Fast-food executives are welcoming the New Year with very little to spill as they prepare to increase minimum wage taking effect in twenty different states in the country. Some of these major increments mark the beginning of steady hike in salary that will stretch till 2021. In Washington, the hike could be recorded $1.53, to $11 per hour, in Arizona it could start from $1.93 to $10 per hour and Washington, D.C. the wages could receive an additional $1, to $12.50 hike per hour. In total, over 4 million low-wage workers across the country will be benefited.
However, the fast-food heavyweights such as the Dunkin’ Brands (DNKN) and McDonald’s (MCD) seem to enter the year with very little to worry. Increased minimum wages are most likely to reflect on prices of dinner items including hamburgers and steaks. This, is turn, may negatively impact the sales for restaurant companies.
Several fast-food eateries currently practice $1 menu, which in turn make them affordable for the lower-income groups. Hike in minimum wages will inevitably impact the $1 menu waiving off many lower-income customers leading to a decline in sales.
A study conducted by Purdue University’s School of Hospitality and Tourism Management, reveals that more than 1 million people working in food preparation and serving sector are receiving wages below the federal minimum of $7.25 per hour. Increasing their wages to $15 per hour would result in price rise estimated over 4%. This means that it will increase the price for a Big Mac to a considerable amount.
In an attempt to outpace competitors in terms of wage increment, the fast-food giant Dunkin’ brands jointly worked with its franchisees for reducing capital investments for remodels, improving supply-chain, simplifying operations, and also look into energy-management cost savings.