JAPAN: McDonald's profits drop by 98.3% in 2005

Despite posting a 5.7% rise in sales, McDonald’s Japan said its group net profit in 2005 plunged 98.3% from the previous year to JPY60m (US$508,700). The company said these extraordinary losses can be attributed to a tightening of overtime payment laws in Japan which forced the company to make good overdue overtime payments to over 130,000 of its workers.

Traditionally overtime has been considered a matter of goodwill gifted by employees, but now the government says it wants all businesses to honour all overtime pay.

To help the company back out of the red the company said it would close 75 of its least profitable outlets this year. However, it said it would also be opening about 100 new stores across Japan. McDonald’s Japan expects sales of between JPY339-351bn, a 4-8% increase from last year. The hamburger restaurant chain’s sales totalled JPY325.66bn, up 5.7%, while the number of customers rose by 12.3%.