The restaurants shut because of California's $20-an-hour minimum wage
How many fast food jobs have been cut in California since the implementation of the new $20-an-hour minimum wage law?
Since the implementation of the new $20-an-hour minimum wage law in California, nearly 10,000 fast food jobs have been cut. This figure comes from the California Business and Industrial Alliance (CABIA), a trade group that has been critical of the law and its impact on businesses in the state6. The job losses have affected various fast food chains, including Pizza Hut, Burger King, and others. The law, which was signed by Governor Gavin Newsom in September 2023, has also led to restaurants raising prices and shuttering locations in response to the increased labor costs.
What specific actions have businesses taken to offset the cost increases associated with the higher minimum wage?
Businesses in California have taken several actions to offset the cost increases associated with the higher minimum wage of $20 per hour. These actions include:
- Raising prices: Many fast-food chains, such as McDonald's, have considered raising menu prices to compensate for the increased labor costs.
- Laying off workers: To cut labor costs, some businesses have had to let go of employees. For instance, Pizza Hut and Round Table collectively laid off more than a thousand delivery workers before the law came into effect.
- Reducing store hours: Some McDonald's franchisees have thought about reducing store hours to minimize the impact of the increased minimum wage.
- Delaying renovations: In an effort to save money, some fast-food outlets have considered postponing store renovations and upgrades.
- Adopting automation: Critics warned that businesses might turn to digital ordering kiosks and other forms of automation to cut down on wage costs for staff. For example, a Burger King franchisee with 140 restaurants on the West Coast announced plans to have digital kiosks installed in all his locations within two months.
These actions aim to help businesses cope with the financial pressure caused by the higher minimum wage while still attempting to maintain profitability.
Which fast food chains have been most affected by the workforce reductions and restaurant closures in California?
Several fast food chains in California have been significantly affected by workforce reductions and restaurant closures due to the new $20-an-hour minimum wage1. These include:
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Pizza Hut: The chain announced cuts to more than 1,200 delivery jobs in December, and some Pizza Hut franchises in California filed notices with the state saying they were discontinuing their delivery services entirely.
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Round Table Pizza: Excalibur Pizza, a franchisee of Round Table Pizza, has plans to cut 73 driver jobs in April, which amounts to 21% of its workforce.
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Rubio's Coastal Grill: This beloved Mexican chain filed for Chapter 11 bankruptcy and closed 48 locations in the state.
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Burger King: Franchisee Harsh Ghai, who owns 140 Burger King restaurants on the West Coast, announced plans to have digital kiosks installed in all his locations in two months, accelerating the rollout due to the wage hike.
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McDonald's: A McDonald's franchisee who owns 18 outposts in California is considering reducing store hours, hiking menu prices, and delaying renovations to offset the impact of the state's $20 hourly minimum wage for fast-food workers.
These chains, among others, have had to make significant adjustments to their operations in response to the increased labor costs from the new minimum wage.