The cost of fast food

[aeromech]

OMG

I bought lunch today for some guys doing some work at my house. Local taco shop. Nothing fancy. I called in an order for three California burritos. That’s it. I supplied the soft drink from Costco. Order total was $42.86 and I left $1 cash tip.

In my mind one of these burritos should be priced at maybe $8-9. The guys were appreciative but Jeez.

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[74 Thing]

You must have not bought a burrito in CA in a while. 12-15 dollars is the norm in northern CA. Prices are just going to go up further when the ridiculous minimum fast food wage goes up in a few months and the businesses have to pass along the costs to the consumer. I already pass on the 12-15 dollar burrito, but soon hamburgers will all be 10 dollars plus as well. The added cost makes my decision to eat cleaner a lot easier.

[Abscate]

Labor costs in that business run about 20% of gross, but pinning high costs on labor rates is a common canard. COGS and energy are through the roof, all due to Tesla of course.
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[74 Thing]

Add to that if you have a manager in the fast food business that makes more than entry level and entry level fast food wages are increased to $20 per hr in CA then the manager as well as all other employees that make more than the entry level worker will want a pay raise as well.

I think a lot of these companies will actually fire a lot of employees and go to full automated or kiosk self serve type order counters instead of paying these higher salaries to employees.

[oprn]

It's been that way here for at least 6 or 7 years. The only time we patronize fast food joints is when we are on a long road trip and trying to make time. Otherwise we find a sit down restaurant, the cost is the same, the food is far superior and I find face to face is easier to communicate too.

I have nothing against new immigrants who depend on these low wage jobs but combine a strong accent with a limited vocabulary, bad speakers, diesel trucks with no mufflers running around me, and my own ringing ears that the experience of ordering a meal in the fast food drive through line up frustrating at the very least and at times impossible.
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[Cusser]

VERY rare for me to go to a fast food type restaurant. Mrs. Cusser is an excellent cook, typically makes enough for my lunches. And she has a Masters in food science/meat science.

But she still has issues driving a stick shift (I have 5 manual transmission vehicles, including the two VWs) even though she's driven stick for decades.....yes, she's not trainable....

My two daughters drive stick much better, taught both on my 1971 VW.
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[vwracerdave]

45 years ago, when I was a teenager minimum wage was $2.35 an hr. I worked in a grocery store sacking groceries all thru 11 & 12 grades. For that $2.35 I could go to McDonalds and get a Big Mac, fries and Coke. For that same $2.35 I could go to a movie Fri or Sat night. Today it still cost 1 hr. of minimum wage to go to a movie or eat at McDonalds. Raising minimum wage does not do anything. The cost of all goods and services are based on minimum wage. If California wants $20 hr. minimum wage than keep your mouth shut when it cost $20 to eat lunch at McDonalds. When they do raise minimum wage, it is a silent way for the Government to raise your taxes. When you make more money, you pay more taxes. If you look at the poverty rate in the USA it is 1 1/2 times minimum wage. If they raised minimum wage to $50 an hr. than everybody that made less than $75 an hour would still be living in poverty. Minimum wage will never be a livable wage. Last job I was working before I retired, I was earning 4 times minimum wage, when minimum wage increased, I fully expected to get a raise where I was still earning 4 times minimum wage. Our labor union made sure that happened.

Today in Oklahoma minimum wage is $7.35 an hr.
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[EverettB]

[raygreenwood]

As Abscate noted, "generally"....very generally....labor at well established, well run fast food restaurants is ~20%....with peaks to about 25%.

Many eons ago I worked for McDonald's for a couple of years while in college. I learned a lot and have kept up over the years. I know numerous businesses in sectors that connect with my industry that supply equipment and construction to the fast food industry. It's one of the most interesting industries around.

The labor issue cost wise right now for fast food is that labor costs....PER HOUR.....in some places....have increased by between 50% and 100%. By that I am NOT saying the percentage of the total cost has has doubled. I see this "almost" everywhere I travel, almost from coast to coast.

Example, here in OKC....before all the insanity of the past 4 years....labor rates at basic fast food were ~$10 per hour starting. Lots of turnover.
Covid hits, no one wants to work with guv'ment checks in the mail and certainly not for $10 an hour.

Cut to the past year +....now, average starting cost around OKC for basic fast food is $15-$17 per hour.

AND.....here is the rest of the cost issue.

1. Energy wise, fast food restaurants for the most part have never been high efficiency. The buildings and equipment in them are set up for throughput. They take a LOT of electricity, natural gas etc. While natural gas prices may be spiking down at the moment, a month or so ago they were the highest since 2008.

2. Overhead cost in the form of infrastructure investment.....for automation....to run with less staff. Tons of $ spent. All of the chains are investing. Not just kiosks like McDonald's. Different burners, grills, fryers and especially HVAC.

A lot of that investment is being spent to generate less maintenance hours. The cost of having to have specialized maintenance personnel come in all the time is a killer cost. Those people make far more than $15-$17 per hour. Equipment that requires less maintenance is a good investment.

An example of this is an industry associate of mine works for one of the largest UV curing and disinfection equipment mfgs in the US. Over the past two years, a whole slew of clients have been spending like mad to upgrade.
Example, numerous McDonald's groups in her region have been buying UV B/C ozone generators for their HVAC units over the grills. It allows the new filtration systems to collect about 10X more grease from the air and putting it in the sump. It cuts down routine HVAC stripping and cleaning by orders of magnitude.

Instead of stripping and cleaning monthly in a busy restaurant....it goes to twice a year. That's a LOT or cash savings.
Dairys use similar equipment for tank disinfection.....which can greatly increase shelf life of certain products....like 2X. That's huge cash savings.

I see numerous cost saving but expensive out front....equipment investment going on in the past 2 years. They are not eating these costs. We are. They are not financing these improvements. Finance costs are prohibitive right now. This is company cash expenditure with direct passing on of the costs.

3. Biggest cost is the food raw materials themselves.....combined with the cost of shipping it to the distribution centers and the restaurants. The entire food industry including grocery store chains is seeing this right now.

Bluntly put, it does not matter that inflation is slowly reducing month over month. It stayed up too long. Coupled with labor shortage issues, the vast majority of manufacturers....adapted.
The first year plus of the insane inflation.....they cut corners, ate crow...and did anything they could to NOT raise their price to their clients (the restaurants) because that would drive down demand.
The first big thing the food and raw goods companies did was alternate production lines running. They quit running so many production lines and this was a no brainer....because they could not get enough labor at the tail of of Covid anyway.....and there were raw material shortages anyway. Costs started rising. This is true in everything from food to electronics to commodities of all kinds.

After too long they could no longer swallow the losses. They are passing them on. Yes, they are losijg customers who cannot afford to eat out as often.....but as enough people adapt and pay the costs, slowly demand....should....rise and production volume should rise...overhead costs should drop....and it's a long slow gradual ramp down again. Hopefully.

Ray

[Bulli Klinik]

I heard on the radio the other day that minimum wage in Denver increased to over $18/hour. Still not enough to live there.

Fast food is shit.
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[raygreenwood]

[chrisflstf]

21 states raised min wage this year. California is $20 per hour now for fast food workers. 2 years ago a jumbo jack was $4.37, before this past xmas it was $6.41. Starting jan 1, jack in the box raised prices due to labor costs going up. Now the same burger is $7.57, all due to some folks, you know who, screaming for higher wages to fight inflation.

So we get more inflation. Sone people never learn. And the whitehouse claims people have $1700 more per year than pre pandemic. All lies. Ive lost $300 per month in the last 3 years

[Xevin]

Growing up in the Central Valley of California in the 70s and 80s. I remember people pissed off at illegal aliens picking lettuce, tomatoes, other crops, and washing dishes. People thought they were taking jobs away from the citizens of America. These same workers were revered by many of the American farmers and service industry owners for keeping overhead down and a bit more profitable. Many of us have benefited from the weird double standard. Well things have changed. Not so easy to pay someone $2.00 an hour under the table.

I haven’t been out to a fast food place in a long time. Yesterday I purposely went to McDonald’s to see what the hell this $16 Bigmac was all about. Haven’t had one in years. I got a BigMac and Fish Filet for $6.49, it was a BOGO special (Buy One Get One). They also had some other inexpensive BOGO specials. I had my own drink and hate McDonalds French fries so that saved me a few bucks. But McDonalds soft drinks only costs a $1.35.

The Big Mac was garbage but I kind of liked the Filet o Fish with that mayonnaise tartar sauce gunk wiped off.
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[Jon Schmid]

Go to In-N-Out (if there's one near you). Great food and reasonably priced, especially given what they pay their employees.

[hobthebob]

Yeah the Filet O' Fish is pretty good. All things considered, that's pretty cheap food, but again, the burger was probably trash...

Near me in Austin restaurants all around are increasing prices slowly, and even Sonic discontinued their happy hour discounts on food. I'm starting to see that I should just go home for or pack lunch now.

Especially since not only are wages increased, but almost EVERY SINGLE restaurant asks if you wanna tip them. I had a bartender give me a nasty look when I picked up a pizza and didn't tip her. I'm sorry, I didn't realize running into the back for 30 seconds is worth a $2 tip! I'm going to stop tipping, just realizing how much wages are increasing.

[Tram]

[raygreenwood]

[Tram]

[Xevin]

[Abscate]