Fast food companies and labor groups in California have reached a deal leading to a $20 minimum wage beginning in April for service industry workers in the state, pending approval by state lawmakers. This agreement prevents a costly confrontation between the companies and labor organizations, with the latter agreeing to withdraw a proposed ballot referendum and abandon a provision in Assembly Bill 1228 that would have held companies accountable for labor violations by franchisees.
The legislation also establishes a Fast Food Council with the authority to increase the minimum wage annually by up to 3.5% or based on the change in the U.S. consumer price index.
While labor groups and workers applaud this agreement, some businesses express concerns about additional regulations and higher wages potentially leading to increased consumer prices and restaurant closures.
What Does This Mean for Restaurant Owners?
The result of this legislation would undoubtedly raise menu prices for consumers as business owners pass on the cost to patrons. But is that always the right solution?
Raising menu prices can deter customers due to perceived lower value, price sensitivity, budget constraints, competition, psychological barriers, potential loss of customer loyalty, economic conditions, negative word of mouth, and the impact of inflation on affordability.
To mitigate the potential negative effects of raising menu prices, restaurants must carefully consider the timing and magnitude of price increases. They may also need to communicate any changes effectively to customers, emphasizing improvements in quality or service to justify the higher prices and minimize customer backlash.
Look for Cost-Saving Opportunities
Increasing your menu prices should be one of many potential solutions to consider with such economic changes. There are plenty of opportunities to enhance your restaurant’s efficiency that would help decrease costs associated with labor, hiring, menu sourcing and more. Times are more challenging than ever for operators, and Synergy has affordable tools to help your business thrive. Our three-day Operations Assessment will pinpoint improvements to your business and ensure its ongoing success. Reach out to us today to learn more: 1-888-861-9212 or email email@example.com.