Fat Brands CEO Warns Restaurant Industry Wage Hikes Aren't Free

March 11, 2019
Updated 1d ago

By Chloe Aiello

Winter weather and understaffing savaged February's restaurant industry outlook. Andy Wiederhorn, Fat Brands President and CEO, told Cheddar he anticipates a rebound come spring, but warned that rising wages will continue to pose a challenge for the margin-strapped industry.

"Everyone wants their employees to make more money, but there's a cost to it. It isn't free," Wiederhorn said.

Restaurant same-store traffic in February fell 3.7 percent industrywide ー its worst results since Sept. 2017 ー and comparable sales fell 0.61 percent over the month, according to a report from restaurant industry analytics company TDn2K. The report notes a pattern of severe weather that has impacted sales, especially in the Midwest.

"The Midwest ... just got slammed and everybody felt it there," Wiederhorn said, adding that his company, which owns Fatburger, Ponderosa Steakhouse and a number of other casual dining brands, experienced some insulation from negative effects of the season.

"Interestingly enough, our Hurricane Grill and Wings brands up and down the East Coast and in the Southeast in the greater Florida area didn't feel as much of a brunt of it ... so there is a little bit of insulation there. Also, maybe the weather didn't get hit quite as hard there," he said.

Seasonal disruptions are to be expected, but it's wage hikes over the long term that worry Wiederhorn, who said he's constantly coaching Fat Brands franchisees on how to adjust prices to maintain margins. He added that the New York and California markets, where minimum wages have been hiked, are especially tight for restaurants ー and that hits consumers directly in the pocket.

"The restaurant industry historically has had a fair amount of entry-level jobs, and keeping wages lower for those entry-level jobs has always worked well for the industry and pricing ー and as soon as you raise those wages, to a stable, family-support type level, then you are really increasing the cost to the consumer.

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