McDonald’s, that once-great American symbol of ingenuity and ruthless efficiency, is having some major difficulties, as its plummeting profits and recent C-suite shake up can attest. But while the fast-food monolith’s biggest problems used to primarily involve concerns about its food, it’s also increasingly facing criticisms about its role as a bad corporate citizen.
The food-quality concerns have been building for decades, of course, as obesity has risen and commercial deep fryers have been blamed. Pop-culture touchstones such as “Super Size Me” cemented the synonymy of “McDonald’s” with “bad habits,” so much so that last week the company’s paid spokesman LeBron James accidentally referred to the years before he started taking serious care of his body as the era when he “ate McDonald’s.” McDonald’s has become so linguistically linked with déclassé mass production that it has even spawned its own pejorative prefix (hence, “McMansions”).
Fast-casual competitors that emphasize fresher ingredients — Chipotle, Five Guys, Shake Shack — have been eating McDonald’s’s lunch in recent years. Analysts and celebrity chefs have offered all sorts of advice to the new McDonald’s chief executive, who officially began this week, to help lift the company’s fallen arches. The recommendations usually involve narrowing or customizing menu options, revamping the décor, that sort of thing.
But the brand’s problems extend far beyond burgers and beautification, though those matter. Consumers, it seems, have started caring about McDonald’s corporate policies, too.
For more than two years, low-wage U.S. workers have been publicly and theatrically agitating for higher pay, more predictable schedules and the right to unionize. With the backing of labor organizations, workers have staged strikes, protests and other PR campaigns, first domestically and eventually abroad. The workers in the “Fight for $15” campaign are employed by many firms across multiple low-wage industries, but McDonald’s has become their main poster child for poverty-wage work (they’re all “McJobs,” after all). A recording of a McDonald’s internal helpline that encouraged workers to apply for public assistance didn’t help.
The damning headlines that resulted likely influenced decisions by a handful of U.S. cities to raise their minimum wages to $15. Then two weeks ago, Wal-Mart, another target of worker protests, announced it would raise its entry-level pay to at least $9 an hour (not quite $15, but better than the $7.25 federal minimum); just a few days later the company that operates T.J. Maxx, Marshalls and HomeGoods followed suit. The unwillingness of McDonald’s to set or endorse a similar wage floor is starting to look less and less understandable — particularly given high-profile critiques arguing that low pay is a choice, not a corporate necessity.
Meanwhile, McDonald’s and its franchisees have faced multiple lawsuits about the legality of many of its other labor practices, including allegations of wage theft and racial discrimination. The National Labor Relations Board recently dealt yet another blow in saying it would sometimes consider McDonald’s a joint employer when its franchisees violate labor laws, given the amount of control the corporate parent reportedly has over its franchisees’ labor practices.
Criticisms about McDonald’s corporate policies have spread internationally, too. Last week, a coalition of labor organizations in Brazil sued the company’s biggest local franchisee, Arcos Dourados (“golden arches”). The suit alleges that after three decades of labor violations — such as paying below the minimum wage and employing underage minors — the company has hurt not only its employees, but also its more law-abiding competitors. A lawyer representing the plaintiffs, João Piza, told me in a phone interview that McDonald’s corporate could eventually be held responsible as well.
Within 24 hours of that suit being filed, McDonald’s itself was also accused of large-scale tax-dodging in Europe.
Normally I assume customers don’t care about these kinds of legal and regulatory kerfuffles. But brand-perception survey data from YouGov suggest consumers are paying attention. Over the last year-and-a-half or so, respondents have become much less likely to say they’re hearing positive news about the company, or that they’d be “proud” (rather than “embarrassed”) to work for it. The share saying they’ve patronized a McDonald’s location in the last month is still sizable — about 39 percent — but well below its levels of over 50 percent in late 2012. Maybe this reflects excitement about competitors such as Chipotle, but bad PR about McDonald’s itself seems a likely culprit.
McDonald’s has thus far tried to address its image crisis by giving away free food and airing sentimental ads. But a better, more effective solution might be to address the sources of its troubles head on, and try to become a better global corporate citizen.