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As an example, average restaurant profit margins are between 2% and 6%. They cannot absorb labor rate increases without raising prices or going bankrupt. Marg

As an example, average restaurant profit margins are between 2% and 6%. They cannot absorb labor rate increases without raising prices or going bankrupt. Margins tend to be similarly low for many other industries as well. Tech is a massive outlier in its ability to absorb large wage increases.

Kye 5y ago
What's the cost of not being willing to pay employees enough to care about doing a good job and hiring enough people to enable good work? I know plenty of people who've stopped eating out or order less because overworked and underpaid employees keep making mistakes.
pydry 5y ago
Their landlords can though. Evidence from LA suggests that this has happened as restaurants negotiated cheaper rents in response: https://anderson-review.ucla.edu/a-15-minimum-wage-may-have-partially-arrived-but-who-pays/ https://anderson-review.ucla.edu/a-15-minimum-wage-may-have-... Restaurants do also have a tendency to be run out of business and replaced by other restaurants when the minimum wage gets hiked though. Restaurant owners take hikes extremely personally. The market can be an unkind mistress.
- jrs235 5y ago
  McDonalds, Dollar General, Chick-fil-a, and many others are really in the real estate/property space. They just have an affiliated model that supports their (real estate) investments and reduces their risk (of holding vacant commercial property).
ipaddr 5y ago
They go backrupt landlord rents space at lower value cycle repeats. Place does well rent goes up. Wages are a small part of a larger process.
908B64B197 5y ago
Truth is they need to either renegotiate their lease or buy commercial real-estate instead and profit on the new restaurant owners coming to town. There's a reason most new restaurant close after 1-5 year. [0] [0] https://www.cnbc.com/2016/01/20/heres-the-real-reason-why-most-restaurants-fail.html https://www.cnbc.com/2016/01/20/heres-the-real-reason-why-mo...

Kye 5y ago

What's the cost of not being willing to pay employees enough to care about doing a good job and hiring enough people to enable good work? I know plenty of people who've stopped eating out or order less because overworked and underpaid employees keep making mistakes.

pydry 5y ago

Their landlords can though. Evidence from LA suggests that this has happened as restaurants negotiated cheaper rents in response: https://anderson-review.ucla.edu/a-15-minimum-wage-may-have-partially-arrived-but-who-pays/ https://anderson-review.ucla.edu/a-15-minimum-wage-may-have-... Restaurants do also have a tendency to be run out of business and replaced by other restaurants when the minimum wage gets hiked though. Restaurant owners take hikes extremely personally. The market can be an unkind mistress.

jrs235 5y ago
McDonalds, Dollar General, Chick-fil-a, and many others are really in the real estate/property space. They just have an affiliated model that supports their (real estate) investments and reduces their risk (of holding vacant commercial property).

ipaddr 5y ago

They go backrupt landlord rents space at lower value cycle repeats. Place does well rent goes up. Wages are a small part of a larger process.

908B64B197 5y ago

Truth is they need to either renegotiate their lease or buy commercial real-estate instead and profit on the new restaurant owners coming to town. There's a reason most new restaurant close after 1-5 year. [0] [0] https://www.cnbc.com/2016/01/20/heres-the-real-reason-why-most-restaurants-fail.html https://www.cnbc.com/2016/01/20/heres-the-real-reason-why-mo...