California's $20 minimum wage sees fewer customers: study
How did the increase from $16 to $20 per hour in minimum wage affect Rubio’s Coastal Grill and its business operations?
The increase from $16 to $20 per hour in minimum wage had a significant impact on Rubio's Coastal Grill, a popular Mexican fast food chain in California3. As a result of the higher labor costs, Rubio's filed for Chapter 11 bankruptcy protection and closed 48 of its locations across the state3. The company cited "significant increases to the minimum wage in California" as one of the reasons for the closures. The rising costs of doing business in California, coupled with the increased minimum wage, led to the necessary restructuring and closures in an attempt to position Rubio's for long-term success.
What specific percentage decreases in foot traffic were reported for Burger King, Wendy's, and McDonald's following the implementation of California's $20 minimum wage law?
Following the implementation of California's $20 minimum wage law, Burger King experienced a 3.86% decrease in foot traffic, Wendy's saw a 3.24% decline, and McDonald's witnessed a 2.5% drop, according to a report by analytics firm Placer.ai.
What were the broader impacts on the restaurant industry as noted by R.J. Hottovy from Placer.ai?
R.J. Hottovy from Placer.ai noted several broader impacts on the restaurant industry due to the increase in minimum wage for fast food workers in California. These impacts include:
-
Price hikes: Many fast food chains, such as McDonald's, Wendy's, and Burger King, raised their prices to offset the higher labor costs, which led to a decrease in foot traffic at these establishments.
-
Decreased foot traffic: There was a decline in the number of customers visiting popular fast food chains. For example, foot traffic at Burger King fell 3.86%, Wendy’s was down 3.24%, and McDonald’s slipped 2.5%.
-
Restaurant closures: Some companies, like Rubio’s Coastal Grill, had to shut down dozens of locations across the state due to the increased labor costs. Rubio’s filed for Chapter 11 bankruptcy protection, citing “significant increases to the minimum wage in California” as a reason for the closings.
-
Casual dining chains benefiting: Casual dining chains, such as Olive Garden and Chili’s, saw an uptick in visits that outperformed the national average since the minimum wage law went into effect5. These chains have been focusing on value meals and promotions to attract customers.
-
Adoption of automation features: To cope with increased labor costs, some fast food restaurants have started to implement automation features like self-serve kiosks and have reduced work hours or postponed capital improvements.
In summary, R.J. Hottovy highlighted the ripple effect of the minimum wage increase on the restaurant industry, including price hikes, decreased foot traffic, restaurant closures, casual dining chains benefiting, and the adoption of automation features.