McDonald’s fast food likely to cost more after increase in the minimum wages

McDonald’s, Domino's

Reacting on the Government's decision to raise the minimum wages, McDonald's, the fast food company, may increase the prices and review its plans of opening 30 more restaurants, which were planned to be added to its chain of 143 restaurants, in the next three years.

The company had a plan to spend nearly $100 million on expansion. Last March there was a substantially increase in the wages and McDonald's gave all its youth workers the adult rates.

There was also an 8 per cent increase in food and paper costs. Currently the New Zealand dollar has been unstable and as the prices of the food commodities were quoted in US dollars their prices have also gone up.

McDonald's New Zealand Managing Director Mark Hawthorne said, "Labor made up 25 per cent of the cost of sales, so the 4.2 per cent wage increase would push up total costs by about 1 per cent, or $4 million a year."

After meeting the McDonald's franchisees concerning the increase in the minimum wage and other costs Mr. Hawthorne added, "I think most franchisees are saying they won't be able to absorb the full costs and we will have to put some measures in place. There will have to be some impact on the menu board."

The increase in the minimum wage is considered manageable by Domino's Pizzas New Zealand.

It's manager, Ryan Bohm said, " The majority of the 1100 workers at the country's 75 Domino's stores were on the minimum wage, but labor costs made up only in the low twenties of percentage points of total costs."