McDougals and Deep Fry are two fast food chains locked in a bitter co

Question

McDougal’s and Deep Fry are two fast food chains locked in a bitter contest to dominate the minimal-pay, yet labor-intensive, fast food business in the north-eastern states. Both chains are eager to expand, but McDougal’s lacks capital because it spends almost forty percent of its gross profits on wage costs. To raise funds to finance expansion, McDougal’s plans to cut the wages of newly-hired staff by 12%, and the wages of experienced staff by 10%.

The answer to which of the following is most important to know in order to raise funds as per the proposed plan?

(A) Are the areas in which MacDougal’s intends to expand already served by a successful fast food chain?
(B) Is wage rate a crucial factor in attracting fast food business staff?
(C) Has McDougal’s acquired a reputation for good service and food quality?
(D) Has Deep Fry planned to open two branches for every one opened by McDougal’s?
(E) Has the restaurant workers’ union protested the proposed wage cut?

Abhilasha143 · Answer

Wage cut will obviously not attract staff but that is not the point. The point is whether the wage cut leading to more capital will actually fulfill the goals

sdas80923 · Answer

Looking for an explanation for this

siddhantvarma · Answer

Let's understand the argument:
-  Background Info : McDougal’s and Deep Fry compete fast food business (minimal-pay, yet labor-intensive)
-  Premise : Both chains want to expand. McDougal’s lacks capital because it spends  almost  forty percent of its gross profits on wage costs. Say McDougal makes $100 in profit, ~$40 is spent on wage costs
-  Plan : M cDougal aims to solve the problem of wage costs eating a big chunk of its profits rby educing salaries for newly hired staff by 12% and experienced staff by 10%

The goal of the plan is to get the capital to expand. McDougal makes a lot of assumptions that cutting wage costs for newly hired staff and experienced staff would give them the necessary capital to expand. For ex:
- Money saved from cutting wage costs >= Money needed for expansion
- Cutting wages won't affect their operations (ex people leaving because of the salary cuts, etc)

We need to find an answer choice which   is most important to know  in order to raise funds as per the proposed plan. We're looking for something that helps us understand if the plan will attain its goal or not.

(A) Are the areas in which MacDougal’s intends to expand already served by a successful fast food chain?
   This might be useful in understanding if the area where MacDougal wants to expand will bring them the success or not, but that's not what we're concerned with. We aim to evaluate the goal of getting capital for expansion based on the plan of cutting wages. This is irrelevant to the argument, so we'll eliminate it. 
 
  (B) Is wage rate a crucial factor in attracting fast food business staff?
   If wage rate affects attracting the staff, McDougal's operations could be affected and they may not be able to get the necessary funds from wage cuts. With the reduced salaries, if they don't get competent chefs or if they're unable to fill all the necessary positions for their expansion, the plan of wage cuts could be counterproductive.  
 On the other hand, if the wage rate doesn't affect the staff, their operations remain unchanged. So their plan can work.  
 This helps in evaluating if the plan will achieve the goal, so we'll keep B.

(C) Has McDougal’s acquired a reputation for good service and food quality?
   Their acquired reputation for service/quality doesn't affect our argument at all. It may affect how their expansion responds in terms of sales and profits, but that's irrelevant in the scope of the current argument. Eliminate C.

(D) Has Deep Fry planned to open two branches for every one opened by McDougal’s?
  Again, the answer to this question will help us evaluate who does better in their expansion business, which we're not concerned with. We're only concerned with if McDougal's wage cuts can help them secure the necessary capital. This does nothing to help with that, so we'll eliminate D.

(E) Has the restaurant workers’ union protested the proposed wage cut?
  This is a tricky one. Let's say the union did protest the wage cut. But did the protest lead to wage cuts not being implemented? We don't know. We can't weigh the union's views on the argument overall. Had this mentioned something on the lines of workers protesting the wage cut and quitting their jobs, or something, it would more directly help us evaluate the argument. 
Simply knowing if the unions protested their plan or not is not sufficient for us to evaluate the argument. So while (E) comes close, it doesn't help us evaluate the argument better than (B). Eliminate (E)

Answer: (B)

McDougals and Deep Fry are two fast food chains locked in a bitter co

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McDougals and Deep Fry are two fast food chains locked in a bitter co

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