• Discounts and special offers
  • Subscriber-only articles and interviews
  • Breaking news and trending topics

Already a subscriber?

By signing up, you accept Moneywise's Terms of Use, Subscription Agreement, and Privacy Policy.

Not interested ?

Squeezing margins

Wiederhorn explained how minimum wage increases could affect a restaurant's finances.

“A restaurant operator makes anywhere from five to 15% in the bottom line at the end of the day,” he said. Estimating labor costs of 30%, Wiederhorn suggested a significant wage jump, such as the minimum for California’s fast-food workers going from $16 an hour to $20 an hour, puts pressure on restaurants to raise prices.

Wiederhorn also mentioned strategies restaurants could adopt to offer value, such as opting for an all-cheese pizza over variants like pepperoni or all-dressed, “controlling” portion sizes, or leveraging technology.

Despite these strategies, he emphasized the importance of prioritizing the guest experience in the hospitality industry, stating that delivering a quality experience to customers “just costs money.”

Don't miss

Addressing affordability

Wiederhorn’s comments shed light on a critical challenge within the restaurant sector. Even McDonald’s, traditionally known for its affordability, is grappling with how to remain accessible to consumers.

During McDonald’s latest earnings conference call, CEO Chris Kempczinski said: “I think what you're going to see as you head into 2024 is probably more attention to what I would describe as affordability.”

The company’s CFO Ian Borden further stated that pricing decisions will be “consumer led,” adding that it’s the franchisees who set prices in their respective restaurants.

That said, McDonald’s reported growth in its business. In 2023, the company saw a 9% increase in global comparable sales, including an 8.7% rise in the U.S. Furthermore, adjusted earnings per share grew by 18% to $11.94, underscoring the company's resilience amid rising costs.

What to read next

Jing Pan Investment Reporter

Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.

Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.