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California’s $20 minimum wage sees fewer customers: study

A study found that California’s new $20 hourly minimum wage law forced restaurants like McDonald’s, Wendy’s and Burger King to raise prices to offset rising costs, causing a sharp decline in customer traffic at popular chains.

California’s new $20 an hour minimum wage law for fast-food workers has led to price hikes and reduced customer traffic at popular chains including McDonald’s, Wendy’s and Burger King, according to a study.

Since the new law went into effect on April 1, Burger King’s customer traffic has fallen 3.86%, Wendy’s has fallen 3.24% and McDonald’s has fallen 2.5%. According to a report from analytics firm Placer.ai:.

Fast food restaurants in California are reportedly seeing a decline in customer traffic since the state’s new minimum wage law went into effect. Getty Images

Popular fast-food chain In-N-Out Burger, which recently raised prices on key menu items to combat rising labor costs, also saw foot traffic fall 2.59%, while Jack in the Box’s foot traffic fell 0.8%.

“Though it’s still early, the ripple effects of the minimum wage increase are beginning to be felt across the restaurant industry,” RJ Hottoby, head of analytics and research at Placer.ai, wrote in the report.

The law raised the minimum wage for fast-food workers from $16 to $20 an hour, but it has also been blamed for forcing companies like Rubio’s Coastal Grill to close dozens of locations across the state.

Rubio, who filed for Chapter 11 bankruptcy protection last week, cited “significant increases in the minimum wage in California” as the reason for the closure.

Another fast-food chain, Foster’s Freeze, recently closed a location near Fresno after the franchise owner said he could no longer afford to pay increased wages to employees.

In the six months before the new law took effect, fast-food prices in California rose an average of 7%, forcing the state’s franchisees to cut hours, postpone capital spending and rush to install automated features like self-service kiosks.

Since April 1, McDonald’s traffic in California has fallen 2.5%. Getty Images

A report from Placer.ai found that casual dining chains could be benefiting from declining foot traffic at fast food restaurants.

According to the report, Olive Garden and Chiliz restaurants in California have seen traffic increases above the national average since the minimum wage law went into effect.

Between February and March of this year, Olive Garden saw a 1% increase in customer visits across California.

In-N-Out Burger saw customer numbers fall 2.59%. Getty Images

Since the minimum wage increase law went into effect, that number has jumped to 1.88%, according to Placer.ai.

Chili’s saw a 3.6% drop in customer traffic across California in February and March.

But in the eight weeks between April and May, visitor numbers increased by 0.19 percent, the report found.

Casual chains like Chili’s and Buffalo Wild Wings have tried to lure customers with deals, like the latter’s “all-you-can-eat” wings promotion on Mondays and Wednesdays, and so far, it’s been successful.

Visits to Jack in the Box restaurants in California fell 0.8% from April 1 through the end of May. Christopher Sadowski

Fast-food companies warned that rising labor costs would be passed on to consumers in the form of higher menu prices.

In Los Angeles County, In-N-Out’s double-double burger combo is selling for $11.44, up $0.76 from last year. KTLA reported.

At the tourist-popular Fisherman’s Wharf location in San Francisco, a double-double burger comes with fries and a drink for $13.63 including tax.

Wendy’s has also seen a decline in customer traffic since the new minimum wage went into effect, with customer traffic at the chain down 3.24%. Christopher Sadowski

Customers who aren’t hungry will have to pay $7.50 for the double patty, without any sides or drinks. KRON 4 reported.

Fast-food chains including Wendy’s, Chipotle, Starbucks, and Taco Bell have raised menu prices by up to 8% in preparation for the new minimum wage law, according to a report released earlier this year by Kalinowski Equity Research.

Wendy’s reportedly raised its menu prices by about 8%, while Chipotle Mexican Grill increased its prices by about 7.5%.

Seattle-based coffee chain Starbucks raised menu prices at its California stores by about 7%, while Taco Bell increased prices by 3%.