Financing

Many restaurants already pay $15 an hour

A survey of operators found nearly 30% already pay $15 an hour, but most are skeptical that the business can function at that pay level.
Wolf Ridge
Photograph by Simon Brubaker

Nearly a third (29.4%) of restaurant operators already pay $15 an hour or above, according to a survey conducted in mid-July by Restaurant Business. 

So why has that pay level become so controversial?

The same survey found that many in the remaining two-thirds of employers don’t believe the traditional restaurant business model can function at that threshold. Nearly 1 in 5 operators (19.5%) said they could not remain in operation with labor costs of that scale.

A slightly smaller percentage (11.8%) indicated that they would immediately consider closing if a $15 wage was enacted. And just under a third of the industry (29.5%) believes a mandated hike to $15 “would kill the restaurant industry.”

Conversely, only 10.8% of operators say a $15 wage would be a ho-hum development because they already pay at least that much

Respondents cited two major ill effects if a $15 minimum wage is imposed, one immediate and one deferred. First, a significant majority (59.3%) said they would need to raise wages across the board to keep a differential between skilled veterans and greenhorn hires in less-demanding posts. That so-called ratcheting effect would significantly amplify the squeeze on margins. 

Second, nearly 4 out of 5 restaurants (79.3%) reported they would raise menu prices to temper the impact on margins. Other research shows that prices are already jumping at a head-turning rate. What remains unknown is how consumers will react to that inflation as their pent-up demand is sated and the cost of other essentials, like gasoline, continues to rise.

A majority of the respondents (51.3%) said they’re not opposed to raising the national minimum wage. But they object to raising it all the way to $15 an hour. Only 10.8% said they regard $15 as a fair new wage limit.

Minimum wage

 

Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.

Multimedia

Exclusive Content

Financing

Red Lobster gives private equity another black eye

The Bottom Line: The role a giant sale-leaseback had in the bankruptcy filing of the seafood chain has drawn more criticism of the investment firms' financial engineering. The criticism is well-earned.

Financing

Beverage chains are taking off as consumers shift their drink preferences

The Bottom Line: Some of the fastest-growing chains in the U.S. push drinks, even as sales at traditional concepts lag in growing delivery and takeout business. How can traditional restaurants get in on the action?

Financing

Brands need to think creatively as the industry heads into a value war

The Bottom Line: Giving customers meal options they can afford will be key to generating traffic this year. But make sure those offers can generate a profit.

Trending

More from our partners