April marked a minimum wage increase in California, and quickly consumers found that all fast food restaurants had increased costs to account for the increased labor costs. Minimum wage in California now sits at $20/ hr., forcing QSR and casual dining restaurant owners to increase menu costs to account for the additional expense.
However, Hajime Jimmy Uba, CEO and President of Kuri Sushi, believes that the increased minimum wage impacting more casual restaurants is also affecting the sales across more upscale establishments. ““What we have seen instead is a general perception that restaurants as a category have become expensive, introducing industry-wide pressures regardless of a given restaurant’s relative value,” he said in a recent Nation’s Restaurant News (NRN) article, “to California specifically for some of Kura’s comp deterioration.” Kura Sushi reported “total sales for Q3 were $63.1 million, representing a comp growth of 0.6% and traffic growth of 0.3%. This is compared to comp growth of 3% in the prior quarter. Sales declines began in mid-April and were ‘sudden and unexpected’,” the company says.
“Looking at that versus where we landed for the full quarter, you can see how different our outlook would have been in the early weeks of April versus the time we gave our pre-release,” Uba said. “As we entered the latter half of April, once we saw the sales deceleration, that was like a sucker punch. We generally don’t make a habit of providing monthly comps, but to illustrate the point we’re trying to make, we’re providing some special context.”
Uba and Kura Sushi marketing teams are operating under the impression that this reflects a macro change in the industry, with minimum wage increases driving the shift. They will roll out new campaigns, including mobile ordering, with a particular focus on California to try to showcase “value propositions like large portion sizes.”
Economic shifts and market trends come and go, and there is always some impact on the industry as a whole. Watching economic trends closely, our restaurant consultants can prepare our clients for how these macro-level shifts may trickle down to impact their restaurant businesses, whatever type of restaurant it is. Richard Weil, owner and principal of National Restaurant Consultants shares his thoughts relating to declining sales and customer visits. “Understanding guests and their spending tree now is critical to attract and retain customers. Involve your staff, and even guests, asking basic questions about the customer experience.”
This is the benefit of working with National Restaurant Consultants: being prepared for what is moving down the pipeline before it is significantly impacting the bottom line. Contact a restaurant consultant today to make sure that your restaurant business is prepared for potential impact from market changes like the minimum wage increases, supply chain, and more.