California franchisee Alex Johnson estimates that his 10 restaurants will lose a combined $470,000 because of his state’s new minimum wage law.
California Governor Gavin Newsom’s successful move to raise the minimum wage for many of the state’s fast-food workers is having a devastating effect on businesses that are being forced to cut labor costs to survive, critics say.
Chipotle, McDonald’s and other major fast-food chains have been raising prices to catch up with the $20 an hour they’ve been paying workers since the new wage went into effect on April 1. The rule applies to restaurants with at least 60 locations nationwide, except those that make and sell their own bread.
The California Business and Industry Alliance (CABIA) said about 10,000 fast food jobs have been cut since Governor Newsom signed the bill. California Assembly Bill 1287 became law last year, and CABIA ran an ad in Thursday’s state edition of USA Today featuring a mock “obituary” for a popular fast-food brand to highlight the law’s unintended consequences.
About 80% of Americans consider fast food a “luxury item” because of its high price.
A car drives through a McDonald’s drive-thru in San Pablo, California. Fast-food chains are being hurt by rising minimum wages for workers, industry groups say. (Justin Sullivan/Getty Images/Getty Images)
The ad highlights several restaurants that have had to raise prices, lay off employees and in some cases close locations to stay afloat, and features news clips documenting changes made by brands like El Pollo Loco, Subway and Burger King in the state.
“California businesses have been under full attack and assault for years,” Tom Manzo, president and founder of CABIA, told FOX Business. “This is just another law that puts businesses even more at risk.”
“By giving hardworking fast food workers a voice and a seat at the table, our state is one step closer to fairer wages, safer and healthier working conditions, and better training,” Governor Newsom said in signing the bill.
Unlike private businesses, governments have options when they run out of money, Manzo said, and government officials are living in a “fantasy world” by thinking big wage hikes will help workers and businesses.
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The $20 minimum wage approved by California Governor Gavin Newsom is causing a “crunch in businesses,” said Angela Marsden, a Los Angeles restaurateur. (Getty Images/Fox News Digital/Photo Illustration/Fox News)
“We can’t raise the price any more,” he said, “and it’s pretty clear. People aren’t going to pay $20 for a Big Mac. It’s not going to happen.”
He noted that to comply with the law, some restaurants are cutting employee hours and will likely turn to automation in the future.
A few weeks before the wage hike took effect, some California fast-food restaurant owners began laying off employees in anticipation of higher labor costs. In December 2023, Southern California Pizza Co., which owns several Pizza Hut restaurants, Announcement of dismissal Approximately 841 delivery drivers across the state are affected.
Meanwhile, rising wages are accompanied by rising fast food prices due to inflation. Implemented by LendingTree The survey found that meals have become so expensive that 78% of consumers consider fast food a “luxury” purchase.
FOX Business’ Brian Bremberg looks at soaring fast food prices under President Biden.
FOX Business has reached out to Newsom’s office.
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Part of the push for the increase was to give fast-food workers more economic freedom in a state known for its high cost of living, but critics say the jobs were designed as a stepping stone for young people.
“It’s an entry-level industry,” Manzo said. “You get a job working in a fast-food restaurant as a kid, you learn a good work ethic, and that carries over to life.”
