The 'Fight for 15' may cost restaurants more than just higher wages, study says

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By RYAN GORMAN

Protests have erupted around the country as fast food workers demand more pay, but at least one non-profit thinks they don't understand the consequences of higher wages.

The "Fight for 15" that has led thousands of employees to march and chant for a $15 minimum wage this summer may very well drive a number of their employers out of business, according to the conservative think tank Heritage Foundation.

Raising wages to such a level would cause profits to drop to an unsustainable level as sales drop while menu prices go up, the non-profit argues.

The average fast food worker made $9.07 in 2013, according to the Bureau of Labor Statistics. A raise to $15 per hour would represent a 66 percent pay hike, on average.

This would result in a 15 percent rise in costs on a business with only about a three percent margin. McDonald's. Burger King and their ilk only clear about $27,000 in profits each year, according to the non-profit.

Each employee pulling in $15 per hour would earn $30,000 per year - each.



Burger joints would be inclined to pass this cost on to their customers, just like any other business. But fast food is not like any other business.

A series of studies conducted since 1990, cited by the Heritage Foundation, showed that for each price hike of even only one percent, fast food demand drops by almost the same amount.

Extrapolated out, a 10 percent menu price increase would result in a nine percent drop in sales.

But restaurants would have to raise prices by a far greater amount, according to the non-profit.

It is believed by the study's authors that the Taco Bells and KFCs of the world would have no choice but to hike prices a whopping 38 percent, leading to a 36 percent decline in sales.

This drop in sales would lead profits to plummet 77 percent and force restaurants to lay off staff or perhaps even close.

The fast food industry relies on cheap labor and razor-thin margins. Disrupting this business model, as unfair as some may feel it is, will lead to deep fried failure, the Heritage Foundation asserts.

It could also spell the end of value meals and the dollar menu, which many people do rely on to get by.

Tell us how you feel in the comments or in our poll. Are you for or against a $15 minimum wage?



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