Your turkey sub soon may cost you a little more.
As minimum wage increases take hold in various municipalities across the United States — with Chicago and Los Angeles two of the latest big cities to implement hikes — restaurants may be among the hardest-hit businesses.
They’re already facing reduced foot traffic and a worker shortage, and the rising labor costs could mean higher bills for that slowing trickle of diners.
“Ultimately what a lot of companies have to do is raise prices,” Bloomberg Intelligence analyst Jennifer Bartashus said of the wage increases. “That becomes a delicate balance — you can’t raise your prices too much because then you lose customers, and traffic is already under pressure.”
The federal minimum wage has been $7.25 since 2009, but state and local governments have enacted higher wage floors in recent years. Several states and cities did another round of hikes on July 1, putting even more pressure on local businesses.
In Iowa, minimum wage stands at that $7.25-an-hour figure.
While higher wages mean more take-home pay for workers, they eat away at already razor-thin margins at restaurants, where some owners say they have no choice but to raise menu prices.
Bricks in Chicago, for example, will increase menu prices 10 percent in the next month, general manager Clayton Falwell said. The restaurant already raised prices on draft beef, switched to more efficient LED lighting and is running food inventory leaner.
“So many people are required in restaurants — you can’t computerize a guy that’s making your pizza or your salad,” Falwell said.
Starbucks recently bumped up the price of a drip coffee by 10 to 20 cents.
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Although the coffee giant didn’t attribute the increase to labor costs, Starbucks CEO Kevin Johnson said in a June interview that “increases in wage and occupancy, and other regulatory requirements” were making some of its urban stores unprofitable.
The chain said it will close 150 company locations next fiscal year, compared with the 50 that it typically shuts annually.
The higher labor costs come at a time when a dearth of low-wage workers extends across the country, leaving restaurants clamoring to find enough staff to grill burgers and build sandwiches. The jobless rate now stands at 3.8 percent, matching April 2000 as the lowest since 1969.