Quote:Applebee's has some key advantages:
1. Volume. The old rule of volume applies--the more you have, the more you can afford to lower prices based upon predictable consistency of numbers.
2. Food supply costs. A local restaurant might have to pay $100 for a pallet of hamburger buns from their supplier. McDonald's--again, because of volume--could go to that same supplier and say that they want ten pallets of hamburger buns, and they'll pay $600 for them. The supplier is delivering a shipment in bulk, which lowers transportation costs, and they're offloading a large amount of product at once, making it easier to provide a lower price.
3. Overhead. I was the manager of a pest control branch in California once. We had small, single-unit restaurants on service that corporate salespeople had signed up at $125 per month. $125 per month for a kitchen the size of a typical home's living room! The service usually took about 20-30 minutes, depending on what issues came up (if any), and then our tech would go on his way. Those small single-unit operations were paying over $250/hr. for service, and if we had to go back out there, depending on the problem, they might be paying a ton more. Say we had to fog the place for roaches and vacuum up any that we found (and there were usually hundreds of thousands). The shop owner had to pay his staff overtime to clean and prep the kitchen, which is no small feat, then had to pay a fee of up to $400 for the service, and an additional $150 if they wanted the cleanout done between 8 PM and 7 AM--they almost always wanted it done around midnight, for obvious reasons.
Now, contrast that with a major fast food chain that had us under contract. Their kitchens were much larger than the average hole in the wall, and we had contractual minimum amounts of time that we had to be there, even if the place was spotless, our baits were fine and there were no reports of anything so much as an ant walking in. Know what that chain paid? $35 a month per location, with a contracted minimum of 30 minutes per stop. What happened if they had a roach problem? We went and took care of it with the same level of service that we gave to that small business owner, only this time we didn't get paid a penny for it, even after the location's manager demanded that we be out there at 2 AM on the nose and not leave the building until he returned to lock it back up at 6 AM--even though the service takes two hours, tops. The fast food chain paid $35 for the same amount of work that the local restaurateur paid $675 for. Know why? Because the fast food chain had 7,000+ locations on service in the United States, all on a five-year contract. The sole proprietor? He had one location on service, and his contract had expired leaving him month to month and able to cancel anytime.
See why your logic doesn't work? Applebee's will eat the wage increase, yeah, but their peripheral costs are so much lower that they don't have to pass the brunt of that price hike along to customers. Chiefjag isn't getting those same big-brand prices on everything but labor, so he has no choice.
While I certainly agree with your premise that small operators that are paying minimum wage will be affected more than large operators paying mainly minimum wage, the fact remains that in my working lifetime, the minimum wage has doubled, yet the mom-and-pops have still stuck around in the shadows of the McDonalds and Taco Bells.
The Chief used the example of absorbing costs by raising the price of drinks alone, when in fact, he'd have to raise the price of his food as well to maintain profit. A 10 dollar meal would go to 15 bucks, a 5 dollar drink would go 7.50, or something like that. His operating cost might be higher due to smaller volume discounts, but labor is a significant percentage of the large companies' operating costs, too. If margins really are as tight as the restauranters tell me, then the big guys would have to raise their prices too. Perhaps not as much, but they would.
No one has to tell me that the large companies in this country get a break the little guys don't. Just don't tell me a minimum wage can't be raised and the country's businessmen won't still prosper. It's happened 4 times, at least, in my own working life. It's a bit overdue, now.
Quote:While I certainly agree with your premise that small operators that are paying minimum wage will be affected more than large operators paying mainly minimum wage, the fact remains that in my working lifetime, the minimum wage has doubled, yet the mom-and-pops have still stuck around in the shadows of the McDonalds and Taco Bells.
Those were gradual, organic changes. A sudden jump to $15 per hour isn't based on the concept of a minimum wage as we're used to it. It's based on the concept that teenagers delivering pizza and asking if you want fries with that should be paid a wage sufficient for most single adults to live comfortably on. We're talking about fundamentally changing what a minimum wage is, and letting small businesses bear the brunt of that.
Quote:Those were gradual, organic changes. A sudden jump to $15 per hour isn't based on the concept of a minimum wage as we're used to it. It's based on the concept that teenagers delivering pizza and asking if you want fries with that should be paid a wage sufficient for most single adults to live comfortably on. We're talking about fundamentally changing what a minimum wage is, and letting small businesses bear the brunt of that.
Yes, but remember the original article that started this discussion discussed a raise from $12.25/hr to $15.00/hr.
I agree essentially doubling the minimum wage would cause a serious shock to the financial system, but that's not what we were talking about originally. And again, While I see your point about smaller operators being hurt more than larger ones, there's not a business out there using mainly minimum wage earners that wouldn't be affected by such a jump.
Let's not forget that customers are currently paying the wages via tips. That 15% or whatever they are obliged to pay on top will disappear.
Quote:Let's not forget that customers are currently paying the wages via tips. That 15% or whatever they are obliged to pay on top will disappear.
...and be passed right to the business owner instead.
[BLEEP]! I'm trying to educate people here on REAL LIFE SMALL BUSINESS economics and people want to debate.
So the minimum wage has doubled but the "mom and pops have hung around in the shadows of the McDonalds and Taco Bells?"
Geeze Louise, how many Mom-and-Pops have you seen close. I can tell you this, the place across the street from me has been 9 different restaurants since I opened. Those Mom-and-Pops have not "hung around in the shadows of McDonalds and Taco Bells".
Please tell us how your small business is able to compete with the purchasing power of the behemoths, I'd love to hear this.
Regards......................the Chiefjag
Quote:[BAD WORD REMOVED]! I'm trying to educate people here on REAL LIFE SMALL BUSINESS economics and people want to debate.
So the minimum wage has doubled but the "mom and pops have hung around in the shadows of the McDonalds and Taco Bells?"
Geeze Louise, how many Mom-and-Pops have you seen close. I can tell you this, the place across the street from me has been 9 different restaurants since I opened. Those Mom-and-Pops have not "hung around in the shadows of McDonalds and Taco Bells".
Please tell us how your small business is able to compete with the purchasing power of the behemoths, I'd love to hear this.
Regards......................the Chiefjag
Chief, I'm not in the restaurant business, but the local guys in my hometown - and there are tons of them - stick around by:
1) Offering better food/atmosphere
2) Filling a niche others don't
3) Offering the right product in the right place in town.
You've watched 9 places fail across the street. You're doing something right and they're doing something wrong. I'm actually quite interested in finding out what that is, because yours apparently is one of the few that sticks around.
And yes, we want to debate. This is a political forum. My own business did not employ at the minimum wage level, so we were immune to a raise in the federal wage.
OK. Good for you. And the "tons" of others.
Regards..................the Chiefjab
Exactly not everyone just wants to eat cheap rubbish. I never go to McDonald's, there's no atmosphere, the food is terrible etc.
I mean I bet many here buy more expensive craft beers because they taste better than the mainstream mass produced cheap beers...
Quote:I don't think craft beers taste better. To me they usually just taste way more bitter.
War on IPAs?!?! Not on my watch. To the pitchfork emporium!!!
Quote:War on IPAs?!?! Not on my watch. To the pitchfork emporium!!!
Ha, you certainly live in the right city!
Quote:I don't think craft beers taste better. To me they usually just taste way more bitter.
Sam Adams and Budweiser Platinum are not craft beer.
Quote:Not even good macros...
No such thing as a "good macro" imo, only the tolerable ones like XX, XX Amber, Land Shark and Blue Moon
Quote:No such thing as a "good macro" imo, only the tolerable ones like XX, XX Amber, Land Shark and Blue Moon
We really should go drinking sometime.
Quote:We really should go drinking sometime.
I don't know, can you handle my elite leftist beers? Pliny the Elder is one of my favorites...but it's brewed by Russian River...
Beer snobs are even worse than wine snobs.