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.

---