>>The CPI comes out and it's only up a fraction excluding food and energy. Give me a break... What do Americans spend a large chunk of their monthly incomes on--FOOD AND ENERGY<<
Wherever you eat, you're paying more
Higher wages increase cost of dining in or out
April 17, 1999
BY CAROL TEEGARDIN
Free Press Business Writer
Almost anywhere you go, it's costing more to eat out these days, whether you're buying drive-through burgers or shrimp chow mein.
That stop at the corner grocer is getting costlier, too, with items like milk and soup escalating in price.
The reason is simple: Restaurants and convenience stores are having to pay their workers more to keep their counters staffed and their shelves stocked.
Although minimum wage is at $5.15, it's not uncommon to find a suburban McDonald's with signs in its windows offering $8 an hour. Most business owners, from fast food to corner grocery stores, say they now must pay their workers anywhere from $7 to $17, and managers up to $35,000 a year.
Gary Leif owns Stir Crazy Cafe, a Chicago-based stir-fry chain that just opened at Great Lakes Crossing in Auburn Hills. He has to pay as much as $17 an hour for a line cook.
"The labor costs in Detroit are high because there's a shortage of workers here," Leif said.
It's hard to get a fix on exactly how much Detroit-area restaurants and convenience stores are boosting prices to cover higher wages. It's not a topic most owners and managers are eager to discuss.
But Renee Billotti, who manages a Mr. Pita on Van Dyke in Sterling Heights, says all of the workers in her store make well over the minimum wage. As a result, "prices have gone up three times since I started here. The $3.99 Reuben Pita sandwich we sell now was about $3.69 five years ago."
Diners have certainly noticed the extra quarter or 35 cents being added to their favorite dishes, but so far they have been willing to pay it.
"If it's a good place to eat, if the service is good and I like it, I'll pay more," said retired educator Jack Adams, of Clawson. "With the economy the way it is, where business owners have to pay more for help, it doesn't bother me if something goes up a few cents."
Wendy's, for example, has boasted about its 99-cent Super Value Menu for more than decade. But at some restaurants, such as the one on Michigan Avenue in Canton Township, some items -- including the junior bacon cheeseburger and Biggie fries -- are now $1.19.
A spokesman at Wendy's International in Southfield who didn't want to be identified admitted there have been minor increases in prices of some items.
"Our prices on The Double and the Chicken sandwich have gone up," said an employee at a Southfield Wendy's who also would not give his name. (The Double is a burger with two meat patties.) "Our customers probably don't notice it because it's happened over a period of time. But our prices have gone up."
Charles Nicholas, spokesman at Burger King headquarters in Miami, said its prices may go up.
"The corporation tries to keep a pretty consistent price point, but in some areas of the country where labor costs are getting higher and higher, it may affect the franchisee side," Nicholas said.
Major grocery store chains like Farmer Jack and Kroger say high labor costs haven't affected food prices. Yet, small, independent grocers like Al Albert, owner of Al's Salvage Groceries in Detroit, are feeling the pinch.
"Three years ago you could pay minimum wage, but you have to pay more to keep people now, and it's definitely driving up the cost of food," Albert said. "Three years ago you could buy a can of Campbell's chicken soup for 29 cents here. Now it's 79 cents. Milk used to be $1.99 a gallon, now it's $2.99."
Restaurant and store owners don't like raising prices, but it's a necessary evil, according to Joe Williams, owner of the Detroit Pizza Factory on Cass in Detroit.
"The labor costs are the highest expense I have right now," Williams said. "I pay my delivery people $10 an hour. I have two managers who earn $28,000. This year, labor costs and the high cost of cheese pushed up prices 30 percent. I sell a lot of pizzas, but it's not like it used to be."
The high cost of labor was a factor in Soon Hee Lee recently closing the Jade Express on Congress in Detroit. Lee closed because she couldn't make a profit.
"Four years ago I put $300,000 in here, and I thought it would be nice, but it didn't work out," Lee said. "Professional Chinese cooks won't come to downtown Detroit and work for less than $3,000 a month."
Despite rising costs in food and labor, financial experts say the nation is not heading into inflation, and that consumers are comfortable spending, what with low unemployment, record stock market closings, and confidence that the good times will continue.
"Labor shortages may affect specific restaurant chains or markets, but they themselves will have to address that. The challenges are there, but you can't draw the conclusion that this will lead to inflation," said John Thompson of the National Grocers Association, in Reston, Va.
Not everyone agrees.
"I don't believe it when people say we're not in an inflationary period," said Albert, the grocer. "I think maybe we are."
Greg Rubin, a partner at Arthur Andersen retail consulting practice in Chicago, agrees and says that escalating labor costs will eventually contribute to inflation.
"If you're a food retailer, your total picture is built out of your cost structure. Your rent and labor are your largest costs after food, and some people have to raise prices to achieve their profit margin."
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Good Luck,
Lee |
