Wage increases are happening across the U.S., with one of the next big hikes taking place Independence Day weekend in the restaurant mecca of Los Angeles. The minimum wage will jump from $10.50 to $12 for larger employers there on July 1. That’s a 14 percent increase in the set minimum with a jump to $15 hourly in the same city by 2020.
Like similar measures that have already taken effect in New York and the Pacific Northwest, this one in Southern California is hitting a lot of restaurateurs’ bottom lines. For one pizza QSR, based in L.A., it was enough of a threat that Fresh Brothers Pizza opted to hire outside help from Revenue Management Solutions to gain some insight into best next moves on menu pricing and other operational strategies, a news release said.
Like other brands in similar wage increase-affected areas, Fresh Brothers is also trying to figure out how to comply with the higher wage regulations, while also keeping guests as well as the company accountants happy and satisfied. It’s easy to see why they might need outside support in these shifting sands since each new wage increase activation or regulation triggers widespread misinformation and even some fear-mongering.
For instance, in New York City recent hikes have prompted plenty of news coverage that often is cloaked in misinformation and dubious sources. And even restaurant industry organizations, like the National Restaurant Association, have joined the doom-saying.
Just this Monday, NRA Vice President of State and Local Affairs Mike Whatley released a statement, for instance, condemning increases like those in New York for what he said were their negative overall restaurant industry consequences. To back up that assertion, Whatley pointed to one of two recent studies on the minimum wage increase issue, which only confused the issue more since each of those analyses came to vastly different conclusions.
The one Whatley seized on was released via the National Bureau of Economics Research and its authors said their findings show that such increases may result in higher wages, but also end up substantially reducing the overall working hours of low-wage earners.
To that, Whatley said, “We are beginning to see the harmful effects of drastic minimum wage increases that previous studies have predicted. We need policies that help small businesses, like restaurants, create more jobs and opportunities.”
But not only have minimum wage experts questioned the study Whatley cited for methods they said confuse the effects of wage increases with those of a “hot” Oregon labor market, according to the New York Times, but perhaps more significantly, that study’s conclusions are completely opposite those of the other study out of University of California, Berkeley, which found no significant effect on the industry from such hikes in the minimum rate of pay.
Brand chooses expert guide through the minimum wage maze
In other words, the industry itself appears to be somewhat confused about the long and short-term effects of these regulations regarding minimum wage. That is likely in part why brands like Fresh Brothers are putting money on expert help to negotiate the effects of wage hikes on chain health, as well as help with menu pricing and engineering, price change analytics and strategic input to take the best path into the future while satisfying all the stakeholders involved.
Fresh Bros. brand leadership explained in a news release that their goal in partnering with RMS of counteracting rising costs and boosting profitability without impeding traffic and loyalty sounds straightforward, but can be very tough to achieve.
“It simply makes sense to work with the experts at RMS,” Fresh Brothers CFO Tony Dellamano said in a news release. The chain has 19 locations which could be affected.
“As we grow, it’s important to base decisions on deep knowledge of our customers’ buying behaviors. … As an example of how RMS is helping us, we are taking a look at how we have had one size of salad — a really large salad — for nine years since the company’s inception.”
“Should we go to both a small and a large size? RMS is helping us determine the best course of action through customer testing and analysis. We would like to improve profitability on our salads, but not in a way that will turn customers off.”
Fresh Brothers will open five locations this year, with a goal to hit 50 units in the next four years.
“The help we offer is based on our knowledge and experience of how to tie operational strategies to actual customer buying behavior,” RMS COO Mark Kuperman, said in the release. “Given the current economic challenges all restaurant operators are facing, such assistance is needed now more than ever.”
Adds Fresh Brothers’ Dellamano: “Beyond labor costs and the cost of goods, operators have to worry about the impact of health care and workers comp insurance. It seems that major cost increases are going to continue to be a fact of life in the restaurant industry, so it’s smart to be proactive in addressing those.”
S.A. Whitehead: Award-winning veteran print and broadcast journalist, Shelly Whitehead, has spent most of the last 30 years reporting for TV and newspapers, including the former Kentucky and Cincinnati Post and a number of network news affiliates nationally. She brings her cumulative experience as a multimedia storyteller and video producer to the web-based pages of Pizzamarketplace.com and QSRweb.com after a lifelong “love affair” with reporting the stories behind the businesses that make our world go ‘round. Ms. Whitehead is driven to find and share news of the many professional passions people take to work with them every day in the pizza and quick-service restaurant industry. She is particularly interested in the growing role of sustainable agriculture and nutrition in food service worldwide and is always ready to move on great story ideas and news tips.
Article originally published on June 28, 2017 by Pizza Marketplace