How California restaurants are adapting to higher wages
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That has created an uncertain- ty among operators that they will lose customers by increasing prices, because the balance of the dining public will not be getting the same wage increase that restaurants will be paying. “Minimum wage increases are good for sales,” said Michael Halen, analyst with Bloomberg Intelligence. “People have more money to spend and you can pass along price in- creases. But it’s harder in this sce- nario because it’s not statewide.” It also comes amid a backdrop of mounting concern about fast-food prices in general, not just in Califor- nia. Traffic at a wide array of chains has been in decline, as higher menu prices have led to a reduction in traffic at many concepts. Chains with strong sales and business models and plenty of de- mand, particularly among consum- ers who have more earnings, will likely weather the storm more easily. Dave’s Hot Chicken raised prices in two waves, first in November and again in February, for a total of 9%. “We didn’t see much degradation at all,” Bitticks said. “We feel pretty good about it.” Brands have looked at oth- er methods for dealing with price hikes. McDonald’s has sped up the implementation of a workforce management program to help man- agers and crew with scheduling, switching shifts and other issues. But the company’s task force is
also helping operators in different parts of the state work together on other concrete solutions. “We have been working together, trying to come up with a plan that we can scale and execute on a statewide basis,” Harper-Howie said. “It’s go- ing to be up to us as franchisees to figure it out and get through it. We have been very lucky to get support, guidance and leadership from the organization.” Kiosks are another potential solution. Dave’s Hot Chicken considered it, but that effort sped up when the California situation took hold. The kiosks are not big labor sav- ers. But they do increase sales. “Check average went up by 15% when people use the kiosk,” Bitticks said. “It’s an indirect price increase.” The company also added large-sized drinks, which he called a “self-se- lected price increase.” Yet the operators also expressed at least some optimism about the state and its restaurants. “I was born an optimist,” Ellison said. “I would not be in this busi- ness if I wasn’t. I bought restaurants in California the last three years at a large scale, knowing these laws were on the table.” “California is a huge economy,” he added. “It’s not ideal by any means. We have a lot of levers we can pull. But we will be OK at the end of the day.” Turnover could be one potential
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benefit. “There’s a correlation be- tween wage inflation and reduced turnover,” Bitticks said. “We do see improvements in turnover.” And that could save on the cost of replacing workers, which is not insignificant. “If you do see reduced turnover, it will be money well spent,” he said. Harper-Howie, meanwhile, called California “one of the best markets to be in.” And then she said that people in other states should not rest easy, because what happens in the state probably doesn’t stay there. “Anyone out here who feels safe, be ready for it, because it’s coming,” she said.
Dale Schwartz Placeholder Text How Dave’s Hot Chicken prepared for California’s recent wage hike
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