The fast food industry generates $350 billion in annual revenue in the United States. It employs approximately 4 million workers. It is one of the most studied, most franchised, most replicated business models in human history.

It is also one of the most expensive industries the American economy has ever subsidized.

Not through tariffs. Not through bailouts. Through wages so low that the workers flipping the burgers qualify for food stamps — and the taxpayers picking up that tab have no idea they are doing it.

This is not an opinion piece. The numbers are public. The sources are government databases and peer-reviewed research. The conclusions are uncomfortable regardless of your politics.

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The Wage Floor That Never Moved

In 1968, the federal minimum wage was $1.60 per hour. Adjusted for inflation, that is approximately $13.68 in 2024 dollars.

The federal minimum wage in 2024 is $7.25 per hour — where it has been since 2009, the longest stretch without an increase in the history of the federal minimum wage.

The fast food industry is the single largest employer of minimum wage and near-minimum wage workers in the United States. According to the Bureau of Labor Statistics, food preparation and serving occupations have a median hourly wage of $13.53 — below the inflation-adjusted 1968 minimum wage.

Source: Bureau of Labor Statistics, Occupational Employment and Wage Statistics, May 2023. bls.gov

In real purchasing power terms, fast food workers earn less today than their counterparts earned in 1968. The industry's revenue has grown from approximately $6 billion in 1970 to $350 billion in 2023. Worker compensation, adjusted for inflation, has declined.

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The Public Subsidy Nobody Voted For

In 2013, the University of California Berkeley Labor Center and the University of Illinois published a landmark study on public assistance usage among fast food workers. The findings were stark.

52% of fast food workers' families were enrolled in one or more public assistance programs. The total cost to federal and state governments: approximately $7 billion per year.

That $7 billion is a direct subsidy to the fast food industry. When McDonald's pays a worker $8.50 an hour and that worker qualifies for Medicaid, SNAP, and the Earned Income Tax Credit, the gap between what McDonald's pays and what it costs to keep that worker alive is filled by the public.

Source: Sylvia Allegretto and Ken Jacobs, Fast Food, Poverty Wages: The Public Cost of Low-Wage Jobs in the Fast-Food Industry, UC Berkeley Labor Center (October 2013). laborcenter.berkeley.edu

A 2021 update by the same researchers found that the annual public subsidy to the fast food industry had grown to approximately $16.7 billion — reflecting both industry growth and the continued failure of wages to keep pace with living costs.

McDonald's alone — the largest fast food employer in the United States — was associated with approximately $1.2 billion in annual public assistance costs at the time of the original study.

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What Happened to the Towns

The economic impact of fast food is not just a wage story. It is a local economy story.

When a McDonald's or a Subway opens in a small town, it does not create net economic activity. It redirects existing spending. The dollars that previously went to a locally owned diner — where the owner lived in the community, banked locally, hired locally, and spent locally — now flow to a franchise system where the royalties go to a corporate parent, the supply chain is controlled by national contracts, and the profit exits the local economy entirely.

Economists call this the "multiplier effect." A dollar spent at a locally owned business recirculates through the local economy approximately 3 to 4 times before leaving. A dollar spent at a national chain recirculates approximately 1 to 2 times.

Source: Civic Economics, Indie Impact Study Series (2012); American Independent Business Alliance research on local economic multipliers. amiba.net

The proliferation of fast food chains across rural and suburban America between 1970 and 2000 coincided with the systematic destruction of locally owned food service businesses. The SBA reports that independent restaurant closures accelerated significantly during the same period that fast food chains expanded most aggressively.

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The Health Cost Nobody Puts on the Menu

The United States spends approximately $4.5 trillion per year on healthcare — more than any other developed nation, and approximately twice the OECD average as a percentage of GDP.

Obesity-related conditions account for approximately $173 billion of that annual healthcare spend, according to the CDC. Type 2 diabetes, cardiovascular disease, hypertension, and certain cancers — all strongly correlated with diet — are among the most expensive conditions in the American healthcare system.

Source: Centers for Disease Control and Prevention, Adult Obesity Facts (2023). cdc.gov

The fast food industry is not solely responsible for the American obesity epidemic. But it is a significant contributor. A 2004 study published in The Lancet found that living near a fast food restaurant was associated with a 5.2% higher risk of obesity. A 2019 meta-analysis in Public Health Nutrition found consistent associations between fast food consumption frequency and obesity, type 2 diabetes, and cardiovascular disease markers.

Source: Jeffery et al., Are fast food restaurants an environmental risk factor for obesity?, International Journal of Behavioral Nutrition and Physical Activity (2006); Duffey et al., Food price and diet and health outcomes, Archives of Internal Medicine (2010).

The healthcare costs associated with diet-related chronic disease are borne primarily by Medicare, Medicaid, and employer-sponsored insurance — not by the industry whose products contribute to those conditions.

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The Franchise Model's Role in Wage Suppression

The franchise model is not incidental to the wage story. It is structural.

When McDonald's Corporation employs workers directly, it is the employer of record and bears direct responsibility for wages, benefits, and working conditions. When McDonald's franchises a location, the franchisee becomes the employer of record — and McDonald's can argue, as it has in litigation, that it is not responsible for the wages paid at franchised locations.

This legal structure — which the National Labor Relations Board challenged in a 2014 ruling that McDonald's was a "joint employer" of franchise workers — allows the franchisor to set the operational standards that determine labor costs (speed of service, staffing ratios, menu complexity) while disclaiming responsibility for the wages those standards require.

Source: National Labor Relations Board, McDonald's USA, LLC as a Joint Employer (2014); Economic Policy Institute, The Fissured Workplace and the Decline of Worker Power (2019). epi.org

The joint employer doctrine has been contested in courts and regulatory proceedings for a decade. The practical effect of the current legal framework is that the entity with the most power over working conditions — the franchisor — bears the least legal responsibility for the workers those conditions affect.

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What the Industry Earned While Workers Qualified for Food Stamps

Between 2009 and 2019 — the decade during which the federal minimum wage did not increase by a single cent — the major fast food companies delivered the following shareholder returns:

• McDonald's: stock price increased from approximately $57 to $187 — a 228% return
• Yum! Brands (KFC, Taco Bell, Pizza Hut): stock price increased from approximately $22 to $110 — a 400% return
• Restaurant Brands International (Burger King, Tim Hortons, Popeyes): significant shareholder returns following its 2014 formation

During the same decade, McDonald's spent approximately $21 billion on stock buybacks — money returned directly to shareholders rather than invested in wages, benefits, or worker training.

Source: McDonald's Corporation Annual Reports 2009–2019; SEC filings; Institute for Policy Studies, Corporate Buybacks and Worker Pay (2019). ips-dc.org

Stock buybacks reduce the number of shares outstanding, increasing earnings per share and stock price without any improvement in the underlying business. They are a mechanism for transferring corporate cash to shareholders — primarily institutional investors and executives with equity compensation — rather than to workers or communities.

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The Counterargument, and Why It Falls Short

The industry's standard response to these critiques is that fast food provides entry-level employment, flexible scheduling, and a pathway to management for workers without college degrees.

This argument has merit in isolation. Fast food does provide employment. Some workers do advance to management. The industry does offer scheduling flexibility that other sectors do not.

But the argument fails on the data.

The median tenure of a fast food worker is approximately 1.4 years, according to the Bureau of Labor Statistics — one of the lowest of any industry sector. The "pathway to management" argument requires workers to stay long enough to advance, which most do not. The flexible scheduling that the industry promotes often manifests as unpredictable scheduling — shifts that change week to week, making it impossible for workers to hold a second job, arrange childcare, or take classes.

Source: Bureau of Labor Statistics, Employee Tenure Summary (2022). bls.gov

The entry-level employment argument also does not address the public subsidy question. The fact that a job exists does not mean the public should subsidize the employer's decision to pay wages below the cost of living.

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What This Means for Franchise Buyers

If you are considering buying a fast food franchise, this data is directly relevant to your investment thesis.

The fast food industry's profitability has historically depended on two subsidies: low wages supplemented by public assistance, and cheap real estate in markets where local competition has been eliminated. Both of those structural advantages are under pressure.

Minimum wage increases at the state level — California's $20 fast food minimum wage, effective April 2024, is the most prominent example — are compressing margins at the unit level. California's AB 1228, which established the $20 minimum for fast food workers, was projected to increase labor costs for California fast food operators by 20 to 25%.

Source: California AB 1228 (FAST Recovery Act), signed September 2023; UCLA Labor Center analysis of AB 1228 impact (2023). labor.ucla.edu

The franchise model that generated strong returns for the past 50 years was built on a specific set of economic conditions — low labor costs, cheap real estate, and limited competition. Those conditions are changing. The FDD you sign today reflects the historical performance of a model that may not persist.

Before buying a fast food franchise, use FDD Score™ to analyze the disclosure document and model the unit economics under current and projected labor cost scenarios — not just the historical averages in Item 19.

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The Bottom Line

The fast food industry did not build this model by accident. It externalized its labor costs onto the public, extracted value from local economies, and used the franchise structure to insulate itself from accountability for the working conditions it created.

The $350 billion in annual revenue is real. So is the $16.7 billion annual public subsidy. So is the $173 billion in obesity-related healthcare costs. So is the 228% shareholder return while workers qualified for food stamps.

These numbers coexist. Understanding how they coexist is the beginning of understanding what the fast food industry actually costs — and who actually pays.

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Sources: Bureau of Labor Statistics; UC Berkeley Labor Center; CDC; National Labor Relations Board; Economic Policy Institute; Institute for Policy Studies; California AB 1228; McDonald's Corporation SEC filings.

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