On a fairly regular basis for more than a year now, we’ve been looking at CEO gaffes as they occur to hopefully gain valuable investing experience and avoid investing in companies where similar situations are possible in the future. Sometimes, though, a gaffe occurs that isn’t necessarily the CEO’s fault, but is still, nonetheless, a PR nightmare.
This week, as a slight break from our usual coal raking of CEOs, we’ll take a look at two gaffes from the same sector that could turn into a huge PR nightmare for both companies.
The restaurant sector is extremely competitive to begin with, so any negative publicity can crush a company, regardless of its size or dominance, over the short term. This week has been something of a nightmare for fast-food restaurant chains McDonald’s Corporation (NYSE:MCD)‘s and Burger King Worldwide Inc (NYSE:BKW).
You must be at least “this employed” to participate in our budget
It all started earlier this week for McDonald’s Corporation (NYSE:MCD), which insulted the very core of its customer base by teaming up with Visa Inc (NYSE:V) to create a budget planning website that it dubbed “Practical Money Skills for Life.” The idea is actually a great one as citizens young and old of upper and lower incomes can always use the reminder and education about how to balance their income and spending. The execution, though, left a lot to be desired.
Here’s the breakdown of McDonald’s Corporation (NYSE:MCD) and Visa Inc (NYSE:V)’s sample monthly budget (link opens PDF file) as found on their collaborative website:
Sample Monthly Budget
|Monthly Net Income||Amount|
|Income (1st job)||$1,105|
|Income (2nd job)||$955|
|Monthly Net Income Total||$2,060|
|Monthly Expenses Total||$1,310|
|Monthly Spending Money||$750|
I’m not exactly sure what fantasyland McDonald’s Corporation (NYSE:MCD) and Visa Inc (NYSE:V) were living in when they created this budget, but it’s downright insulting to a majority of the public.
First off, there’s the assumption that a full-time McDonald’s Corporation (NYSE:MCD) employee will have a second full-time job. I’m not sure McDonald’s or Visa Inc (NYSE:V) is aware of how difficult it is to (1) get a full-time job right now in the fast-food sector with the looming implementation of the Patient Protection and Affordable Care Act, and (2) work around your first full-time job with a second full-time job.
Second, in what alternate universe is health care $20/month? According to research by Bloomberg, in 2010 McDonald’s Corporation (NYSE:MCD) employees paid an extremely reasonable $14/week. This is still incredibly cheap compared to the expected monthly average premium of more than $200/month once the PPACA is implemented, but nowhere near $20/month as this budget assumes.
Also, where’s the monthly budget for food, groceries, gas for the car, child care, and life’s other intangibles? Oh, yeah, it’s right there in the “other” category… $100 a month! Even more comically, the first version of this budget (which has since been rejiggered by McDonald’s Corporation (NYSE:MCD) and Visa Inc (NYSE:V)) assumed a heating bill of $0! Apparently some of the best things in life are free… just not heating if you live in the real world!
What they’re putting in kids meals these days
A gaffe like this for McDonald’s Corporation (NYSE:MCD), which threatens to hurt public opinion of the company and potentially even thwart some customer traffic, is just what struggling U.S. restaurant chains need to gain ground on the usually dominant fast-food chain. For Burger King Worldwide Inc (NYSE:BKW), which has redesigned its menu to mimic many of the successful aspects of McDonald’s own menu, it could have represented a perfect opportunity to hit McDonald’s while they were down. Instead, it tripped up as well.