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McDonald’s has bigger problems than $15/hour wages

Talking Numbers

Protesters will be taking to the streets Thursday demanding McDonald's and other fast food restaurants raise their wages to $15/hour. But for McDonald's that may be the least of their worries right now.

Protesters are planning on taking to the streets in 100 cities Thursday demanding fast food restaurants pay employees $15 per hour. Fast Food Forward, an organization funded by the Service Employees International Union (SEIU), is picketing many popular restaurants but they are particularly keen about going after the largest of them all, McDonald's.

Of the 14,000 McDonald's restaurants bearing the golden arches logo in the US, only about 1,500 are actually company owned. The rest are owned several thousand smaller franchisees.

(Watch: Fast food workers & a living wage)

If were McDonald's were to decide to have all of its employees – and those of its franchisees – raise hour wages to $15, it will do so by phasing out entire jobs altogether, according to CNBC contributor Gina Sanchez, founder of Chantico Global.

"I don't think it impacts the corporation but it really asks a bigger question, more than just how much does a Big Mac need to cost in order to support $15 wages," says Sanchez. "It asks a bigger question about whether or not McDonald's is going to have to rethink or redesign its business model. You could argue that if [workers] continue to demand $15 wages, that we'll see more automation in the McDonald's franchises."

Sanchez believes McDonald's will need to do that if it's to hit its targets.

"The fact of the matter is that McDonald's has to do what it takes in order to support same-store sales growth," says Sanchez "Right now, McDonald's is expecting 3% to 5% same-store sales growth next year – that's actually pretty optimistic – [and] 6% to 7% in terms of operating income."

In the last reported quarter, same-store sales grew 0.7% and operating income was $2.4 billion, up 5.7% from the previous year. While McDonald's upper management may be optimistic about 2014, Sanchez doesn’t see things quite the same.

"They're going to spend an increase of $200 million just for its Olympic advertising this coming year," says Sanchez. "And, they have modest inflation pressures. So, the outlook for McDonald's isn't as positive."

Pressure to raise wages won't help McDonald's either, says Sanchez. "That just adds to a more negative outlook for McDonald's."

(Read: Yum's November KFC China sales flat, sees 2014 earnings rebound)

For Talking Numbers contributor Richard Ross, Global Technical Strategist at Auerbach Grayson, the recent-term charts look bleak. McDonald's is up 9% year-to-date compared to the benchmark S&P 500's growth of 25%.

"Some of those fundamental concerns have been weighing on the stock," says Ross. "[McDonald's has] been in a well-defined downtrend since March."

But, McDonald's long-term trend has been generally positive since breaking the 150-week moving average in 2003. In the past 11 year, McDonald's is up nearly 500% while the S&P 500 is up "only" 103%.

Watch the video above to see what key levels Ross is looking for in McDonald's stock and to see Sanchez's fundamental analysis of the company.

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