California business leaders have rejected the state’s decision to raise the minimum wage for fast-food restaurant workers to $20 an hour.
Nearly 10,000 jobs at chains from Pizza Hut to Burger King have been cut since the law was signed in September 2023, according to a trade group.
Fast food chains have raised prices and cut jobs to cut costs to pay the new minimum wage. This week, In-N-Out raised prices – with the Double Double meal now over $10.
Beloved Mexican chain Rubio’s Coastal Grill has filed for bankruptcy and is closing 48 restaurants in the state due to wage increases.
Desperate business leaders have criticized Gov. Gavin Newsom for forcing the bill through — and are pleading with him to stop targeting businesses.
‘Entrepreneurs are fed up. Frankly, it’s having a ripple effect on everyone now,” Tom Manzo, president of the California Business and Industrial Alliance (CABIA), told me. Fox & Friends on Monday.
California business leaders, including Tom Manzo (pictured), have rejected the state’s decision to raise the minimum wage to $20 an hour for fast-food restaurant workers
CABIA ran an ad in the June 6 edition of USA Today featuring fake “obituaries” of popular brands to highlight the impact the new law has on businesses.
“The biggest problem California faces is continued rising costs and a persistent anti-business climate,” Manzo said. ‘That’s why we decided to place this ad in the first place.
‘People can’t afford fast food even though… it shouldn’t be a luxury product. Fast food is not a luxury item.’
The trade group’s tongue-in-cheek ad, titled “In Memoriam: Victims of Newsom’s minimum wage,” highlighted the issues facing smaller brands, including Rubio’s, and fast-food giants, including Pizza Hut, Burger King, Subway and McDonald’s.
It contains news clips documenting the changes companies have made in response to the wage increase.
This includes raising prices, letting go of workers to reduce labor costs – and in some cases closing locations.
One says: “A McDonald’s franchisee that owns 18 locations in California is considering shortening store hours, raising menu prices and delaying renovations to offset the impact of the state’s $20 per hour minimum wage for fast-food workers. ‘
Manzo said, “That’s why we keep advocating, because lawmakers, the governor, need to wake up. You can’t be so anti-business.’
‘We will continue to fight. We advocate for small to medium-sized businesses, people who have no voice. And…California is a great place to live.
‘We just need to change direction. We have to change the immediate trajectory, and that’s what we’re going to do. That is our mission.’
Governor Newsom’s office claims that 4,500 jobs have been added at limited-service restaurants since the bill was signed last year.
His office added that there were 6,600 new fast food jobs in the state between April 2023 and April 1.
Restaurant Business Editor-in-Chief Jonathan Maze doesn’t believe the minimum wage increase has actually helped workers.
“It’s hard to do,” he said. ‘You have two problems. You have the fact that it was done almost overnight.
“You have the fact that it was a 25 percent pay increase. When both things happen at the same time, it’s very difficult for restaurants’ bottom lines, and you see the consequences.”
He said Americans are now eating out less than before because of the price increases.
“This was a challenging environment,” Maze added. “If you look at what McDonald’s had reported a few weeks ago, their prices have gone up 40 percent since 2019.
‘Everything costs a lot more. Construction costs have increased and that requires companies to increase their prices.
‘The result of all this is that fast food has largely lost its reputation as a value player. The result of this is that consumers eat out less often. They don’t go to McDonald’s or other places as often as they used to.”
Even before the law was made official earlier this year, chains like Pizza Hut and Round Table let go of more than a thousand delivery drivers to brace for the financial impact of the change.
The law, signed by Newsom last September, increases the minimum wage for fast food workers to $20 an hour at chains with more than 60 locations in the US.
California Governor Gavin Newsom signed the fast food law on September 28, 2023, raising the minimum wage for certain chains
To highlight the law’s impact, a trade group on Thursday placed a fake ad in the USA Today edition featuring fake “obituaries” of popular brands
Rubio’s Coastal Grill announced it would close 48 restaurants in the state (Photo: The grand opening of the third Rubio’s location in the Pacific Beach neighborhood of San Diego, California in 1986)
Critics warned that companies would turn to digital ordering kiosks as a way to reduce staff wage costs
That’s 25 percent more than California’s standard minimum wage of $16 an hour, which itself went into effect in January.
At the national level, Congress hasn’t touched the minimum wage in decades; it is still $7.25 per hour. Instead, so-called “wage wars” are playing out at the state level.
When the Democratic governor signed the bill into law in 2023, Newsom said the state was “moving one step closer to fairer wages, safer and healthier working conditions and better training by giving hardworking fast-food workers a stronger voice and a seat at the table.”
But Republican critics argued that the wage increase would simply mean replacing workers with self-checkouts and “robot chefs.”
Harsh Ghai, a Burger King franchisee with 140 restaurants on the West Coast, announced in April how he plans to have digital kiosks installed at all of his locations within two months.
Until the pay increase, he planned to roll them out over the next five to 10 years.