Fast food chains in California are cutting jobs – as a way to cut costs after the state’s minimum wage was raised to $20 an hour.
Nearly 10,000 jobs at chains from Pizza Hut to Burger King have been cut since the law took effect April 1, according to a report from a state trade group.
In addition, chains have closed restaurants, including beloved Mexican chain Rubio’s Coastal Grill, which filed for Chapter 11 bankruptcy this week and closed 48 locations across the state.
The California Business and Industrial Alliance (CABIA) blasted Governor Gavin Newsom for pushing through the law, which also meant businesses in the state would have to raise prices.
To highlight the law’s impact, the trade group took out an ad in the USA Today edition Thursday featuring fake “obituaries” of popular brands.
California Governor Gavin Newsom signed the fast food bill into law on September 28, 2023, surrounded by workers from SEIU Local 721 in Los Angeles
The tongue-in-cheek advertisementTitled “In Memoriam: Victims of Newsom’s minimum wage,” it 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. ‘
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 that Newsom signed last September raises the minimum wage for fast food workers to $20 an hour at chains with more than 60 locations in the US.
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.
“California businesses have been targeted and attacked for years,” said Tom Manzo, president and founder of CABIA Fox Business.
“It’s just another law that further puts businesses at risk.”
He said civil servants are living in a “fantasy land” if they think drastic pay increases will actually help workers or businesses.
“You can only raise prices so much,” Manzo told the outlet. ‘And you see it. People aren’t going to pay $20 for a Big Mac. It’s not going to happen.’
To highlight the law’s impact, the trade group placed a fake ad in the USA Today edition on Thursday featuring fake “obituaries” of popular brands.
Rubio’s Coastal Grill announced it would close 48 restaurants across the state this week (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
When the Democratic governor signed the bill into law in 2023, Newsom said the state was “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 that 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.
“We have kiosks in about 25 percent of our restaurants today,” Ghai told Business Insider at the time.
“However, the remaining 75 percent will have kiosks in the next 30 to 60 days.”
