Thanks for visiting our page about price increases in San Francisco! We knew this day would come, but it doesn't make it any easier to talk about. However, we did make a handy video to help explain!
p.s. Sorry for the shoddy production quality...the side-cut camera fell without us noticing. And since we don't like forced videos, we only shot this in a couple of takes. That meant we got stuck with some bad home video footage. But hey, we're scrappy! =)
Thanks for watching the video! We know it's somewhat confusing if you aren't familiar with small business economics, but since we have a whole page dedicated to this topic, here are the need-to-knows all in one place:
- Right now, San Francisco minimum wage is $12.25/hr and it will increase to $13.00/hr on July 1, 2016.
- We pay our bobaristas well-above minimum wage, but try to keep it relative to current minimum wage. If minimum wage increases, so do our wages.
- Assuming labor as a percentage of revenue (LAPR) is 30% (a standard cafe-model metric), the same metric (LAPR) will swell to 37%. That means, every business will lose 7% in profit if they can't figure out how to cut costs or generate more revenue.*
- We launched in October 2011. Our Classic Milk Tea with boba was $4.00. Four years later, it's still $4.00 with the same ingredients: Straus organic milk, housemade syrup, Grade A balls, and premium loose-leaf teas. #nextlevelqualityforlife
- Along with the minimum wage increase, we've been absorbing price increases on our organic milk, water, and other cost-of-goods (COGS) over the last four years as well. We've been getting more efficient, but not at the same magnitude as a 30%+ COGS increase. Basically, as Biggie said, Mo Money, Mo Problems.
- Our total price increase of $0.50 does not fully absorb the 23%-30% in labor increase, but it definitely helps.
- We phased the price increase because it's the right thing to do in order for you, our fans and community, to adjust. No one likes a crazy price hike! We always said we did this for our mission— to share our love for milk tea and to bridge cultures— not for the money.
*For experienced restauranteurs, we know LAPR isn't the best metric out there, but it's the easiest way to explain what's happening. We can get crazier into our Excel models, but that's for another forum. #ExcelNotGisele
Let us know if you have any questions or comments, we'd love to hear from you. You can reach us at info AT bobaguys.com