Yesterday, 1851 shared the news of Shake Shack’s plans to increase prices due to increases in wages throughout the company. According to CNBC, Shake Shack isn’t the only restaurant raising menu prices this year, and it all has to do with minimum wage increases.
"What we are seeing is that there is an increase in restaurant operators who are taking price increases and the number one reason relates to labor," said Darren Tristano, CEO of Technomic. Tristano says that price inflation might be as much as five percent.
In some states, the minimum wage is increasing up to 25 percent. “...labor is generally about 25 to 30 percent of the cost of a restaurant. So, if a quarter of your cost is going up 25 percent, that's a significant amount, it's going to result in maybe a 5 percent cost increase on just labor hitting the bottom line. It's just math unfortunately."
Michael Mabry, chief operating officer of MOOYAH Burgers, Fries & Shakes, says the company has been planning for minimum wage increases for about a year. Negotiating with vendors, MOOYAH was able to keep the cost of its three main products (beef, bread and potatoes) flat or lower. Because of this, the restaurant will actually be decreasing the price of several items on the menu.
CNBC also spoke with Pita Pit’s president, Peter Riggs, who highlighted the importance of a strong corporate culture. "Pita Pit understands the value of our in-store employees and the importance of them because they are the true representatives of our brand, dealing face-to-face with our customers when they walk through the door," Riggs said. "So we try to make sure that all of our employees feel like they are compensated fairly."