McDonald's CEO forecasts upcoming recession, criticizes California fast food bill
McDonald's CEO Chris Kempczinski said the U.S. economy is likely heading towards a minor recession with a more significant one in Europe, and also weighed in on the California assembly bill to raise the minimum wage for fast food workers.
Video Transcript
[AUDIO LOGO]
DAVID BRIGGS: My play is McDonald's, ticker symbol MCD, shares moving marginally today as the company's CEO Chris Kempczinski speaks at the Chicago Economic Club. He provided an update on the broader economy, noting we are probably headed to a minor recession and a more significant recession in Europe specifically.
The head of the "Golden Arches" also bashing that Assembly Bill 257 in the state of California, which would raise fast food workers' minimum pay to $22 an hour starting next year. Kempczinski calling the bill a terrible piece of legislation. He also took aim at one particular exemption in that bill for those who sell bread by the loaf. There are a lot of complicated exemptions within that bill, really applies to those franchises, over 100 locations. He said it should apply to everyone.
Now, shares of McDonald's up 13% over the last six months, pretty good number, and really unmoved by this news, as you might expect. Mostly flat, up marginally. There's a lot ahead on this fast food bill, Rachelle.
The industry groups are challenging it. They would like to see a ballot initiative to send it to the hands of voters. I'm not sure if that works out well for McDonald's and the like. But this is a huge cost increase that critics say will increase the cost of food already difficult for people in California.
RACHELLE AKUFFO: And I know that we've spoken to franchise owners who say, look, we ourselves at our McDonald's, we're a franchise, but we're being penalized. We're going to have to obviously try and pay more for staff. So it's a lot. If you're a small franchise owner versus being the big corporation, this is a much tighter squeeze for you.
So I definitely do feel for them. But you're in a rock-- between a rock and a hard place. You want to attract more people to come into the workforce. And a lot of them didn't want to because of COVID. You have this customer-facing profession, it's hard, and you want to be able to afford a cost of living while inflation is still sky high. So it's tough on both sides, for sure, Seana.
SEANA SMITH: Yeah, Dave, you mentioned the fact that it could mean higher prices for consumers. There was an analysis out by UC Riverside. They estimated that if fast food wages rose 20%, that means that prices in these restaurants would increase by 7%. So coming at a very tough time when people are already struggling to make ends meet to pay for the higher prices that we're currently seeing on food. So even higher prices, a 7% increase, could be very, very worrisome for many, many people that will be largely affected by this.
DAVID BRIGGS: Yeah, and in particular lower end of the economy, not the people you want to be hurting as we enter recessionary-type time.
