Operations

Harri report finds major cost disparities for restaurant operators in key US markets

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March 26, 2025

Harri, a front employee experience technology for restaurants, released its first ever 2025 Wage & Labor Cost Index. The report looked at the growing disparity in restaurant labor costs and its impact on operational viability across U.S. markets, according to a press release.

The study looked at 300 QSR locations, including McDonald's,Wendy's and Burger King. The research introduces an innovative economic framework that adapts Purchasing Power Parity principles to analyze labor costs. The study employs a standardized "burger basket" methodology to enable precise cross-market comparison of wage impacts on profitability.

Key findings from the report include:

• Wage compression in California: Recent minimum wage hikes to $20 have effectively eliminated the traditional $3-4 wage premiums operators previously used to attract talent.
• Economic paradox in Los Angeles: Operators paying average market wages of $21.08 face hourly rates that reflect 160% of an average medium sized burger meal, despite keeping average prices at $13.13.
• Philadelphia wage surges: Actual wages ($11.92) exceed the $7.25 minimum wage by 164%, highlighting market-driven increases in the city with the nation's lowest wage floor.
• Regional disparities: West Coast wage-to-price ratios (136-152%) far exceed East Coast levels (110-119%), signaling the rise of distinct regional operating models.

"The restaurant industry is experiencing its most dramatic shift in labor economics since Ray Kroc standardized the QSR model in the 1950s," Luke Fryer, CEO of Harri, said in the press release. "We've created our first-of-its-kind index that helps operators understand and navigate the complex relationship between wages, pricing, and profitability."

This research is particularly timely as restaurant operators nationwide grapple with unprecedented wage pressures. The index illuminates how transformative wage legislation in states like California and New York is fundamentally altering the industry's economic foundations, and how restaurants are pulling different operational levers to adapt across different markets.

"We're witnessing wage acceleration significantly outpace both menu price adjustments and broader inflation, creating an unsustainable operational equation for many operators," Fryer noted. "As wage growth continues to climb, restaurants are under increasing pressure to either raise menu prices or reduce staff to control costs — which directly impacts customer satisfaction and traffic patterns. For instance, in markets like LA, where wages are approaching an average of $21 per hour while average meal prices remain under $14, there are critical unanswered questions about the sustainability of business models in high-wage markets."