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CALIFORNIA FAST-FOOD FRANCHISEES WORRIED THEY’LL LOSE CUSTOMERS TO CHILI’S,
APPLEBEE’S BECAUSE OF $20 MINIMUM WAGE
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Published April 15, 2024, 1:21 p.m. ET
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Ad execs tout TikTok's benefits for businesses in cringeworthy video
Fast-food franchisees are worried that customers will defect to fast-casual
options like Chili’s and Applebee’s as the state’s minimum-wage law forces basic
burger joints to jack up menu prices to offset soaring labor costs.
The higher-priced chains aren’t subjected to the new wage requirements, which
took effect April 1 and only apply to workers at limited-service restaurant
chains — or eateries with at least 60 outposts nationwide where diners pay
before eating and there is either no or limited table service.
As a result, the price disparity between fast-food and casual-dining restaurants
could shrink, Business Insider earlier reported, especially after
California-based eateries have already lifted menu prices to offset the new $20
hourly wage — which is 25% above the state’s general minimum pay.
4
As of April 1, California implemented a new wage law that requires
limited-service chains — or eateries with at least 60 outposts nationwide where
diners pay before eating and there is either no or limited table service — to
pay their workers at least $20 hourly. Anadolu Agency via Getty Images
Shane Paul, who owns seven Jack in the Box outposts in San Diego, told BI that
he’s lifted prices at his restaurants by as much as 11% over the past six to 12
months in anticipation of the higher wages.
In years prior, before the wage-hike was imminent, Paul had only put prices up
as much as 4%, he said, according to BI.
As a result, Paul said that transactions at his Jack in the Box restaurants “are
already trending down,” and speculated that diners are oing to Chili’s or
Applebee’s for a sit-down meal for “a dollar or two more than us.”
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Similarly, Harsh Ghai — who owns about 180 Burger King, Taco Bell and Popeyes
restaurants across California — predicted that he’s also “gonna start to compete
with” casual dining restaurants and even grocery stores as a result of the wage
law, BI reported.
Ghai — who’s already lifted prices at his fast-food restaurants between 8% and
10% over the past year to combat food inflation alone — said that he’s weary to
lift prices any further to absorb higer wages because customers simply wouldn’t
return.
For reference, in a typical year, Ghai’s restaurants only up their menu prices
between a mere 2% and 3%, according to BI.
4
California fast food franchisees have been worried that customers will opt for
fast-casual options like Chili’s and Applebee’s, where they could get the
restaurant experience for just a few more bucks per head. @chilis / Instagram
Ghai also shared that he’s expediting the rollout of self-service kiosks to cut
down on labor costs.
Scott Rodrick, a McDonald’s franchisee who owns 18 outposts in The Golden State,
also told BI that he’s rethinking the length of operating hours and whether to
plow money into capital expenditures to compete with Chili’s and Applebee’s.
“So for example, if I have to replace an HVAC [unit] on the roof, I might push
that off to 2025 or 2026,” Rodrick added.
4
Scott Rodrick owns 18 McDonald’s in northern California via his company, Rodrick
Management Group. He’s reportedly owned outposts of the Golden Arches for the
past 30 years. Scott Rodrick/Facebook
He’s also discussed delaying a dining room remodel at one of his McDonald’s
locations, which are run via his company, Rodrick Management Group.
Even before the California law went into effect, McDonald’s CEO Chris
Kempczinski admitted that inflation would compel the fast-food chain to raise
menu prices.
McDonald’s locations in wealthy areas such as Fairfield County, Conn. are
charging around $18 for a Big Mac meal.
4
Rodrick’s strategy for offsetting California’s new $20 minimum wage requirements
for fast food workers includes delaying a dining room remodel at one of his 18
McDonald’s, and having landscapers come biweekly rather than weekly. Los Angeles
Times via Getty Images
67
What do you think? Post a comment.
A separate McDonald’s restaurant in Connecticut was charging diners $7.29 for an
Egg McMuffin and $5.69 for a side of hash browns.
Sit-down Japanese chain Kura Sushi’s CEO Hajime Uba told analysts earlier this
month that he thinks the $20 wage law will increase the sushi bar’s value
proposition as its prices are getting “closer and closer and closer” to
fast-food pricing, according to BI.
Kura Sushi, for reference, has 60 locations across the US — most of them in
Califonia — with seven more set to open this year.
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Filed under
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* 4/15/24
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As of April 1, California implemented a new wage law that requires
limited-service chains -- or eateries with at least 60 outposts nationwide where
diners pay before eating and there is either no or limited table service -- to
pay their workers at least $20 hourly. Anadolu Agency via Getty Images
California fast food franchisees have been worried that customers will opt for
fast-casual options like Chili’s and Applebee’s, where they could get the
restaurant experience for just a few more bucks per head. @chilis / Instagram
Scott Rodrick owns 18 McDonald’s in northern California via his company, Rodrick
Management Group. He’s reportedly owned outposts of the Golden Arches for the
past 30 years. Scott Rodrick/Facebook
Rodrick’s strategy for offsetting California’s new $20 minimum wage requirements
for fast food workers includes delaying a dining room remodel at one of his 18
McDonald’s, and having landscapers come biweekly rather than weekly. Los Angeles
Times via Getty Images
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