Businesses consider passing costs on to consumers
Consumers in California are bracing themselves for a significant price hike on their favorite fast-food items, including the iconic Big Mac, as the state’s minimum wage increase is set to go into effect this spring. With the rising labor costs, businesses are left with no choice but to pass on the burden to consumers.
“Someone’s got to pay,” says Fat Brands chairman
Speaking on “The Big Money Show,” Fat Brands chairman Andy Wiederhorn expressed his concern over the impact of the wage hike on businesses. He emphasized that consumers who advocated for the legislation to raise the minimum wage from $15 to $20 and eventually $25 must have been aware of the consequences. Wiederhorn stated, “Everyone wants their employees to make more money, but it just costs. And someone’s got to pay for it. And the restaurant operators don’t have the margin for that. So prices are going to go up.”
Minimum wage increase and its effects
California passed a law last fall mandating a $20 per hour minimum wage for all restaurants with at least 60 locations nationwide, excluding those that make and sell their own bread. This increase is scheduled to take effect on April 1, 2024. Fast-food giants like McDonald’s and Chipotle have already indicated that prices will have to rise to cope with the heightened labor costs.
McDonald’s faces criticism over inflated prices
McDonald’s has faced backlash for its inflated prices, such as the nearly $18 price tag on its Big Mac combo. The company has pledged to prioritize affordability amid growing concerns. However, critics argue that lowering prices may not be feasible for many restaurants and fast food chains.
Businesses left with limited options
Wiederhorn points out that restaurant owners already operate on thin profit margins, typically ranging from 5 to 15%. Since labor costs account for a significant portion of expenses, increasing the minimum wage from $15 to $20 or $25 would nearly double these costs. As a result, businesses find themselves with no alternative but to raise prices.
Promoting value without compromising quality
While some suggest that restaurants and fast food chains should find ways to lower prices for consumers, Wiederhorn argues that it’s not feasible without compromising quality. He mentions that operators can explore options like offering all-cheese pizzas or controlling portion sizes, but ultimately, providing a good guest experience requires additional investment.
In conclusion, as California moves forward with its minimum wage increase, consumers should prepare to dig deeper into their pockets for their favorite meals. The burden of rising labor costs falls on businesses, leaving them with no choice but to pass the expense on to consumers.