Fitch: Restaurateurs watch minimum wage hike closely
While a federal minimum wage increase seems like a long shot, city and state raises such as the one passed last month in Massachusetts, have the restaurant industry nervous, according to New York-based financial research firm Fitch Ratings.
The restaurant industry, where labor represents roughly a third of costs, is already dealing with headwinds that include lower foot traffic and rising food costs, Fitch said. Higher labor costs due to rising minimum wages and health insurance requirements under the 2010 federal Affordable Care Act will pressure already low profit margins, which for operators range in the low-to-mid single digits on a pre-tax basis, translating into price increases and potential job losses, Fitch added.
In fact, the company said National Restaurant Association figures showed that following the last increase in the federal minimum wage in 2007, 58 percent of restaurant operators increased prices while 41 percent reduced hours.
With even a base hike impacting profits, and 22 states and the District of Columbia already above the federally mandated minimum wage of $7.25 per hour, restaurants are feeling the pinch, Fitch said. And with another dozen states, including Massachusetts, and others coming onboard even without a federal hike, restaurants are watching the minimum wage very carefully
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