiple trade union federations to file a com-
     gularly denounced McDonald’s record of misconduct,
                                                               and safety risks, and low wages.13 Most recently, Mc-    plaint against McDonald’s with the Organization for
     including tax avoidance in countries around the globe,
                                                               Donald’s workers have denounced numerous cases           Economic Co-operation and Development (OECD) in
     worker mistreatment and harassment in its restau-
     rants, mismanagement of its waste and the detrimen-       of sexist behaviors, sexual and moral harassment         2020.20 For the past six years, McDonald’s workers,
     tal consequences of its activities on the environment.5   and sexual abuse at McDonald’s workplaces, and the       trade union federations and civil society organisations
                                                               company’s failure to take appropriate action to reme-    have participated in several international days of ac-
     McDonald's conduct matters because of its unrivaled       dy these abuses.14 McDonald’s has also been pointed      tions, involving workers in more than thirty countries.21
     footprint over the world’s economy. The company is        out for its gender equality policy: while women ac-
     the global fast food leader with more than 38,000         counts for 58 percent of its workforce, McDonald’s       In addition, numerous reports published in recent
     restaurants in 119 countries,6 serving more than 70       has entered into franchise agreements with male          years have highlighted the McDonald’s poor tax, so-
     million customers per day.7 In 2019, the burger giant     operators for 95 percent of its restaurants and only     cial and environmental practices, as well as its extrac-
     was the most valued brand in the world outside of         seven percent of restaurant operators are women.15       tive business model. As designed, the McDonald’s

/4                                                    © ReAct 2021                                                                                                         © ReAct 2021                                                                /5
JANUARY 2021 - HOW MCDONALD'S UTILIZES FRENCH PUBLIC SUBSIDY PROGRAMS TO BOOST PROFITS AND HARM WORKERS AND THE FRENCH STATE - REACT
years, the McDonald’s Corporation has distributed           sequent economic stimulus plan implemented by the           portrayed itself as a significant job creator in France,
     US$76 billion to shareholders in the form of share          French government. For example, the Youth Plan may          making public pronouncements about both the quan-
     buybacks and dividends. In contrast to many large           have yielded €45 million in public subsidies to McDo-       tity and quality of the jobs created at the burger giant.
     French firms, McDonald’s Corporation has continued          nald’s for hires that the burger giant would have had to    Specifically, the company has committed to create a
     to reward shareholders during the pandemic – with           make anyway to compensate for its high staff turnover       certain number of new jobs each year and has ente-
     approximately US$4.6 billion in dividends and share         rate during the first six months since its implementa-      red into a number of partnerships with French public
     buyback payments distributed over 2020 – while its          tion. Another proposal, which would halve the required      authorities at the federal, regional and local levels
     workers have publically demanded that the company           contribution on Added Value paid by businesses              based on these job creation promises. While the
     provide them necessary protective equipment. At the         [Cotisation sur la Valeur Ajoutée des Entreprises], is      company benefits both financially and reputationally
     same time, McDonald's restaurants in France have            estimated to save McDonald’s more than €11 million          from public job creation commitments that undergird
     generated more than €2.3 billion in profits between         in 2021. Finally, McDonald’s restaurants may save           these public-private partnerships, this report uses
     2011 and 2019. Yet, the vast majority of McDonald’s         another €10 million in social contributions under the       McDonald’s own data to show that the corporations’
     restaurants in France do not pay any legally-man-           new unemployment insurance bonus-malus system.              reality falls short of its hype by at least 10,000 posi-
     dated profit-sharing to workers because of the artifi-                                                                  tions over the last eight years. Worse yet, behind the
     cial fragmentation of its restaurants into entities with    Despite the tax-payer funded financial support, this re-    company’s job creation myth, McDonald’s workers

                                                                                                                                                                                                                                                  © iStockphoto.com / Makkayak
     fewer than 50 Full-Time Equivalent (FTE) employees.         port shows that McDonald’s does not use the financial       report understaffing and poor working conditions.
     For instance, among the 25 most-profitable McDo-            savings generated by the company’s participation in
                                                                                                                             Finally, this report concludes with direct demands on
     nald’s restaurants that have disclosed their annual ac-     these government programs to raise wages, syste-
                                                                                                                             McDonald’s to redirect profits to improve workers’
     counts between 2015 and 2019, six or fewer of these         matically pay employee profit-sharing to workers, or
                                                                                                                             pay, address its employee profit-sharing avoidance,
     restaurants made employee profit sharing payments,          improve its business model to rely less on low-wage,
                                                                                                                             prioritize workers’ health and safety, adopt transpa-
     despite generating restaurant-level profits of between      part-time and precarious jobs. For example, McDo-
                                                                                                                             rent reporting of its public job creation commitments
     €570,000 and €1 million annually. In 2019, the most         nald’s net employment growth has been minimal over
                                                                                                                             and its receipt of public monies through state-sup-         sions, attention must be drawn to the role and res-
     recent year for which data is available, only four of       the last eight years, especially compared to the com-
                                                                                                                             port programs. Fundamentally, McDonald’s needs to           ponsibility of corporations in the recovery and requi-
     these 25 restaurants made profit-sharing payments.          pany’s revenue growth over the same period. Speci-
                                                                                                                             invest in improving the quality and pay of its jobs ins-    rements in return for state-support programs. Now
                                                                 fically, McDonald’s revenue grew by over 27 percent,
                                                                                                                             tead of syphoning off billions to reward shareholders.      is the time that the French government revamps
     These massive profits are boosted by corporate sup-         nearly double its workforce growth of 15 percent. In
                                                                                                                                                                                         the rules so that these multinationals provide their
     port programs that have been implemented by public          addition, the average number of Full-Time Equivalent
                                                                                                                             In addition, this report makes recommendations ai-          fair share to both workers and the French State.
     authorities and funded by taxpayer euros. This report       (FTE) jobs per restaurant has actually fallen in the past
                                                                                                                             med at French regulators and policymakers including
     investigates the ways McDonald’s takes advantage            few years despite the company’s job creation claims.
                                                                                                                             reforming existing job creation schemes, corporate
     of tax credits and programs that allow for reductions       And while McDonald's boasts about the percentage
                                                                                                                             tax rebates, programs that reduce employers’ social
     in required social contributions, particularly those        of its workers under permanent contracts, the com-          contributions, and public-private partnerships at all
     aimed at expanding employment opportunities.                pany’s turnover and resignation rates are sufficiently      government levels. These programs should be rede-
     Specifically, the report examines in detail the impact of   high to render the job stability normally associated        signed to ensure that receipt of publically-financed
     past programs like the Tax Credit for Competitiveness       with permanent contracts merely an illusion. Mc-            euros is conditional upon concrete commitments
     and Employment which has allowed McDonald’s to              Donald’s staff turnover rate was 65 percent in 2019.        and demonstrable progress towards those goals, as
     save between €290 and €400 million over the 2013-           And McDonald’s has stopped reporting data on its            opposed to being used to increase corporate pro-
     2018 period, while restaurants’ profits have substan-       resignation rate and the rate of job separation within      fits or to increase returns to shareholders. Further,
     tially increased. The transformation of this tax credit     the probation period, both of which were far higher         these tax-funded corporate supports should neither
     into a reduction of employers’ social contributions in      than the rates for the hotel and food service sector        be provided to companies like McDonald’s that fail
     2019 will likely lead to an estimated €135 million in       overall in 2013, the latest year this data is available.    to live up to their tax, social and environmental obli-
     annual savings for McDonald’s in the coming years.                                                                      gations nor granted in exchange for mere promises.
                                                                 At a time when the priority of the French govern-
     In addition, the report examines the impact on McDo-        ment’s stimulus plan is job recovery, the report            In the ongoing health and economic crisis, the French
     nald’s of the state support programs implemented            also examines the validity of McDonald’s job crea-          government’s stimulus plan focuses on economic
     during the COVID-19 lockdown as well as in the sub-         tion claims. For many years, McDonald's France has          recovery and job creation. As part of these discus-

/6                                                      © ReAct 2021                                                                                                            © ReAct 2021                                                                                 /7
JANUARY 2021 - HOW MCDONALD'S UTILIZES FRENCH PUBLIC SUBSIDY PROGRAMS TO BOOST PROFITS AND HARM WORKERS AND THE FRENCH STATE - REACT
-
                         MCDONALD’S HIGH PROFIT,                                                                                  McDonald’s:
                                                                                                                                                                                                     income, or profit, of more than US$5.2 billion on
                                                                                                                                                                                                     average over the same period, as displayed in

                            LOW WAGE MODEL
                                                                                                                                  The Global Restaurant Leader
                                                                                                                                                                                                     Figure B.28 In 2019, the company registered an
                                                                                                                                  Over the past ten years (2009-2019), McDonald's                    all-time historic global profit of US$6.03 billion.
                                                                                                                                  Corporation LLC’s (hereafter McDonald’s Corpo-
                                                                                                                                  ration) global systemwide sales – the combined                     For its shareholders, holding McDonald's stock
                                                                                                                                  sales at corporate-operated and franchisee-ope-                    (NYSE: MCD) is an extremely profitable invest-
     As the largest restaurant chain in the world, McDonald’s dominates the fast food industry, with total
                                                                                                                                  rated McDonald’s locations – increased by 38                       ment. Over the last ten years, McDonald’s stock
     systemwide sales twice as high as those of its next largest global competitor, Yum! Brands, which ope-
                                                                                                                                  percent, from US$72 billion in 2009 to more than                   price has almost tripled from US$76.76 on De-
     rates the Taco Bell, KFC and Pizza Hut, among others.23 The burger giant’s golden arches are among
                                                                                                                                  US$100 billion in 2019, as shown in Figure A.27                    cember 31, 2010 to US$214.58 on December 31,
     the most iconic brands in the world and are valued at US$126 billion.24 Its more than 38,000 restaurants
                                                                                                                                  The global fast food giant generated annual net                    2020.29 In fact, even though the company’s sales
     generate massive profits worldwide, including in France. In fact, France is the company’s second largest
     market in terms of systemwide sales, second only to the United States. McDonald’s France has gene-                                                                                              dropped during the pandemic, as it was forced to
     rated nearly €3 billion in net income, or profits, over the past ten years alone. However, most of these                                                                                        close a quarter of its restaurants across the globe,
                                                                                                                                                           Figure A :                                the stock price hit an all-time high of US$229.64
     profits are not reinvested in France but instead are siphoned off to McDonald’s Corporation LLC, its
     American corporate parent. Further, the vast majority of McDonald’s workers in France do not receive                              McDonald's Corporation Global Systemwide                      on October 15, 2020, following significant reco-
                                                                                                                                              Sales, 2009-2019 ($US billions)                        very in sales.30 The largest holders of the com-
     profit-sharing payments as McDonald’s operators structure their French entities in a way that has the
     effect of circumventing these legally-mandated employee payments.25                                                                                                                             pany are US-based financial institutions. Of the
                                                                                                                                                                                               100   top ten holders – who together own just over
                                                                                                                                                                                        96
                                                                                                                                                          89                      91                 one-third of the common stock of the company
                                                                                                                                              86    88          88          85
                                                                                                                                                                      83
                                                                                                                                         77                                                          – all but one are US-based investment banks.31
                                                                                                                                  72

                                            McDonald’s                                                                                                                                               In addition, over the past ten years, more
                                            At A Glance26                                                                                                                                            than US$76 billion, or more than US$7 bil-
                                                          _                                                                                                                                          lion annually, on average, have been distri-
                                                                                                                                                                                                     buted to shareholders in the form of share
                                            US$100.2 BILLION                                                                                                                                         buybacks and dividends.32 Even during the Co-
                                               Global systemwide sales
                                                                                                                                                                                                     ronavirus pandemic, the company has conti-
                                              US$6.0 BILLION                                                                      2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019             nued to pay dividends to its shareholders.
                                                    Global profits

                                                     38,695
                                         Global McDonald’s restaurant count
                                                                                                                                                           Figure B :
                                                     24,849
                                         McDonald’s restaurants outside of US                                                            McDonald's Corporation Global Profits,
                                                                                                                                                 2009-2019 ($US billions)
                                                        119                                                                                                                                                                    Figure C :
                                         Countries with McDonald’s locations
                                                                                                                                                                                                6             McDonald's Corporation Stock Price
                                                                                                                                                                                        5.9
                                                                                                                                                                                                              (NYSE: MCD), Dec. 31, 2009-Dec. 31, 2019 ($US)
                                                       93%                                                                               5
                                                                                                                                              5.5   5.5   5.6
                                                                                                                                                                                  5.2
                                       Share of McDonald’s locations franchised                                                                                 4.8         4.7                                                                                      214.5
                                                                                                                                  4.5                                 4.5                                                                                    197.6
                                                                                                                                                                                                                                                 172 177.5

                                                                                                                                                                                                                                     118 121.7
                                                                                                                                                                                                             99          97   93.7
                                                                                                                                                                                                                  88.2
                                                                                                                                                                                                      76.7
                                                                                                  ©
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                                                                                                        W
                                                                                                         O
                                                                                                          N
                                                                                                              /S
                                                                                                                hu
                                                                                                                  tte
                                                                                                                     rs           2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019              2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
                                                                                                                       to
                                                                                                                         ck
                                                                                                                           .co
                                                                                                                              m

/8                                                 © ReAct 2021                                                                                                                               © ReAct 2021                                                                   /9
MCDONALD’S PRIORITIZES DIVIDENDS DURING PANDEMIC

       The COVID-19 pandemic has severely impacted             economic security in many of the countries in
       McDonald’s operations globally. McDonald’s re-          which it operates, including in the United States,
       venue fell six percent in the first quarter of 202033   McDonald’s plans to continue these significant
       as one-in-four McDonald’s restaurants globally          payments to shareholders in 2021 and expects
       were shuttered due to the spread of the virus,          upcoming dividend payments for that year to
       including nearly all the locations in France.34         amount to between US$3.5 and US$4.0 billion.38

       Despite the precarious situation of McDonald’s          In this unprecedented time, major global cor-
       workers during the health crisis, McDonald’s exe-       porations have cut or indefinitely suspended
       cutives informed shareholders that it planned to        their dividends such as General Motors, Ford,
       proceed with its pre-pandemic plans for divi-           Macy’s and Estee Lauder.39 In total, more US
       dend payments. For the first three quarters of          companies have either suspended or can-
       2020, McDonald’s reported US$2.8 billion in di-         celled dividends in 2020 than in the previous
       vidend spending and the company has recently            10 years combined.40 In France, the govern-
       announced a cash dividend of approximately              ment has required companies asking for cer-
       US$958.9 million for the fourth quarter35 Total         tain forms of COVID-19-related state assistance
       dividends paid in 2020 will sum to an all-time          intended to help them weather the economic
       historic high of approximately US$3.8 billion.          impact of the crisis, to not pay dividends this
                                                               year.41 Almost one-third of French companies
       In March 2020, CEO Chris Kempczinski stated             listed on the Paris stock exchange cancelled
       that the quarterly dividend is a “paramount prio-       or suspended dividend payments in 2020.42
       rity”36 and in the company’s May shareholder
       meeting, Kempczinski asserted that one of the           Further, while McDonald’s announced a halt
       main goals of the company's capital allocation          on share buybacks in March, the company did           TOTAL DIVIDENDS PAID
       program is “prioritizing dividends to our sharehol-     distribute US$868.9 million in buybacks in Ja-
       ders.”37 Despite critiques that McDonald’s has          nuary and February 2020, as the coronavirus
                                                                                                                    IN 2020 WILL SUM TO AN
       not done enough to protect workers’ health and          took hold in China and spread to Europe.43           ALL-TIME HISTORIC HIGH
                                                                                                                       OF APPROXIMATELY
                                                                                                                        US$3.8 BILLION.

                                                                                                                                             © iStockphoto.com / Sushiman
/ 10                                                  © ReAct 2021                                                        © ReAct 2021                                  / 11
McDonald’s France,                                     Over the same period, the number of restaurants       Unlike most fast food chains, McDonald's does           significantly outstrips both the growth in restau-
       a significant profit driver                            in mainland France rose from 1,161 to 1,490, repre-   not derive most of its revenue from the sale of         rant openings (28 percent) and total systemwide
       for the McDonald’s Corporation                         senting a 28 percent increase, with approximately     fast food or the revenue generated by royalties         sales (32 percent) for the same period, sug-
                                                              30 annual new restaurant openings, on average.46      from restaurant operators, but rather from the          gests that McDonald’s France SAS has extrac-
       France is McDonald's second largest market in
       the world in terms of systemwide sales.44 Over                                                               rents it charges to its restaurant operators for lea-   ted a larger share of revenues from restaurant
       the past 10 years (from 2009 to 2019), total sys-                                                            sing the physical restaurants.47 Whether a McDo-        operations as the period progressed. Indeed, if
       temwide sales by McDonald's in France rose
                                                                      France is McDonald's second                   nald’s restaurant is corporate-owned, franchised        McDonald’s France SAS charged the same level
       each year, from €4.18 billion to €5.50 billion, a 32            largest market in the world                  or operated as a 50/50 joint venture between            of royalties and rent year after year, then McDo-
       percent increase.45
                                                                    in terms of systemwide sales.                   the corporation and another entity, the restau-         nald’s France SAS’ revenue increase would be
                                                                                                                    rant operator enters into a “lease-management”          the same as the increase in systemwide sales.
                                                                                                                    agreement with the corporation which combines
                                                                                                                    typical franchise obligations like standard pro-        When examining McDonald’s France SAS’ re-
                                                                                                                    duct offerings and restaurant design, sourcing          venue breakdown as detailed in Appendix 1,
       TABLE 1: Increase in McDonald’s France systemwide sales and number of restaurants in mainland France,        requirements among others elements, with those          payments made by restaurant operators to the
                                             2009-2019 (in billion Euros)
                                                                                                                    of a commercial lease. In France, the vast majority     company increased by approximately 53 percent
                         McDonald’s France total systemwide sales                                                   of lease-management agreements are executed             over the period, from €667 million in 2009 to
            Year                                                       Total number of McDonald’s restaurants
                                        (billions)                                                                  by operators with McDonald's France SAS.48 Pur-         €1.02 billion in 2019.52 The higher proportion of
                                                                                                                    suant to these lease-management agreements,             revenue extracted by McDonald’s France SAS
            2009                           €4.18                                        1,161
                                                                                                                    McDonald's France SAS receives (1) a 5 percent          may be explained by an increase in the percen-
            2010                          €4.22                                         NA                          royalty based on restaurants' sales for the use of      tage of rent charged by McDonald's to restau-
                                                                                                                    the trademark and franchise know-how49 and (2)          rant operators. Given that the royalty paid for
            2011                          €4.34                                        1,226                        a payment up to 12 to 18 percent of restaurant          the operation of the McDonald's system (trade-
            2012                          €4.35                                        1,260                        sales as a rental payment.50 These payments re-         mark and know-how) is intended to remain the
                                                                                                                    present most of McDonald's France SAS revenue.          same year after year to conform to transfer pri-
            2013                          €4.42                                        1,298                                                                                cing regulations, McDonald's can essentially in-
                                                                                                                    McDonald's France SAS's annual accounts show            crease its rental charges to boost its revenue.
            2014                          €4.57                                        1,345
                                                                                                                    a constant increase in revenue – mainly gene-
            2015                          €4.59                                        1,388                        rated from the royalty and rents received from          In addition, during the same time period that
                                                                                                                    franchisees – from €694 million in 2009 to €1.06        McDonald’s France SAS revenue increased by
            2016                          €4.70                                         1,419                       billion in 2019. This revenue increase amounts to       53 percent, profits remained relatively stable
                                                                                                                    a rise of 53 percent over the ten-year period.51
            2017                          €4.90                                        1,442

                                                                                                                                                                                                                                 © iStockphoto.com / Petekarici
            2018                           €5.10                                       1,464                        The fact that McDonald's France SAS's revenue
                                                                                                                    increase of 53 percent over this 10-year period
            2019                          €5.50                                        1,490

          Change
                                           +32%                                        +28%
        (2009-2019)
                                                                                                                               Over the past 10 years,
                                                                                                                                total systemwide sales
                                                                                                                              by McDonald's in France
                                                                                                                                  rose each year, from
                                                                                                                          €4.18 billion to €5.50 billion,
                                                                                                                                 a 32 percent increase.

/ 12                                                  © ReAct 2021                                                                                                 © ReAct 2021                                                                               / 13
throughout the period, with the exception of years        tem of France while holding substantial reserves             TABLE 3: Average annual sales, net profit and net profit margin for McDonald’s restaurants
       2016, 2017 and 2019, during which McDonald’s              from past operations.55 Specifically, McDonald’s                         in mainland France, by ownership structure, 2011-2019 (in Euros)
       France made substantial provisions for risks.53 In        France distributed almost €3 billion in dividends
       total, McDonald's France SAS declared almost              to its US parent company over the past ten years.                                                      Average annual     Average annual net    Average net profit
                                                                                                                                      Structure type
                                                                                                                                                                             sales               profit               margin
       €3 billion in profits over the 2009-2019 period.54
                                                                 At the restaurant level, McDonald’s restaurants                        Franchised                        €3,445,565           €208,669                6.06%
       McDonald’s France SAS profits are then either             are also usually very profitable whether ope-
                                                                                                                                   50/50 joint ventures                   €3,509,335           €202,004                 5.76%
       distributed as dividends to its sole shareholder,         rated directly by McDonald’s (hereafter referred
       McDonald's System of France, a subsidiary of              to as "corporate-owned restaurants")56, through                                       Total               €3,781,196            €114,128              3.02%
       McDonald's Corporation registered in Delaware,            50/50 joint ventures (hereafter referred to as
                                                                                                                                                Corporate-owned
       U.S.A., or allocated to "other reserves", an accoun-      "joint venture restaurants")57 or through fran-                                                          €4,429,303            €-20,687               -0.47%
                                                                                                                                                     (100%)
       ting category in which reserves can be held in an-        chisees (hereafter referred to as "franchised          Corporate-owned
                                                                                                                                                Corporate-owned
       ticipation of potential payments related to finan-        restaurants”).58 Appendix 2 provides a simplified                                                         €3,270,716           €193,187                5.91%
                                                                                                                                                     (90%)
       cial or operational risks or that can be distributed      breakdown of these units. As of the end of 2019,                               Corporate-owned
                                                                                                                                                                           €3,755,740           €342,222                9.11%
       later as dividends to the same US entity, or allo-        14.5%, 15.5% and 70.0% of McDonald’s restau-                                        (51%)
       cated to “retained earnings”, an accounting cate-         rants were operated as corporate restaurants,                  All restaurants combined                  €3,555,070            €187,736               5.28%
       gory in which the amount of profits can be held           50/50 joint ventures and franchises, respectively.
       until the shareholder takes a decision concerning
       its allocation. As shown in table 2, over the past        McDonald's does not provide information on           of restaurants by ownership structure, infor-             margin, on average, although they have much hi-
       10 years, McDonald's France SAS has distributed           the profits made by individual restaurants.          mation on restaurant revenue and profits for              gher sales than all other structure types. The finan-
       all of its profits as dividends to McDonald's Sys-        Hence, in order to measure the profitability         three-quarters of McDonald’s French restau-               cial situation portrayed on the financial statements
                                                                                                                      rants for the nine-year period 2011 to 2019               of McDonald’s 100 percent corporate-owned res-
                                                                                                                      was collected and analyzed from financial                 taurants raises legitimate concerns, since these
                                                                                                                      data published by infogreffe.fr. A detailed dis-          restaurants are usually operated via McDonald’s
                  TABLE 2: McDonald’s France SAS, profit and its distribution, 2009-2019 (in million Euros)
                                                                                                                      cussion of this data is provided in Appendix 3.           subsidiaries that exceed the 50-employee (FTE)
                                                                                                                                                                                threshold that require mandatory payment of
                                             Dividend                  Other reserves
                                                                                                      Retained        As shown in table 3, these data show that over the        employee-profit sharing. The fact that these very
           Year            Profits       distributed to US
                                                              Amount at year   Change in other        earnings        nine-year period 2011-2019, McDonald's restau-            entities – the ones under complete McDonald’s
                                               Parent
                                                                  end             reserves
                                                                                                                      rants in France have generated more than €2.3             France’s control and the most likely to require em-
          2009             €677                €10                €757                                €0.590          billion in net profits, or in excess of €187,000 in an-   ployee-profit sharing – are the only McDonald’s
          2010             €247                €15               €1,425             +€668             €0.590
                                                                                                                      nual profits on average per restaurant, represen-         entities in the country with almost consistently ne-
                                                                                                                      ting an average net annual margin of 5.3 percent.         gative profits in their accounts, is puzzling at best.
           2011            €255                €0                €1,656             +€231             €0.590

          2012             €286                €0                 €1,912            +€256             €0.590          Corporate-owned restaurants with 51 percent               Workers have challenged what they consider
                                                                                                                      of the shares owned by McDonald’s France                  amounts to financial manipulation. Specifically,
          2013             €266                €0                €2,197             +€285             €0.590
                                                                                                                      SAS are the most profitable among the struc-              the works council of McDonald's Ouest Parisien
          2014             €283              €1,200              €2,463             +€266             €0.590          ture types, with a 9.1% net profit margin, on ave-
                                                                                                                      rage, followed by franchised restaurants (6.1%),
          2015             €275               €360               €1,547             -€916                0
                                                                                                                      90-percent corporate-owned restaurants (5.9%)                    McDonald's restaurants in
          2016              €47               €360               €1,462             -€85                 0            and 50/50 joint ventures (5.8%). These restau-
                                                                                                                      rant-level profits persist despite the high rents,
                                                                                                                                                                                    France have generated more
          2017              €20               €250               €1,260             -€202                0
                                                                                                                      royalties and other fees charged by McDonald’s.            than €187,000 in annual restau-
          2018             €290                €0                €1,280             +€20                 0
                                                                                                                                                                                   rant-level profits, on average,
                                                                                                                      On the contrary, many McDonald’s 100 percent
          2019             €199               €750                €820              -€460                0
                                                                                                                      corporate-owned restaurants are unprofitable
                                                                                                                                                                                         between 2011 and 2019.
         TOTAL            €2,846             €2,945                                 +€63
                                                                                                                      over the 2011-2019 period with a -0.47% net profit

/ 14                                                   © ReAct 2021                                                                                                    © ReAct 2021                                                      / 15
("FTE") employees.66 On the contrary, companies           restaurants were operated through frag-
                                                                                                                                                         with fewer than 50 FTE employees do not have              mented corporate entities companies in 2019.70
                                                                                                                                                         to comply with these obligations, but employers
                                                                                                                                                         can voluntarily decide to honor them. Each Mc-            As the table shows, it is necessary to dis-
                   MCDONALD’S FRANCE                                                                                                                     Donald's restaurant employs approximately 50              tinguish the situation of franchised restau-
             DISTRIBUTED ALMOST €3 BILLION                                                                                                               employees on average,67 but usually less than             rants and 50/50 joint ventures from the si-
                                                                                                                                                         50 FTE employees since most are part-time em-             tuation   of  corporate-owned     restaurants.
             IN DIVIDENDS TO ITS US PARENT                                                                                                               ployees.68 As shown in Table 13 later in this re-
                 COMPANY OVER THE PAST                                                                                                                   port, the average number of FTE workers per Mc-           Companies operating franchised restaurants
                       TEN YEARS.                                                                                                                        Donald’s restaurant in 2019 is approximately 37.          and restaurants in 50/50 joint ventures appear
                                                                                                                                                                                                                   to systematically register one company per

                                                                                                                 © Daria Photostock / Shutterstock.com
                                                                                                                                                         By design, McDonald’s French operators do not             restaurant. That is, 98 percent of restaurants
                                                                                                                                                         operate through a single company, but rather              with these two ownership structures – which
                                                                                                                                                         operate through fragmented corporate subsi-               compose 85 percent of all McDonald’s restau-
                                                                                                                                                         diary entities, one entity per restaurant. Delibe-        rants in France – are organized such that one
                                                                                                                                                         rately structured, these entities often fall below        corporate entity contains a single restaurant.71
                                                                                                                                                         the 50 FTE employee threshold for mandated                Hence, in these cases, this extreme level of
                                                                                                                                                         employee profit-sharing. That is, despite the fact        fragmentation means that employees will not
                                                                                                                                                         that the total number of employees in all these           automatically participate in profit-sharing be-
                                                                                                                                                         smaller McDonald’s entities work for the same             cause each individual corporate entity usually
                                                                                                                                                         operator and ultimately for the restaurant giant.         falls below 50 FTE employee requirement, des-
                                                                                                                                                         By legally structuring itself in this way, McDo-          pite the fact that each of these restaurants have
       filed a criminal complaint for tax fraud money       in net earnings per year, on average, with 85                                                nald’s and its franchisees are able to avoid man-         generated, on average, more than €200,000
       laundering, arguing that the McDonald’s France       percent of them receiving less than €20,000 per                                              datory profit-sharing payments in most cases.69           in profits per year over the 2011-2019 period.
       subsidiary that included the corporate-owned         year as compared to 65 percent for workers in
       restaurants in the west of Paris artificially re-    the hotel and food service sector as a whole.62                                              An analysis of the number of companies re-                As for the corporate-owned restaurants, most
       duced profits to avoid profit-sharing payments. 59   In France, like abroad,63 McDonald's restau-                                                 gistered to operate McDonald's restaurants in             are also organized in a similar way as the 98
       This criminal complaint follows investigations by    rants hire their crew members at or just above                                               France shows that 94 percent of McDonald's                percent of 50/50 joint venture and franchised
       the European Commission and French tax au-           the minimum wage and pay their front-line ma-
       thorities concerning McDonald’s tax avoidance        nagers just slightly higher wages.64 McDonald’s
                                                            has a specific responsibility as it employs 29                                                     TABLE 4: Distribution of McDonald’s restaurants in mainland France, by ownership structure
       practices. The European Commission indeed
                                                                                                                                                                        and the proportion distributed across fragmented corporate entities, 2019
       underlined that McDonald’s tax scheme with           percent of the fast food workforce in France and
                                                            should ensure its jobs provide decent wages,                                                                                                                        Number of
       Luxembourg allowed the McDonald’s company                                                                                                         Ownership
                                                                                                                                                                             Proportion of capital     Number of
                                                                                                                                                                                                                              restaurants in
                                                                                                                                                                                                                                                       Percent of
       collecting royalties from European operations        job stability and safe working conditions.65                                                                     held by McDonald’s        McDonald’s                                 restaurants in single
                                                                                                                                                         structure                                                           unique corporate
                                                                                                                                                                                   France              restaurants                                    unit entities
       not to pay any corporate tax which “is not how                                                                                                                                                                            entities
                                                            In addition to low wages, most McDonald's res-
       it should be from a tax fairness point of view.”60                                                                                                                           100%              66                       6                   9.0%
                                                            taurants in France generally do not pay any
       In France, McDonald’s and the French financial
                                                            profit-sharing to their employees, despite the                                               Corporate-owned             90%             128            215       126           153   98.4%       71.2%
       Prosecutor are reportedly bargaining a settle-
                                                            substantial profits these workers make pos-
       ment on this case, including a potential fine.61
                                                            sible. The corporate structure of McDonald’s                                                                             51%              21                       21                  100%
                                                            restaurants results in depriving workers of
       McDonald’s low wages                                                                                                                              50/50
                                                            their legally-obligated profit-sharing payments.                                                                         50%                   229                      227                   99.1%
       and limited profit-sharing                                                                                                                        joint ventures

       Fast food workers in France are among workers        French law provides that the payment of pro-                                                 Franchises                  0%                    1,037                    1,013                 97.7%
       with the lowest annual earnings in the French        fit-sharing is mandatory when profits are made
                                                                                                                                                         TOTAL                                             1,481                    1,393                 94.1%
       economy. Fast food workers receive €17,500           in companies with at least 50 full-time equivalent

/ 16                                                © ReAct 2021                                                                                                                                      © ReAct 2021                                                        / 17
units. Specifically, in 2019, 147 of the 149 corpo-   Of these six entities, the majority has been pro-
       rate restaurants in which McDonald’s has more         fitable over the past five years but none paid
       than a 50 percent and less than a 100 percent         employee profit-sharing.74 The remaining 60 are
       stake are organized into corporate entities that      operated by subsidiaries operating several res-
       have only one restaurant per entity.72 Here again,    taurants. As a result, these subsidiaries employ
       the registration of each of these restaurants – 69    more than 50 FTE employees and have set up
       percent of all corporate-owned restaurants – into     legally-mandated Works Councils and appointed
       separate corporate entities makes it possible to      trade union delegates. However, while McDo-

                                                                                                                                                                                                                                                                      © Greg Looping / Hans Lucas via AFP
       circumvent mandatory employee profit-sharing          nald's restaurants in France made an average
       payments on a huge scale. Some of these corpo-        profit of nearly €188,000 per year over the 2011-
       rate-owned restaurants pay employee profit-sha-       2019 period,75 these subsidiaries are often unpro-
       ring – likely because they are among the few          fitable or have accumulated significant losses in
       ones that exceed the 50 FTE employee-threshold        recent years. As table 3 above shows, McDo-
       or because an economic and social unit was set        nald’s 100 percent corporate-owned restaurants
       up – but they are a distinct minority compared        have made a €20,000 loss, on average per
       to the number of profitable restaurants. In 2014,     year, although they have generated much higher
       the most recent year for which this analysis was      sales than all of the other types of McDonald’s                                           appropriate economic and social unit classifica-       employees with French McDonald's employees
       carried out, approximately 14 percent of profi-       restaurants. As a result of being at or below zero                                        tion for each restaurant is daunting. McDonald’s       working at the French headquarters in Guyan-
       table corporate restaurants in which McDonald’s       profit on paper, these McDonald’s entities typi-                                          high level of staff turnover and the number of le-     court. McDonald's employees at the French
       has more than a 50 percent and less than a            cally did not distribute any profits to employees.                                        gal actions that would need to be undertaken to        headquarters receive a substantial profit-sha-
       100 percent stake were paying employee pro-                                                                                                     address the high level of fragmentation creates        ring payment each year. As shown in Table 5,
       fit-sharing. The remaining 86 percent did not         To challenge the artificial division and fragmen-                                         significant challenges to these collective claims.78   over a period of seven years, McDonald's France
       pay any employee profit-sharing despite gene-         tation of structures by an operator, employees                                                                                                   Services paid nearly €6.1 million in profit-sha-
       rating more than €25 million in profits and dis-      or their trade union representatives must take                                            Another way to examine the issue of the frag-          ring to its employees, amounting to an annual
       tributing more than €20 million in dividends.73       legal action and demonstrate the existence of                                             mentation of McDonald’s restaurants is to look         average payment of €1,602 per employee.82
                                                             an "economic and social unit" across the smal-                                            at the profit-sharing outcomes at McDonald’s
       The remaining 66 corporate restaurants are 100        ler units, a laborious and expensive set of le-                                           most-profitable restaurants.79 Some of McDo-           Given the low wages of McDonald’s wor-
       percent owned by McDonald’s France. Six were          gal actions.76 With close to 1,400 unique corpo-                                          nald’s most-profitable restaurants exceed the 50       kers across the country, profit-sharing pay-
       operated as unique corporate entities at the end      rate entities operating McDonald’s restaurants                                            FTE employee-threshold and are thus required           ments of a similar magnitude would have subs-
       of 2019 although they share a common owner.           in France,77 filing legal claims to recognize the                                         to pay employee profit-sharing provided that           tantial impact on these low-wage workers.
                                                                                                                                                       other legal requirements are fulfilled.80 Howe-
                                                                                                                                                       ver, among the 25 most-profitable McDonald’s           In May 2019, French Law n° 2019-486, known as
                                                                                                                                                       restaurants that disclosed their annual accounts       the “PACTE Law” included provisions modifying
                                                                                                                                                       between the years 2015 and 2019, at most six           the profit-sharing system. However, the PACTE
                                                                                                                                                       and as few of two restaurants, depending on the        Law did not address the issue of profit-sharing
                                                                                                                                                       year, made employee profit-sharing payments.           avoidance based on the fragmentation of opera-
                                                                                                                                                                                                              tions. In addition, the law also tightened the requi-
                                                                                                                                                       Overall, only 15 percent of McDonald’s restau-         rements under which mandatory employee-profit
                                                                                                                                                       rants in France paid employee profit-sharing in        sharing must be done, making it more difficult for
                                                                                                                  © iStockphoto.com / Natalia Kuzina

                                                                                                                                                       2015, and employees’ lost earnings resulting from      employees to qualify for these payments. For exa-
                                                                                                                                                       the circumvention of the employee profit-sharing       mple, the law increased the period during which
                                                                                                                                                       was estimated to be €40 million euros per year.81      the 50 FTE employee-threshold is required be-
                                                                                                                                                                                                              fore mandating the payment of employee pro-
                                                                                                                                                       To understand the impact of these profit-sharing       fit-sharing from three to five successive years.83
                                                                                                                                                       payments, it is illustrative to compare the finan-
                                                                                                                                                       cial situation of French McDonald’s restaurant         In June 2020, members of President Macron’s

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TABLE 5: Average profit-sharing payments distributed to employees of McDonald’s France Services,                      ting from state support shall share value created   der additional burdens should not be placed on
                                            2013-2018 (in Euros)                                                             with employees when they become profitable          companies impacted by the economic crisis, Mc-
                                                                                                                             again.”85 Recently, as part of the debate around    Donald’s exemplifies the pressing need to revise
                                                                               Average profit-sharing paid to                the stimulus plan, members of the French Parlia-    taxpayer-funded corporate subsidy programs, par-
        Year         Employee profit-sharing     Average number of workers
                                                                                     each employee
                                                                                                                             ment have discussed potential actions that should   ticularly for largely-profitable multinationals, and
        2013               €1,034,029                       560                            €1,847                            be required from corporations in return for state   to address their profit-sharing avoidance based
                                                                                                                             support.86 While some argue that what they consi-   on the fragmentation of franchise operations.
        2014               €1,009,163                       586                            €1,722

        2015                €948,237                        554                            €1,712

        2016                €881,198                        551                            €1,599

        2017                €598,901                        539                             €1,111

        2018                €838,596                        516                            €1,625
                                                                                                                                           Among the 25 most-profitable McDonald’s restaurants
        2019                €790,416                        505                            €1,565
                                                                                                                                     that disclosed their annual accounts between the years 2015
        TOTAL              €6,100,540                       3,811                          €11,181
                                                                                                                                             and 2019, at most six and as few of two restaurants,
       AVERAGE              €871,505                        544                            €1,602
                                                                                                                                 depending on the year, made employee profit-sharing payments.

                                                        party in the French Parliament announced a draft
                                                        Bill to extend mandatory employee-profit sharing
                                                        to companies with less than 50 FTE employees, a

                                                                                                                                                                                                                                        © 8th.creator / Shutterstock.com
                                                        change that could finally have the effect of requi-
                                                        ring McDonald’s operators to share a portion of
                                                        their profits. At the time of this writing, this legis-
                                                        lation had not been officially filed.84 In September
                                                        2020, Bruno Le Maire – the French Minister in
                                                        charge of Economy, Finance and the Stimulus
                                                        Plan – said he was in favor of commitments made
                                                        by companies to share value through charters in
                                                        return for state-support programs. He underlined
                                                        that “it seems fair to him that companies benefi-

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-
                MCDONALD'S RELIANCE ON PUBLIC                                                                             to McDonald’s over a six-month period for hires the      Conversion of the Tax Credit

               EMPLOYMENT-SUPPORT MECHANISMS                                                                                                                                       for Competitiveness and
                                                                                                                          company would have made anyway to compensate
                                                                                                                          for its high staff turnover rate. Moreover, the French   Employment into a reduction

                     TO INCREASE PROFITS                                                                                  government’s proposal to halve the Contribution
                                                                                                                          on Added Value made by Businesses [Cotisation
                                                                                                                                                                                   in social contributions: An even
                                                                                                                                                                                   more profitable mechanism
                                                                                                                          sur la Valeur Ajoutée des Entreprises] would gene-       for McDonald’s
                                                                                                                          rate €11 million in savings per year for McDonald’s.
                                                                                                                                                                                   Adopted in 2013, the "Crédit d’Impôt Compétiti-
                                                                                                                          Thanks to these various support programs, Mc-            vité et Emploi" (CICE) [Tax Credit for Competitive-
                                                                                                                          Donald’s has taken advantage of the reduction            ness and Employment] has allowed companies
       Despite the McDonald’s hefty profits and de facto circumvention of legally-mandated employee profit
                                                                                                                          of the costs of its workforce to increase profits,       that pay low wages to significantly reduce their
       sharing payments, the global burger giant, its French subsidiary and restaurant operators benefit from
                                                                                                                          rather than improve pay or working conditions.           tax bills. Until recently, the tax credit was calcu-
       taxpayer-funded programs intended to boost employment, particularly of low-skilled workers. These
                                                                                                                          The McDonald’s case thus provides a power-               lated as a percentage – between four and se-
       programs have been put in place by successive French governments and range from corporate tax
       credits and reductions in employers’ mandated social contributions to state-aided contracts.                       ful example of the need for enforceable requi-           ven percent, depending on the year – of wages
                                                                                                                          rements in return for state-support programs in-         paid during the calendar year to employees re-
                                                                                                                          cluded in the stimulus plan so as to reduce the          ceiving less than 2.5 times the French regulated
                                                                                                                          inefficiencies that result from these measures.88        minimum wage.89 The stated purpose of this tax
       While these tax breaks and other corporate sup-          reasons but a modified version of the program is
       port programs intend to reduce unemployment and          on the government’s agenda. If the modified pro-
       support the skill-building of often-young workers,       gram is designed in the same way as the initial
       these programs do not appear to have any signi-          one, it will likely benefit McDonald’s restaurants
       ficant effect on McDonald’s employees or wages.          through further reductions in employers’ mandated
       These programs, however, appear to have had a            social contributions, despite significant staff tur-
       significant positive impact on McDonald’s ope-           nover and a high rate of employee resignations.
       rators profits in the past years, thereby indirectly
       enabling McDonald’s France to extract more pro-          Most recently, McDonald’s has benefited from the
       fits from restaurant operators. As previously dis-       French government’s exceptional measures to
       cussed, these profits are not re-invested in France,     support companies and workers during the CO-
       but rather distributed to the US corporate parent.       VID-19 pandemic. While the lockdown certainly im-
                                                                pacted revenue, the impact was mitigated by the
       In addition, the French government had initially set     company’s significant operational advantages that
       up a new program that was to be implemented in           allowed it to continue to generate sales thru drive-
       2021 – the bonus-malus unemployment insurance            thru, delivery and “click and collect” ordering. Given
       system – that aimed to modulate the required em-         McDonald’s size and dominance as well as these
       ployer contributions for this critical safety net pro-   significant operational advantages, McDonald’s res-
       gram. This program was cancelled in November             taurants are likely in a far better position than small
       2020 by the Conseil d’Etat [French Supreme               independent restaurants, thereby further advan-
       Court for administrative matters] for procedural         cing the burger giant’s competitive advantage. In
                                                                November 2020, McDonald’s CFO stated that the

                                                                                                                                                                                                                                          © iStockphoto.com / cnicbc
                                                                company is "well-positioned to win and grow mar-
                                                                ket share in the QSR industry across [its] top mar-
                                                                kets."87 Above all, McDonald’s will likely largely be-
                                                                nefit from the French government’s stimulus plan.
                                                                For instance, the Youth Plan set up in July 2020
                                                                may have yielded €45 million in public subsidies

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credit was to enable companies to benefit from      wages paid in the previous year to a reduction                                                     TABLE 6: McDonald’s estimated tax savings via the Tax Credit for Competitiveness and Employment,
       "funds to improve their competitiveness, in par-    in the amount of current year employer social                                                                                           2013-2018 (in Euros)99
       ticular through efforts in investment, research,    contributions, including mandated employee
                                                                                                                                                                            Estimated tax savings for
       innovation, training, recruitment, new market       provisions for health care, disability insurance,                                                                                              McDonald’s restaurants at     Average estimated tax
                                                                                                                                                                Year       all McDonald’s restaurants
                                                                                                                                                                                                                year end                savings per restaurant
       exploration, ecological and energy transition       unemployment insurance, and retirement. The                                                                              (millions)
       and the restoration of their working capital".90    redesigned program does not, however, address                                                       2013                €31 - €52                       1,298                 €24,052 - €39,696
                                                           the underlying criticism that the CICE’s corpo-
                                                                                                                                                               2014                €48 - €59                       1,345                 €35,673 - €43,972
       Since its adoption, the CICE has been criticized    rate benefits are unconnected from demons-
       for the lack of concrete commitments required       trable increases in high-quality job growth.95                                                      2015                €48 - €67                       1,384                 €34,899 - €48,196
       from the French government of companies
                                                                                                                                                               2016                €49 - €74                        1,419                €34,778 - €52,088
       that benefit from the program. Critics claim that   Under the tax credit mechanism’s initial formu-
       the tax credit has enabled many companies to        lation, employee wages that did not exceed 2.5                                                      2017                €60 - €77                       1,442                 €41,623 - €53,349
       reduce their corporate taxes without actually       times the minimum wage (€3,746.18 per month in                                                      2018                €54 - €71                       1,464                 €36,578 - €48,284
       creating high-quality, new jobs in the country.91   2018)96 were used to calculate this tax credit. Given
       In August 2018, a report from Sciences Po’s La-     McDonald’s low wages, the company benefitted                                                        Total             €290 - €399                        NA                  €207,603 - €285,585

       boratoire Interdisciplinaire d’Évaluation des Po-   greatly from this tax credit since virtually all Mc-
       litiques Publiques (LIEPP) [Interdisciplinary La-   Donald’s restaurant staff – front-line workers and
       boratory for the Assessment of Public Policies]     managers across the country – met this criterion.97
       found no impact of the CICE on companies’
       decisions to hire and no significant impact on      In the absence of consolidated data disclosed
       wage increases except for those in executive        by McDonald's France on the exact amount of its
       occupations, other white collar occupations         CICE corporate subsidies, a sample of financial
       (“professions intellectuelles supérieures”) and     statements from McDonald’s restaurants was used
       intermediate occupations (“professions inter-       to estimate the amount of subsidy for the 2013-
       médiaires”) over the 2013-2015 period; there        2018 period and a statement from McDonald’s
       was no impact on wages in low-wage occu-            France’s CEO for year 2013 was used to make an
       pations.92 In October 2018, the Committee in        alternative estimate for the same period. The de-
       charge of reviewing the CICE – a committee          tailed methodology for calculation is described
       under the supervision of the Prime Minister –       in Appendix 4. As shown in Table 6, McDonald’s
       also found a very limited overall effect on em-     restaurants saved an estimated €290 to €400
       ployment.93 The most recent assessment publi-       million over the 2013-2018 period, an average of
       shed by France Stratégie in September 2020          €208,000 to €286,000 per restaurant. McDo-
       has reached the same conclusion.94 Despite          nald’s France Services SARL – McDonald’s subsi-
       the criticism, the scheme was renewed year af-      diary providing franchising support to restaurants
       ter year until it was redesigned in January 2019    – benefited from a total tax credit amounting to ap-
       and transformed from a tax credit based on          proximately €2.2 million over the same period.98
                                                                                                                   © Pavlovska Yevheniia / Shutterstock.com

                                MCDONALD’S RESTAURANTS SAVED
                              AN ESTIMATED €290 TO €400 MILLION
                                OVER THE 2013-2018 PERIOD VIA
                              THE TAX CREDIT FOR COMPETITIVENESS
                                       AND EMPLOYMENT.

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