Higher wages will actually be good for fast food restaurants

As the fight for higher minimum wages continue, the restaurant industry is caught in the middle of the battle.

But according to a new industry report by BTIG, rising minimum wages aren’t necessarily a bad thing for restaurant owners.

To understand why this is the case, let’s first look back to 2009.

Here’s BTIG:

During the depths of the recession, restaurant operators experienced a material moderation in labour turnover as employees faced significantly reduced job opportunities. The decline in labour turnover drove improvements in guest satisfaction as more tenured employees were better capable of serving guests and a reduction in hiring and training costs which benefited earnings.

In other words, limited opportunities during the worst of the recession left restaurant workers content with their jobs. Thus, employers had more experienced workers and less turnover.

As the job market continues to improve, increased turnover is returning to the restaurant industry. But, according to BTIG, restaurateurs can change this with higher wages and other employee benefits.

Several fast food chains have already boosted wages and benefits, granting them positive publicity while also working to reduce employee turnover.

“While investors may initially be concerned about the cost of these benefits we believe the more significant impact is through reduced labour turnover which improve the guest experience, store efficiency and unit level economics,” BTIG wrote.

And so then on this view, the long-term benefits of being able to keep employees who are better paid — and because of experience better workers — outweigh the conventionally viewed detriments of having to pay workers more.

As of July 1, McDonald’s raised wages at all corporate-owned locations to $US1 more than the local minimum wage. The company will also start offering five days of paid vacation to employees who have been with McDonald’s for at least one year.

On the same day, Chipotle announced it would offer tuition reimbursement to all employees, in addition to paid vacation time and paid sick leave.

Starbucks has perhaps taken the lead in terms of industry benefits. The coffee chain has partnered with Arizona State University, to cover four years of tuition for employees working towards online degrees from the school.

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