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Are consumers getting used to high restaurant prices?

Many industry experts have cautioned about higher menu prices in California as a result of the new minimum wage for fast-food workers.

For instance, Andrew Wiederhorn, chairman and founder of restaurant operator FAT Brands, recently warned on Fox Business that dining out costs would rise in response to minimum wage increases.

“Someone's got to pay for it and the restaurant operators don't have the margin for that,” Wiederhorn cautioned. “So, prices are going to go up.”

Jon Taffer, executive producer and host of “Bar Rescue,” also raised concerns about the likelihood of increased menu prices in California.

During a discussion on Fox Business about California’s new state law banning unadvertised service fees being added to meals and delivery services — so-called “junk fees” — Taffer stated, “The consumer is starting, dare I say, to get used to the $30 hamburger.”

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A 'finite set of economic conditions'

A decline in sales along with changes in legislation has Johnson looking elsewhere to grow his business portfolio.

“I'm not growing anymore in this state. I'm not expanding any new locations. I’m doing a different franchise in Nevada and that's where I'm taking those new jobs versus California.”

Ultimately, the issue centers on finances. Johnson emphasized the existence of a "very finite set of economic conditions" necessary for a restaurant to make money. He expressed that this new minimum wage bill "cast doubt" on his ability to continue operating in California.

Regarding his decision to invest in the neighboring state of Nevada, Johnson explained: “There just isn't so much regulation, there isn't so many different types of people telling you how to run your business.”

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About the Author

Jing Pan

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.

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