+

Cookies on the Business Insider India website

Business Insider India has updated its Privacy and Cookie policy. We use cookies to ensure that we give you the better experience on our website. If you continue without changing your settings, we\'ll assume that you are happy to receive all cookies on the Business Insider India website. However, you can change your cookie setting at any time by clicking on our Cookie Policy at any time. You can also see our Privacy Policy.

Close
HomeQuizzoneWhatsappShare Flash Reads
 

The CEO behind IHOP and Applebee's reveals why higher minimum wages are actually a good thing for restaurant chains while the industry panics

Feb 25, 2019, 22:28 IST

Hollis Johnson/Business Insider

Advertisement

As unemployment drops and workers' wages rise, not every restaurant industry executive is panicking.

While margins are a growing concern as labor costs rise, Dine Brands CEO Steve Joyce says that higher pay among lower-income workers is ultimately good news for IHOP and Applebee's.

"When we talk to the franchisees I go, 'Remember they're also our customers,'" Joyce told Business Insider.

"So, if they're making more money, they've got more disposable [income] to come in," Joyce continued. "Or, if they weren't working and now they're working, or they went from part-time to full-time, they're going to drive business as well."

Advertisement

In 2019, 21 states and Washington, DC, raised their minimum wages. Pressure to raise the federal minimum wage to $15 per hour - which would more than double it - is mounting. Even without legislation, companies are paying workers more as they scramble to hire and retain talent in a period of low unemployment.

Executives at restaurants including Chipotle, Denny's, and Macaroni Grill have all mentioned labor costs or related issues as a top concern in the restaurant industry in 2019.

"There's no end in sight with the minimum wage," Nishant Machado, Macaroni Grill's CEO, told Business Insider. "It's going to get to a point where there's going to have to be some change, either in the labor models or in the pricing strategy."

Read more: From Denny's to Chipotle, chains' CEOs say the biggest challenge in 2019 is workers' skyrocketing pay

Joyce argues that lower-income customers getting paid more is something to celebrate. Joyce previously told Business Insider that typical IHOP and Applebee's customers have a household income of between $70,000 and $75,000. These people, Joyce says, are looking for both a deal and an enjoyable experience when they spend their money to eat out.

Advertisement

Hollis Johnson/Business Insider

"My sense would be that not only are people getting jobs, they're out spending ... Which is partly why we're pretty optimistic about this year," Joyce said.

Joyce acknowledged some concerns that the boost in consumer confidence might not last, as many experts warn of an upcoming economic downturn. However, he said that when people stop eating out, Applebee's and IHOP are "in the space that people leave last."

"When restaurants are empty it's going to start at Del Frisco's," he said. "It's not going to start at Applebee's."

NOW WATCH: McDonald's just added 'Donut Sticks' to its breakfast menu - here's our verdict

You are subscribed to notifications!
Looks like you've blocked notifications!
Next Article