Global business - the new local hero?
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Polling reveals the world of work for millions is on the doorstepBig business is vital to turning around deprived communities and is more of a wealth provider than it is traditionally given credit for, according to new research by The Work Foundation.
The think tank looked in detail at the economic impact of McDonald's franchised restaurants as the company turns 30 years old in the UK. It found flaws in the so-called 'leaky bucket” argument that contends that big business pours money in - and out - of poor neighbourhoods.
It estimates that 60% of a franchised McDonald's restaurant's £1.5 million annual expenditure - £900,000 - stays local and generates a further £2.2 million of local spending power. It means McDonald's 470 franchised restaurants lock in just under £1.5 billion a year into the communities they serve in the UK.*
The report comes as a new survey shows that more than 20 years after Norman Tebbit told British workers to get on their bikes, for millions the world of work remains on their doorstep.
Over a third of us (39%) work within walking distance - less than three miles - of where we live. This means millions of people are dependant on work that is on offer in their immediate neighbourhood. It's a powerful argument for business to invest in deprived communities.
Moreover, that percentage rises to almost two-thirds (58%) for those in unskilled and manual occupations, and almost half (46%) for those with no formal qualifications.**
The report, “Who is being served? McDonald's and the UK enterprise agenda”, is authored by The Work Foundation’s Andy Westwood and Liz Reynolds, of the US based Initiative for a Competitive Inner City.
Andy Westwood said: "McDonald's and others have a business model that confers far more on local communities than most people would credit. These are local businesses that recruit, train and promote local people - often the ones that are overlooked in other parts of the labour market. The economic impact is quantifiable and represents a considerable investment in communities.
"Employers who have wealth neutral locations, investing in skills and training in both the poorest and most affluent communities, are the local heroes the UK needs. Outside the public sector there is often very little of this kind of scale of activity in many such places. So the real picture of economic and social impact of big business is rarely as black and white as we are commonly led to believe.
"If you wanted to design an enterprise model that would work in deprived areas, providing jobs, creating wealth and generating wider economic and social values, then the franchising model is a difficult one to beat."
Peter Beresford, CEO of McDonald's UK, said: "This report confirms what we've always expected. Over the last three decades our restaurants have provided opportunities in communities where they can otherwise be rare.
"It's not just about creating jobs, but creating careers. There aren’t many places where you can go from being hourly paid to being your own boss as a franchisee. Equally, our transferable skills have proved a useful launch pad for people to forge successful careers outside McDonald's."
The report says:
# The leaky bucket is a leaky argument - it doesn't capture the value that flows from the national training operations of larger organisations
# UK based McDonald's franchisees like Tony Sealey in Birmingham are following in the footsteps of US inner city pioneers like Herman Petty, whose restaurants helped regenerate the south side of Chicago in the 1960s
# McDonald's has restaurants in 85 of the 88 areas assisted through the Office of the Deputy Prime Minister's Neighbourhood Renewal Fund.
*A local multiplier effect of 2.48 has been applied to the £900,000 mentioned above to capture the economic gain that money brings to an area. The rate of 2.48 has been arrived at using the New Economic Foundation's local multiplier process. Applying this multiplier effect, the £900,000 generates an extra £2.2 million of local spending power per franchised restaurant, giving a total of £3.1 million per franchised restaurant.
**BMRB polled 2,000 people across the UK between 10 and 12 September. The interviews took place by phone and a series of questions on the proximity of the workplace to the home were asked.
The report, 'Who is being served? McDonald's and the UK enterprise agenda', is available at www.theworkfoundation.com and is authored by Andy Westwood, Director at the Centre for Economic and Social Inclusion and an associate of the Work Foundation, and Liz Reynolds, who is a consultant and former Director at the City Advisory Practice at the Initiative for a Competitive Inner City (ICIC). She is currently a PhD candidate in the Department of Urban Studies at the Massachusetts Institute of Technology in Boston.
This independent report on the economic impact of McDonald's restaurants in deprived areas was written and produced by the Work Foundation. It was commissioned by McDonald's to inform debate ahead of the UK's first ever Enterprise Week in November 2004.
