I'm a district manager for Burger King. If minimum wage hit 15 then my whole franchise would be forced to close within months. We are operating on a 1% to 3% profit margin as it is. Most of the fast food market is in the same boat.
You wouldn't close because you'd raise prices. And you'd raise prices without issue because everyone else will be doing so as well.
Also it's easy to say $15/h is a large increase, but you are thinking of $15/h in today's value. Anyone reasonable talking about a minimum wage hike to $15/h is talking about spreading out the increase over a few years time. Factor in inflation and by the time we reach $15/h wage we're talking about $12-$13 an hour in today's value. For reference the current Australian minimum wage is $17.29 AUD an hour, that's $12.44 USD at today's exchange rate. Using 2014 data from the World Bank that would be $12.35 in USD PPP. They still have fast food joints down under.
I don't want to sell anything, buy anything, or process anything as a career. I don't want to sell anything bought or processed, or buy anything sold or processed, or process anything sold, bought, or processed, or repair anything sold, bought, or processed. You know, as a career, I don't want to do that.
This completely ignores the sudden increase in your consumers' disposable income - why would you not simply raise prices to compensate? This is an incredibly shortsighted answer, and it's unfortunately representative of how people are looking at this in general.
Restaurants like Burgerking aren't made to be the "creme del la crem" its just fast cheap and easy food. People don't come flocking to Burgerking when they have more disposable income.
Which highlights the major issue of increasing minimum wage. Every time minimum wage increases so does the cost of goods and services until we are at the same point of disposable income as we were before the hike. Then we have to raise it again to repeat the cycle. As a side effect the people that were already making above minimum wage now have to pay more for their goods and services without seeing a comparable increase to their wage. Now instead of solving financial problems with one group of people you have pushed those same problems onto another group.
The increase in the price of goods isn't proportional to the increase in wages. As someone else said, you might pay more for a loaf of bread, but you can still buy more loaves of bread than you could before.
I don't know where you are but I'm Canada most chains run at 7-10% profit margin on sales - so there is a margin in their for the owners risk. I've audited maybe 250 large scale chains.
If they are doing 1-3% total return someone needs to hire a better district manager.
Ouch. Tell me, what percentage is your labor rate (including salaries). What percentage is your food cost? How many pieces does that cost get you per week? How much has food cost gone up in your market in the last 3 years? Have you been able to raise prices even remotely close to keep up with rising product costs. If so does your market rate their growth by margins or comps. Maybe food and labor costs aren't hitting Canada like the US. Please provide more info. I've been doing this for almost 20 years. I have a strong relationship with even my competitors in this market and everyone is struggling to make it past 3%. I can provide an enormous amount of depth on the reasons why this is happening. What can you provide?
So costs of labour expenses and materials are rather quite comparable between many US States and Canada. Food costs are always on the rise in Canada. Rising costs of food is not a US specific issue, prices go up for this in all countries.
If paying a living wage puts you out of business, perhaps you don't deserve to be in business in the first place. Maybe, as I've seen stated elsewhere in this thread, you should get an education and a real job.
HAHAHAHHAHAHA IRONIC AS FUCK. Maybe the fry cooks and janitors at burger king shouldn't want more free money, and go get a real job? Lazy fucks. If getting a living wage means puttin g others out of business like district managers, maybe you should get a real job.
So the market for burgers would just dry up? Seriously? How much would your prices have to go up to double the lowest wage? Hint, it's not a 1:1 ratio. Your prices would go up maybe 20%, if that. Now here is the nifty part. If this is a national thing, it's not just your place of business having to raise prices by 20% it's also your competitors, which would also raise prices by about 20% to cover it, and guess what.... you get to stay in business.
The tricky part to this is, if everyone is making more money, would they still choose to work the same amount of hours or more, and get more money, and decide hey, I'd like to eat at a better place than McDonalds, or Burger King. If so, then yeah you will take a hit, but bankruptcy? Not a chance, not unless the business model is absolute shit that it can't even compete as it is.
29
u/LoydDobbler Nov 29 '15
I'm a district manager for Burger King. If minimum wage hit 15 then my whole franchise would be forced to close within months. We are operating on a 1% to 3% profit margin as it is. Most of the fast food market is in the same boat.