Restaurants are under increasing pressure from minimum wage hikes to pay workers more and pass off costs in higher prices for customers, Fox Business reports.
Eighteen states raised their minimum wage at the start of the year, forcing thousands of restaurants to adapt to rising labor costs. However, patrons will only absorb so much of the cost.
“When we increase in prices … we see guest count go down,” “Restaurant Stakeout” host and CEO of Uncle Jack’s Steakhouse Willie Degel told FOX Business. “The consumer is not willing to pay for the experience then.”
Degel predicted a dark future for the restaurant industry if labor costs keep increasing.
“I think you’re going to see thousands of restaurants close their doors,” Willie Degel told FOX Business. “Fine dining is going to go by the wayside.”
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The 20% tip will certainly be going away.
ReplyDeleteIn Europe, wait staff are paid salary. They do not rely on tips and it certainly does not affect the turnover of patrons. Only in America do we expect people to make 2 something an hr and then get screwed by a table of 6 who leaves a dollar tip.
ReplyDeleteHow about the farms who hire illegals do they have to pay 15 an hour or are they exempt?
ReplyDeleteSomethings got to give though... Wages have stagnated or gone down overall, where shareholders and corporate pay has skyrocketed.
ReplyDeleteThis blaming labor or saying costs have to be forwarded onto the consumer sound tired and old.
The numbers speak for themselves. We are getting screwed by the wealthy, who only want to squeeze us more.
I don't know what the answer is, I'm not sure that raising minimum wages is the right answer, but SOMETHING has to happen.
This is what we need.
ReplyDeleteToo many restaurants now
Restauranteurs cannot make a living because there isn't enough volume
Get rid of the low volume shops and problem is solved
the good ones will hire those who lose their jobs, and pay them the min wage
ReplyDeletePercentage wise, the recent minimum wage increases in various states and cities are pretty large when viewed against the existing Federal minimum of $7.25.
MD increased to $8.75 in July 2016, and is now $9.25 (raised 7/17) and going to $10.10 this coming July. By July it will be an increase of $2.85 in just two years, just over a 39% increase.
For that 39% increase, employers get nothing unless they raise prices or cut hours, employees, services and/or content. Each of those steps, or a combination, will cause some drop-off in customers and dollars in the register. Enough of a hit will translate to more business closings. It's history, and it's fact. Happens every time.
Obamacare caused many employers to cut hours to keep employees below a mandated threshold that piled on added benefit costs. But fewer hours meant smaller paychecks.
Bear in mind, employers can always pay above the minimum. Smart bosses do that when they have productive employees who are generating revenue well above and beyond the cost to keep them around.
End of the day there is no free lunch, even though legislators seem to think so, and a 39% jump in a large portion of business costs will get passed along to the remaining customers. Have seen this since the early 70s when I managed several service businesses with over 100 employees.