Two of the city's biggest fast-food chains yesterday said they will raise prices by 2 to 5 per cent in the next four months as inflation and the introduction of a minimum wage eat into profits.
In the six months to September 30, Cafe de Coral suffered the first drop in profit growth since the Sars epidemic in 2003.
A wage increase of 19 per cent for half of its 7,800 employees and rising food costs and rents drove the chain's net profit down by 15 per cent year-on-year to HK$190.8 million. Its profit margin also went down by 2 percentage points.
Fairwood, another corporation with fast-food stores in Hong Kong, also saw net profit plunge 17.65 per cent during the same period to HK$58.2 million. However, excluding a one-off gain from property sales last year that inflated its profit in the previous period, it would have been a 5.7 per cent increase of net profit. Nevertheless, rising costs still drove down its profit margin by 1 per cent.
Cafe de Coral chairman Michael Chan Yue-kwong said he expected wages to rise about 10 per cent in the second half of the financial year but that a robust expansion plan in Hong Kong and on the mainland meant the chain would pass on some of the costs to customers.
'The rise will only be between 50 HK cents and HK$1 per dish,' Chan said. 'Pork prices have jumped by 30 to 40 per cent since last year, while beef has risen by about 20 per cent.'
Both companies blamed the minimum wage law, in effect since May, for rising costs.