McDonald's Corporate Announcement on Service Charge Specifications

McDonald's Corporate Announcement on Service Charge Specifications

McDonald's Breaks Ties with National Restaurant Association Over Tip Credit Policy

In a move that signals a shift in the restaurant industry, McDonald's has decided to drop its membership from the National Restaurant Association (NRA). The decision comes as a result of a policy difference, particularly over the tip credit, which allows full-service restaurants that accept tips to pay a lower-than-minimum wage to their tipped workers.

The NRA, in response, has reaffirmed its commitment to representing the restaurant industry as a whole and advocating for policies that support sustainable growth and workforce development. However, the organization has stopped lobbying against an increase in the federal minimum wage during the pandemic.

The debate over the tip credit has been ongoing, with critics such as Saru Jayaraman, president of One Fair Wage, stating that the subminimum wage for tipped workers is indefensible. The CEO of McDonald's, Chris Kempczinski, has echoed this sentiment, expressing concern about the tip credit creating an uneven playing field and contributing to poverty and high employee turnover.

Kempczinski believes that everybody should be paying the same minimum wage and has taken a strong stand against the practice of subminimum wages supplemented by tips in the restaurant industry. As a result, McDonald's has cut the prices on its combo meals and brought back the Extra Value Meals moniker. The company is also covering the cost for those operators whose price cuts lead to financial losses.

This is not the first time that McDonald's has split with the NRA over a policy issue. In 2019, McDonald's informed the NRA that it would no longer support lobbying against an increase in the federal minimum wage.

The issue of the tip credit has gained more attention as more states increase their minimum wages and customers push back at fast-food restaurants over price hikes. California, for instance, started requiring fast-food chains to pay an even higher wage, $20 an hour, last year.

Kempczinski has highlighted the seven states plus Guam that do not have a tip credit, noting that it doesn't lead to job loss and that such states have lower poverty levels and lower turnover rates. Texas Roadhouse, for example, spends about a third of its restaurant sales on labor, compared with 25% at Chipotle, in states without a tip credit.

McDonald's is now open to conversations about raising the federal minimum wage. The NRA has confirmed that McDonald's left the group over a policy difference, marking a significant step towards potential changes in the restaurant industry's approach to wages and employee benefits.

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