Fat Brand Chairman and Founder Andy Wiederhorn details the economic impact of raising California’s minimum wage to $20 an hour.
California consumers will be paying more for a Big Mac when the state’s minimum wage hike goes into effect this spring.
As companies consider passing costs on to consumers, Andy Wiederhorn, chairman of Phat Brands, said “someone has to pay” for higher wages.
“Consumers, the voters, want to know what they’re getting by pushing this bill to raise the minimum wage from $15 to $20 and then to $25,” he said on Tuesday’s “Big Money Show.” I’m sure they knew it was there,” he said.
“Everyone wants their employees to earn more, but it just costs money. And someone has to pay for that. And restaurateurs don’t have the margin to do that. .So prices will go up.”
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Last fall, California passed a law requiring all restaurants with at least 60 locations nationwide to pay a minimum wage of $20 an hour, including an exception for restaurants that make and sell their own bread.
This price increase is scheduled to take effect on April 1, 2024.
Fast-food products in California could see significant price increases after the state introduced a $20 minimum wage. (Reuters/Joshua Roberts/Reuters Photo)
Several major fast-food franchises, including McDonald’s and Chipotle, have already indicated they will need to raise prices in response to rising labor costs.
McDonald’s has come under heavy criticism recently for its menu price hikes, particularly its Big Mac combo that costs nearly $18, and has vowed to focus on affordability, the New York Post reported.
While there are calls for restaurants and fast food chains to lower prices for consumers, there is “no way” for owners to cut costs and maintain quality for customers, Wiederhorn says. he pointed out.
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“Restaurateurs end up making 5% to 15% profit, but if labor costs are one-third of cost, it becomes 30% and wages go up from 15 to 20, or $25.” In a few years, its cost will almost double. So prices will have to go up. ”
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Wiederhorn also noted that while operators have several options to “drive value,” overall it “just costs money” to provide a good experience for guests. .
“There are things you can do as an operator to drive value. For example, instead of a pepperoni pizza or a barbecue chicken pizza, you can make an all-cheese pizza. Things like that. You can control your portion sizes.” . You just need a little bit of technology,” he said.
“But look, we’re still in the hospitality business and the guest experience has to be number one. As we return from the pandemic to dining rooms and eating out and even take-out food, guests will have a good experience.” And it just costs money. ”
FOX Business’ Eric Revell contributed to this report.
