As we detailed earlier, Shake-Shack shares crashed to record lows after the fast-food restaurant as increased labor costs (thanks to Obama's minimum-wage-hikes) crushed margins and caused menu price hikes that slowed demand...
Shack-level operating profit margins decreased 300 basis points to 25.2%, primarily due to increased labor and related expenses resulting from increases in hourly wages that were implemented at the end of fiscal 2016...
Every market's different, John, and every market is affected by rising minimum wage. A lot of our markets will soon see a $13, $14, $15 minimum wage. Our average wage across Shake Shack is about $13 right now, starting.
And worse, in its outlook, the company stated that "Same-Shack sales growth to be flat to prior year (vs. 2% to 3%), which includes approximately 1.5% to 2% of menu price increases taken at the end of December."
This, as any rational economist knows - and we detailed in December 2015 before the socialist experiment in 'fair-wages' began, is exactly as was expected, and as The Wall Street Journal reports, Shake-Shack is not alone. A spate of high-profile New York City restaurants closing or increasing prices has raised concerns about the effects of higher minimum wages in one of the world’s most renowned food-and-drink cities.
Running a restaurant in a competitive and fast-changing market has never been easy, but restaurateurs and chefs say they are being pinched by rising wages for their workers.
In New York City, the minimum hourly wage rose from $9 to $11 at the end of December 2016, and will increase to $13 in December of this year.
Smaller businesses, tipped employees, and fast-food workers have different schedules for rising wages, but all are increasing.
“It’s going up too fast,” said Jeremy Merrin, proprietor of the Havana Central chain of Cuban restaurants, which has closed two of its New York City locations during the past several years, and raised prices at others. “We can’t catch our breath.”
Data provided by the city’s health department shows that the restaurant market is still robust with active establishments on the rise as of March. But the number of new permits for restaurants has fallen slightly in recent years with a 16% decline from 2013 to 2016.
In the five months since the $11 hourly wage took effect, several well-known restaurants have closed or announced plans to do so.
Angelica Kitchen ended a 40-year-run in the East Village in April. “I felt like I was being regulated in a way that took certain choices away from me that I felt belonged to me, rightfully, as a business owner,” said owner Leslie McEachern. “I’m not trying to undercut or underpay anybody, but I also don’t know what’s coming down the pike.”
An Upper East Side’s eatery known for its General Tso’s chicken, China Fun, abruptly closed in January after nearly 25 years. A note on the door blames “punishing rules and regulations” for the closure, and governments that “believe we should…pay for all that ails us in society.”
Other spots, such as Xi’an Famous Foods, a group of Chinese restaurants in New York City, have pinned the wage increases as the reason for raising prices.
Gov. Andrew Cuomo and the state Legislature last year passed a law raising the minimum wage to $15 hourly in New York City and its suburbs by 2021, with the rest of the state following.
“To suggest that people need to be living in poverty in order for businesses to succeed is untenable and untrue,”
Finally, if Shake Shack's actual results and New York's facts still don't convinve the 'intellectual-yet-idiots' that non-market-driven (minimum-wage-hike-set) compensation is economically irrational, we hope this helps...