California Enacts $20 an Hour Minimum Wage for Fast Food Workers: Employees and Franchise Owners React
A trip to your favorite fast-food spot may be a little pricier than usual, especially if you live in California. Franchise owners in the state are grappling with a recent law mandating that minimum wage for all fast-food employees must be set to at least $20 an hour. As a result, owners of chain restaurants such as Jersey Mike’s and Wendy’s are taking various cost cutting measures including reducing employee work hours and increasing menu prices. Read on to learn more about how this law affects California fast-food workers and whether it could have a widespread effect on other popular restaurants.
The new minimum wage law for California fast-food employees
According to 2023 data from the U.S. Bureau of Labor Statistics, California employs the most fast-food workers of any state with an estimated 427,270 employees. Fast forward to April of this year, a new law increased the minimum wage for employees at fast-food restaurants to $20 an hour — the highest amount in the country's restaurant industry. This is a significant bump from the previously enforced $16 an hour.
The extra money allows employees like Julieta Garcia, who works at Pizza Hut in Los Angeles, to cover her monthly phone bill. Meanwhile, Howard Lewis, an employee at a Wendy’s in Sacramento, is using the money to invest. “Today was payday and I bought $500 worth of stock,” he told the Associated Press. On the other hand, this increase is causing franchise owners to adjust their operations to avoid huge financial losses.
How franchise owners are reacting to the fast-food minimum wage increase
Although this law went into effect in the spring, California franchise owners like Wendy’s franchisee Lawrence Cheng are staying afloat by cutting overtime as well as lessening employee work hours per shift. “I schedule one less person, and then I come in for that time that I didn’t schedule and I work that hour,” he said. He also revealed that he raised his menu prices by 8 percent in January to prepare for this law.
Simaltanesouly, the Hoover Institution, responsible for analyzing economics and politics in California, noted in a report that the state has lost close to 10,000 fast-food jobs since the minimum wage law was passed. The adjusted represents about 1.3 percent of fast-food workers in the state.
Similarly, Juancarlos Chacon, who owns several Jersey Mike's locations in Los Angeles, has increased menu prices to the point where customers will spend over $11 on a turkey sandwich that once cost less than $10. “I’ve been in the business for 25 years and two different brands and I never had to increase the amount of pricing that I did this past time in April,” he revealed. While this hasn’t turned customers away entirely, Chacon noted that many aren’t adding extra items like chips, a drink or dessert as usual.
Enif Somilleda, a Del Taco general manager in Orange County, is seeing some benefit to scaling back her staff, even if it means upping her own workload. “Financially it has helped me,” she said. “But I have less people so I have to do a lot more work.”
What this means for fast-food restaurants across the U.S.
It remains to be seen whether this minimum wage law will encourage other states to do so. But, Jot Condie, president and CEO of the California Restaurant Association, noted that the cost cutting measures could result from it shouldn’t come as a surprise. “When labor costs jump more than 25 percent overnight, any restaurant business with already-thin margins will be forced to reduce expenses elsewhere,” he explains. “They don’t have a lot of options beyond increasing prices, reducing hours of operation or scaling back the size of their workforce.”
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