Fast-Food Chains Costing Taxpayers the Most Money

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7. Domino’s
> Cost to U.S. taxpayers: $126 million
> CEO Compensation: $9.1 million
> U.S. restaurant workforce: 73,920
> Revenue: $1.68 billion
> Net income: $112 million

Domino’s has more than doubled its net income since 2008, when the company posted $54 million in earnings. Many of Domino’s employees are likely enrolled in government programs. According to NELP, the company could have raised employee wages rather than spend that money expanding aggressively overseas and investing heavily in technology aimed at easing the ordering and delivery process. The stock has surged over the last five years with the share price up more than 900%. Meanwhile, the compensation of J. Patrick Doyle, Domino’s CEO since 2010, amounted to more than $6 million in 2011 and more than $9 million in 2012.

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6. Sonic
> Cost to U.S. taxpayers: $164 million
> CEO Compensation: $1.7 million
> U.S. restaurant workforce: 96,012
> Revenue: $544 million
> Net income: $36 million

Unlike the other major fast-food restaurants, Sonic operates exclusively as a drive-in restaurant, with skating carhops who serve customers in their cars. The company notes that carhops are a “brand treasure,” and because many are tipped, some do actually earn better than minimum wage. Sonic generated $36 million in profits in fiscal 2012. The company also returned about $30 million to shareholders with stock buybacks and dividends, while paying its CEO a total compensation of $1.7 million. Sonic’s CEO stated in February that a hike in the minimum wage “would put pressure on profit margins,” although he also noted the company would adapt to a change. As of the last fiscal year, the company’s net profit margin was less than 7%.

5. Dunkin’ Donuts
> Cost to U.S. taxpayers: $274 million
> CEO Compensation: $1.9 million
> U.S. restaurant workforce: 160,732
> Revenue: $658 million
> Net income: $108 million

When Dunkin’ Brands went public in 2011, its debt level was relatively high, according to The Wall Street Journal. In spite of the high debt load, Dunkin’ owners borrowed more money and paid themselves $500 million in dividends. Much of the company’s workforce is paid a low wage, with crew members and cashiers earning slightly above minimum wage on average, according to Glassdoor.com. The company’s ability to raise wages may be constrained by its debt load. Last year, Dunkin’ Brands had over five times its equity in debt and paid out more than 11% of its sales in interest expenses. Still, the donut and coffee company recently revealed plans to expand to the U.K. over the next five years.

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4. Wendy’s
> Cost to U.S. taxpayers: $278 million
> CEO Compensation: $5.8 million
> U.S. restaurant workforce: 162,876
> Revenue: $2.51 billion
> Net income: $7 million

Wendy’s returned $39 million to shareholders in fiscal 2012 and paid CEO Emil Brolick $5.8 million in total compensation. Most of the company’s workers earn low wages, and according to NELP, they cost U.S. taxpayers more than a quarter of a billion dollars. While labor advocates have pushed the company to pay its workers more, Wendy’s may not be well positioned to pay its employees a higher salary. As of last year, the company’s net income was just $7 million. Over the last 12 months, that number rose only slightly, to $15 million.

3. Burger King
> Cost to U.S. taxpayers: $356 million
> CEO Compensation: $6.4 million
> U.S. restaurant workforce: 208,307
> Revenue: $1.97 billion
> Net income: $118 million

Burger King has struggled to compete with Wendy’s and McDonalds in recent years. Poor pricing, a limited menu, and a “target market of men in their early 20s — a demographic that has been hit hard by unemployment,” contributed to the company’s troubles, according to a 2012 report by The Wall Street Journal. Last year, Wendy’s overtook Burger King in total sales at its restaurants. Despite the recent slide in sales, the company has been able to increase its profitability, and net income rose from $88 million in 2011 to $118 million in 2012. This is likely due in large part to Burger King’s shift towards franchising all of its stores. Critics of the chain, including New York mayoral candidate Bill de Blasio, have argued Burger King has a responsibility to improve its workers’ pay.

2. Yum! Brands (Pizza Hut, Taco Bell, and KFC)
> Cost to U.S. taxpayers: $648 million
> CEO Compensation: $14.1 million
> U.S. restaurant workforce: 379,449
> Revenue: $13.63 billion
> Net income: $1.60 billion

Yum! Brands has had enormous success in China due to rising incomes, as well as the popularity of KFC and Pizza Hut in the country. However, concerns over food safety in the wake of avian bird flu outbreaks, as well as inappropriate antibiotics use on the part of its suppliers, have recently resulted in lower sales. Still, Yum! Brands’ net income has been steadily rising since 2008. Compared with CEOs of other low paying fast-food chains, David Novak received the highest compensation, at more than $14 million in 2012. There has been much criticism that the company’s workers are underpaid and assertions this costs U.S. taxpayers nearly $650 million per year. Despite this, Yum! professes a strong relationship with its employees, and claims “to recognize and compensate employees based on their performance.”

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1. McDonald’s
> Cost to U.S. taxpayers: $1.2 billion
> CEO Compensation: $13.7 million
> U.S. restaurant workforce: 707,850
> Revenue: $27.57 billion
> Net income: $5.47 billion

McDonalds remains extremely profitable. The burger chain’s net income was nearly $5.5 billion last year. The company also effectively returned all of its profits to shareholders, paying out a total of $5.5 billion in dividends and stock buybacks. While arguments have persisted on both sides as to whether McDonald’s should or should not increase its workers’ pay, the company itself recently demonstrated just how difficult living on less than $8 an hour can be. In July, a sample budget from the company’s financial planning website for employees was leaked. The planners made several questionable assumptions, including that an employee could work two nearly-full time jobs and spend $20 a month on health insurance.

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