McFail Double: Huff Post and Think Progress Attack on McDonalds Proven Wrong

Monday the Huffington Post published an analysis of McDonald’s payroll by a University of Kansas undergrad who pulled the wrong figures from the companies annual financial report and came up with a false conclusion. Huff Post has since corrected the story but Think Progress, who followed their lead, has only issued a partial correction.

The gist of the Huff Post story was that McDonalds could double it’s wages–to $15 an hour–by raising prices 17 percent. So a $3.99 Big Mac would become a $4.67 Big Mac (17 cents per dollar). But it turns out the undergrad who came up with those estimates made some math mistakes.

Tuesday the blog Just One Minute pointed out that the undergrad had apparently divided payroll figures for company owned stores by McDonald’s total revenue for all stores, both company stores and franchises to get 17 percent. If other words, the payroll for franchise stores was omitted but the revenue was included.

If you just stick to the figures for company owned stores, which are readily available, you find that payroll is actually 25.3 percent of revenues (Just One Minute rounded to 26 percent). So that’s about how much more McDonalds would have to make on each item to maintain current profits.

Wednesday, the Columbia Journalism Review did the same calculation and reached the same conclusion:

You have to divide company-operated payroll & employee benefits by
company-operated sales to get an apples-to-apples measure. That gets you
25 percent. So a Big Mac would, in fact, have to go up by a full
dollar, not 68 cents, in order to double wages at McDonald’s. And the
Dollar Menu would have to become the Dollar Twenty-Five menu.

CJR went a little further and used figures from an outside research firm to arrive at a comparable if less certain  figure of 24 percent for McDonalds franchise operations. (Though for some reason CJR felt the need to sideswipe the company’s food as “standardized coronaries-on-a-plate” in the process.)

Given that the original claim about how much McDonalds would need to raise prices was completely wrong, Huff Post did the right thing. They pasted a new article under the old URl with the headline “Errors in McDonald’s Wage Analysis.” The new piece notes “the research used as the basis of the story contains significant errors that cast doubts on its claims.” Huff Post gets an Apple Pie for the correction.

But over at Think Progress, there is still a story in place with the headline “Your Big Mac Would Only Cost $.68 More if McDonalds Doubled Its Pay (Updated).” The update actually refers to two updates the first of which is an admission that the CEO’s pay is a rounding error in the scope of McDonald’s overall payroll. The second update at Think Progress cites and links the CJR analysis noted above but still manages to come up with the wrong conclusion:

Ryan Chittum of the Columbia Journalism Review crunched the numbers
and found that the price rise of 68 cents per Big Mac, or 17 percent
overall, is only true for company-operated restaurants. Including
franchises, which make up 80 percent of McDonalds restaurants, puts the
increase at 25 percent.

As explained already, that’s not what CJR found. CJR found the 17 percent figure was an error and that the correct figure was 25 percent for company owned stores and an estimated 24 percent for franchise stores. That means the Think Progress headline and the rest of the story (which has been tweeted out nearly 1,000 times) is completely unsupported as it stands.

Addendum: Forbes posted the same analysis on its site Tuesday using the 17 percent figure. They also have not update their post to show that this figure is incorrect and was based on an error.