Consumers in California should brace themselves for higher prices on beloved fast-food items like the Big Mac as the state’s minimum wage hike comes into play this spring.
As businesses grapple with absorbing increased labor costs, Andy Wiederhorn, chairman of Fat Brands, emphasized the inevitability of price adjustments. “Someone’s got to pay for it,” he asserted on Tuesday’s episode of “The Big Money Show.”
“The consumers who are voters must have known what they were getting into by promoting this legislation to raise the minimum wage from $15 to $20 and on its way to $25,” Wiederhorn remarked. “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.”
California passed legislation last autumn mandating a $20 hourly minimum wage for all restaurants with at least 60 locations nationwide, with an exception for those establishments that produce and sell their own bread. This increase is slated to take effect on April 1.
Major fast-food chains like McDonald’s and Chipotle have already signaled impending price hikes to offset the escalated labor expenses.
McDonald’s, in particular, has faced scrutiny over its nearly $18-priced Big Mac combo and other menu adjustments, pledging to prioritize affordability, as reported by the New York Post.
Despite calls for eateries to lower prices, Wiederhorn stressed that cost reduction without compromising quality is unfeasible for owners.
“A restaurant operator makes anywhere from 5% to 15% bottom line at the end of the day, and if your labor cost is one-third of your cost, so 30%, and you raise the wage from $15 to $20 or $25 over the next couple of years, you’re almost doubling that cost. And so they’re going to have to raise prices,” Wiederhorn explained.
While acknowledging the potential for promotional tactics and technological enhancements to promote value, Wiederhorn emphasized that maintaining a high-quality guest experience necessitates financial investment.
“There are things you can do as an operator to promote value…But look, we’re still in the hospitality business and the guest experience has to be number one. As we return from Covid to dining rooms and dining out and even to-go food, the guest wants a good experience — and that just costs money.”