Good News for Californians? In-N-Out Promises to Fight Minimum Wage Price Hikes

• In-N-Out Pricing Policy: Lynsi Snyder, president of In-N-Out, commits to maintaining current prices despite California's new minimum wage legislation, ensuring no significant increases in the beloved burger joint's menu prices.
• Competitors' Responses: While In-N-Out stands firm on pricing, other fast-food chains like McDonald's and Chipotle announce plans for pricing increases in response to wage hikes, aiming to offset rising costs.
• Industry Challenges: The restaurant industry faces a delicate balance in adjusting menu prices amid rising costs, with constraints on how much prices can be raised without risking customer demand, particularly for fast-service burger outlets.

Lynsi Snyder, president of In-N-Out, has pledged to maintain current rates at the beloved burger joint on the West Coast.

Snyder stated in a recent interview with TODAY that the private firm won't see significant pricing rises in California as a result of the state's new minimum wage legislation. The Fast Act, which increased the beginning salary for fast food employees from the previous $16 per hour to $20 per hour, went into effect on April 1.

Additionally, Snyder stated that because mobile ordering possibilities impede the customer service experience, the organization would not investigate them. She also stated that she has no interest in becoming a publicly traded firm or franchising.

According to the New York Post, an In-N-Out restaurant in Los Angeles recently increased the cost of a drink by five cents and a burger by twenty-five cents.

Executives at Chipotle and McDonald's Announce Pricing Increases

Snyder's adamance that In-N-Out won't raise prices differs from the stance several rivals have adopted in the wake of the Fast Act.

To counteract the salary hikes, McDonald's CEO Chris Kempczinski announced on a conference call in November that the business would raise pricing, reduce restaurant expenses, and boost productivity.

Chief Financial Officer Jack Hartung of Chipotle stated on the company's conference call that month that the Mexican restaurant chain anticipates raising California pricing by a "mid-to-high single-digit" percentage, but he made it clear that no "final decision" had been taken.

Before the Fast Act took effect, two significant Pizza Hut franchisees declared late last year that they intended to fire over 1,200 delivery drivers in the state, according to Business Insider.

Balancing Act: Challenges in Adjusting Menu Prices amid Rising Costs

The growing disparity between dining out and staying home, in addition to the several price hikes businesses have already implemented since the outbreak, limits the extent to which they may raise menu prices before seeing a sharp decline in demand.

Chains with a devoted customer base will find persuading customers to accept the higher price easier. Several analysts pointed out that Chipotle (CMG) can change its menu. CFO Jack Hartung of CMG told Yahoo Finance that the business expected to boost its California prices in the mid-to high-single-digit range.

According to Saleh, margins are down "100 basis points for the industry" from before the outbreak. The soaring costs of restaurants have not been entirely offset by price hikes, even if foot traffic has surpassed that of 2019.

Prices at fast service burger shops have already increased by 30% since 2019, which puts a limit on how much more businesses can charge at this time, especially for outlets that cater to lower-class consumers.