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Customers will ultimately pay the price from wage increase, says Sonic chief

The higher minimum wage will likely be paid for through menu pricing in order to keep franchises profitable, says CEO Clifford Hudson.

April 1, 2016

Boosting the minimum wage will only boost the cost of food and Sonic CEO believes there is little doubt of that scenario taking place.

The wage boost will prove to be an inflationary economic impact, said Clifford Hudson, according to a Reuters report.

"I am not suggesting that there is not a challenge to move that kind of pricing, that kind of hourly wage pricing component, but these are proposed on a multi-year stage basis and there is no doubt that this is going to be inflationary as this relates to consumer product," Hudson said during his company's quarterly conference call Tuesday, report Reuters.

Passing on the cost to food prices will be necessary for franchises to stay profitable, he stated.

"It is going to be incumbent to fund us or them as that development occurs," the CEO said. "To help them develop a pricing model et cetera that works for them in such a way that doesn't disrupt their business, their individual store or on a broader enterprise basis."

Just this week California became the first state to enact a $15 minimum wage that will be rolled out incrementally through the next four years. Several cities in California had already taken such action. Several states nationwide are considering the same move.