“Fast-food workers at several restaurants in New York walked off the job on Thursday, firing the first salvo in what workplace experts say is the biggest effort to unionize fast-food workers ever undertaken in the United States,” reports the New York Times.
With memories of flopped Black-Friday Wal-Mart Stores (NYSE:WMT) protests still fresh, employees of McDonald’s (NYSE:MCD), Wendy’s (NYSE:WEN), Taco Bell (NYSE:YUM), and other fast-food and quick-serve restaurant chains have walked off the job to protest for higher wages.
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CHEAT SHEET Analysis: Are These Protests a Catalyst or a Trend?
Unionization efforts are nothing new for the fast-food industry, but they are rare and have a history of failure. The industry has a tremendously high turnover rate — as high as 123 percent per year, according to research by Sibson & Company. Historically, the rate has been as high as 400 percent.
The reasons for high turnover are obvious: low pay, short hours (to dodge the responsibilities employers owe to full-time employees), poor conditions, not a lot of opportunity for advancement — all reasons why an employee would want to unionize.
But it’s also obvious that without a core of long-term employees, unionization movements lack the organization and energy necessary to affect real change. When workers in the auto industry walk off the job, entire facilities shut down and management pays attention. When workers in the fast-food industry walk off the job, they are usually either defeated or replaced.
It’s too early to tell whether these protests will be a one-off event, as the Wal-Mart strikes seemed to be, or the beginning of a more stable and organized movement.
How Will This Affect Fast-Food Stocks?
Fast-food stocks are effectively immune to protests and walk-offs on a small scale. Individual stores, which are largely franchised, may see temporary sales disruptions, but it would take a massive movement to affect the stock. In order for investors to worry, the company’s revenue must be in jeopardy, and while everyone wishes good fortune to those seeking better working and living conditions, business as usual tends to prevail. The Black Friday Wal-Mart protests are a pretty clear example of this.
If the movement gains strength in historically union-friendly New York City, where the efforts originated, then there may be a reason for investors to sit up and listen closely to what’s going on. A substantial number of stores in the NY area being blocked by protesters could impact revenue, and wage raises as a result of union pressure would impact earnings.