CABIA President Tom Manzo appeared on Fox & Friends to discuss how the minimum wage increase is affecting the fast food industry at a time when thousands of people are out of work.
California’s new $20 minimum wage for fast-food workers has already caused prices to rise and customer traffic to drop at restaurants since it went into effect on April 1, data shows.
Recent Research Released by Placer.ai The investigation found that as a result of the new law, which affects more than 60 restaurants, most fast food chains have increased menu prices in the state by a percentage range from the mid-single digits to the mid-teens, and that the price increases are hurting business.
Governor Gavin Newsom signed a bill into law on September 28, 2023 at SEIU Local 721 in Los Angeles that will raise the minimum wage for fast food workers in California to $20 an hour. The law goes into effect on April 1, 2024. (Sarah Reingewirtz/MediaNews Group/Los Angeles Daily News via Getty Images) / Getty Images)
The analysis found that in February and March of this year, foot traffic at major chains in California increased compared to the previous year and exceeded the national average, but that situation changed dramatically after the wage increase was implemented.
From April to May, California fell below the national average They were hit in seven of the eight weeks, according to Placer.ai, with the analytics firm saying quick-service burger chains were hit the hardest.
Rising prices put thousands out of work, California minimum wage hike has businesses “fed up”
For example, McDonald’s saw roughly the same customer traffic in its California locations as the rest of the country in February and March, but after the minimum wage law went into effect, performance in McDonald’s California locations (which account for about 9% of the company’s U.S. locations) began to decline by nearly 250 basis points.
A McDonald’s fast food restaurant in Belmont, California on April 3, 2023. (Tayfun Coskun/Anadolu Agency via Getty Images/Getty Images)
| Ticker | safety | last | change | change % |
|---|---|---|---|---|
| MCCD | McDonald’s Co., Ltd. | 253.07 | -1.44 | -0.57% |
Visits to California locations of Burger King, Wendy’s, Jack in the Box, In-N-Out Burger and Chipotle in April and May also fell below the national average, according to the survey, which also saw prices increase 6% to 7% in the state to offset wage increases.
| Ticker | safety | last | change | change % |
|---|---|---|---|---|
| Quick Service | Restaurant Brands International Inc. | 69.33 | +0.46 | +0.66% |
| Wen | Wendy’s Co. | 16.84 | +0.18 | +1.11% |
| Jack | Jack in the Box Inc. | 54.95 | -1.00 | -1.80% |
| CMGB | Chipotle Mexican Grill Co. | 3,250.74 | +79.86 | +2.52% |
Placer.ai’s analysis also noted that the minimum wage increase would have broader effects on the state’s restaurant industry.
“It’s still early, but we’re starting to see ripple effects from the minimum wage increase across the restaurant industry,” said RJ Hottoby, head of analytics and research at Placer.ai. “We’re starting to see operators close locations in their states first, especially chains that were already facing financial difficulties.”
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The study noted that the new law has forced several California restaurant chains to close, including Rubio’s Coastal Grill, which cited the minimum wage increase as one of the reasons it filed for bankruptcy last week.
A passerby looks into the window of Rubio’s Coastal Grill on Lincoln Boulevard in Los Angeles. (Zoe Cranfill/Los Angeles Times via Getty Images/Getty Images)
Meanwhile, casual dining chains, which typically already pay workers more than the $20 minimum wage, appear to be benefiting from higher menu prices at fast-food restaurants, according to the study.
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Olive Garden and Chili’s restaurants in California outperformed the chains’ national averages in customer traffic in April compared to a year ago, the data showed.
