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FAST FOOD IS ABOUT TO GET MORE EXPENSIVE IN CALIFORNIA

Marc Sternfield
2 weeks ago

A Southern California fast food franchise owner is the latest to signal that
menu prices will go up when the minimum wage for all fast food employees climbs
to $20 an hour in April under a new California law.

Marcus Walberg, whose family operates four Fatburger restaurants in Los Angeles,
recently told Business Insider that he sees no option but to raise prices and
make other changes to adapt.



“It’s a scary thing because customers are already complaining that prices are
too high,” Walberg told the business news outlet.

California law to increase minimum wage for fast-food workers won’t apply to
everyone

Executives at McDonald’s and Chipotle Mexican Grill have already indicated menu
price hikes are coming. During a conference call in November, McDonald’s CEO
Chris Kempczinski told analysts that his company expects to raise prices by a
“mid-to-high single-digit” percentage.

Also, two major Pizza Hut franchise operators in California announced last month
they would be laying off all in-house delivery drivers as a result of the new
law. The layoffs impact hundreds of Pizza Hut locations across the state
including Los Angeles, Orange, Riverside, Ventura and San Bernardino counties
and Sacramento, and involve more than 1,200 drivers.


Anneisha Williams, right, who works at a Jack in the Box restaurant in Southern
California celebrates as she holds the bill signed by California Gov. Gavin
Newsom at the SEIU Local 721 in Los Angeles, Thursday, Sept. 28, 2023.
California fast food workers will be paid at least $20 per hour under the new
law signed by Newsom. (AP Photo/Damian Dovarganes)

Among changes at his Fatburger locations, Walberg says he is trimming employee
hours and eliminating paid vacation time. Doing business in California, he says,
“has been more strained now than any time I can remember.”

The current minimum wage in California is $16 per hour. The increase to $20
comes after the passage of Assembly Bill 1228 which aims to help fast-food
workers cope with the rising cost of living and inflation.

“Higher minimum wages may have many downstream effects on consumers, businesses,
and the overall economy,” Justin Rush, a North Carolina-based financial planner,
told KTLA 5 News. “To offset higher labor costs, businesses may increase the
prices of their products or services accordingly. However … some businesses may
invest in automation to reduce the reliance on low-wage workers altogether. So,
a business may pay more for the workers they have but end up employing fewer
workers altogether.”

Rush, however, also acknowledges that paying fast food workers more could spur
economic growth.


How many of these In-N-Out secret menu items do you know?

“If low-wage workers experience an increase in income due to a minimum wage
hike, they may have more disposable income to spend. This can boost consumer
spending, which may benefit businesses, especially those in industries catering
to lower-income consumers,” he said.

In the third fiscal quarter of 2023, Chipotle saw revenue climb 11% year over
year while McDonald’s revenue soared by 14%. Both fast-food chains have
consistently, and recently, raised menu prices.

KTLA consumer reporter David Lazarus says the minimum wage hike is long overdue.

“The fast-food industry has long relied on low-paid workers for profits. They
justified this in the past by saying they primarily offer entry-level jobs to
young people, who will gain valuable work experience and then move on to jobs
with decent wages,” Lazarus says. “In recent years, however, the industry has
seen an influx of older workers who can’t find employment elsewhere. They’re
seeking a living wage. That’s what the California law is meant to address.” 



Instead of simply raising prices and cutting jobs or benefits, Lazarus believes
fast food chains should put customers first.

“Rather than making drastic cuts, the fast-food industry should price its
products in line with operating costs.”

Categories: California News, Consumer News, Local News, News



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