The quick-service landscape has already begun to show effects of California’s upcoming fast-food wage law that plans to bring the minimum rate to $20 per hour.
Perhaps the biggest news recently being Pizza Hut franchisees PacPizza and Southern California Pizza Co. potentially removing north of 1,000 delivery drive jobs.
The franchisees shared in a WARN Act notice they were eliminating first-party delivery services and, in turn, slicing drivers from the payroll.
That would amount to more than 1,200 jobs, including 841 in SoCal alone.
.This would go into effect in February in areas such as L.A., Sacramento, and Palm Springs.
More common of late have been promises from large-chain executives to take additional price to counter the legislation. Chipotle and McDonald’s hinted at such moves in November, with the latter’s CEO, Chris Kempczinski, telling analysts on an earnings calls franchisee cash flow in California would “certainly” take a hit.
The state houses some 1,300 McDonald’s, along with more than 230 franchisees and over 70,000 hourly employees and managers. The company is open in 90 percent of the state’s counties, including 300-plus in Los Angeles County.
Only counting McDonald’s presence in the Golden State, it would be among the top 30 biggest quick-service chains in America. Roughly 15 percent of Chipotle’s footprint is in California, too.
As a refresher, California’s AB 1228 will introduce a Fast Food Council designed to monitor the quick-service segment.
In addition to minimum wage for restaurant employees rising to $20 per hour—above the $16 per hour beginning in January for other businesses—the Council could annually increase pay by 3.5 percent or according to changes in the Consumer Price Index, whichever is lower.
The law is expected to impact more than 500,000 fast-food workers in the state. AB 1228 only covers chains with 60 units or more in the U.S., but higher wages at bigger companies will likely have a secondary effect on smaller concepts and independent restaurants that can’t afford the same level of labor costs.
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