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The prices will not double. According to someone on the internet†, labor is 25% of fast food revenue. The prices need only go up 25% to maintain profit margins.
by jws 12y ago
The prices will not double. According to someone on the internet†, labor is 25% of fast food revenue. The prices need only go up 25% to maintain profit margins.
Economics wil then raise its ugly fuzzy head and the balance between automation and human labor will shift, there will be more machines doing work. People already making $15/hour will eat less fast food since it is more expensive, people who have had their wages double will probably eat more fast food since they have more money. Total consumption could go either way. Total employment could go either way, it depends.
One possible outcome is that revenue gets shifted to lower paid workers who spend it, creating more jobs and a larger economy. Capital investors will get less, but they already have so much capital piled up that there is a glut and they have difficulty getting people to rent it from them (~3% prime rates).
What actually happens? That is the realm of gamblers.
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† http://smallbusiness.chron.com/common-food-labor-cost-percentages-14700.html http://smallbusiness.chron.com/common-food-labor-cost-percen...
- wavefunction 12y agotechnically, if labor is 25% of costs and the cost of that labor is increasing by 66%, prices would only need to rise 16.5% to maintain current rates of profitability (.25 * .66)
- greedo 12y agoBut raising the min to $15 is a 107% bump, so prices would have to rise by +/- 27%, before you factor on the increase in Social Security costs. The employer contrib to SS is 6.2%, and Medicare is 1.45%. So a $15 min wage actually costs the employer an additional $8.60/hour. An even easier and more insightful way is to carve up a Big Mac. In the US, the average price for a Big Mac is $4.79. Overhead: 30% or $1.44 Food Cost: 25% or $1.20 Labor: 25% or $1.20 Franchise Royalties: 13% or $.62 Profit: 7% or $.34 Now a Big Mac isn't as profitable as fries or soda, but those percentages are across the entire menu. Not a lot of profit for a burger... I think a lot of devs here are not seeing the overall economics of the fastfood world, and perhaps feeling a bit of guilt due to the difference in their salaries versus the fastfood workers...
- wiredfool 12y agoSo, basic restaurant economics: 30% food cost 30% labor 30% overhead 10% profit (ideally) Most restaurants run on really thin margins, a percent here or there is going to eat the profit. And a lot of restaurants, unless they're super successful are right at the edge. The owner puts in long unpaid hours or something similar.