More restaurant operators in California are explaining how they will try to mitigate the cost of paying hourly workers more money when a state law takes effect next Monday hiking fast food workers’ wages from $16 to $20 an hour.
Executives at McDonald’s and Chipotle Mexican Grill have already indicated menu price hikes are coming.
Earlier this month, California-based El Pollo Loco told investors it would begin automating some of its salsa-making and, according to the Wall Street Journal, Jack in the Box is testing fryer robots and automated drink dispensers to rely on fewer employees.
In December, two major Pizza Hut franchise operators announced they would be laying off all in-house delivery drivers as a result of Assembly Bill 1228, which passed in the state Legislature and was signed into law by Gov. Gavin Newsom in September.
The bill is seen as a critical cost-of-living boost for the approximately 700,000 quick-service restaurant workers in the Golden State who launched a statewide union last month after successfully lobbying for the wage increase.
Alexander Johnson, whose family owns 10 Auntie Anne’s and Cinnabon locations in California, told the WSJ that he has reduced his staff by about 10 employees and his 73-year-old parents have returned to working in their stores to save on labor costs.
“It pains me to think about shutting down stores or laying people off,” said Johnson. “I love California, and I’m very sad about what’s going on.”
The owner of Round Table Pizza locations in California, Excalibur Pizza, said in a state WARN notice that it would eliminate 73 driver positions by mid-April.
While all fast food operators will need to make adjustments or simply absorb the increased costs, it remains to be seen if the new law will lead to significant, industry-wide job cuts.
An estimated 70% of Californians consume fast food each week.
KTLA 5 News consumer reporter David Lazarus says fast food operators find themselves at a crossroads that was paved, in large part, by their own success.
“This is a balancing act. Fast-food operators have the dual challenges of paying workers fairly while also keeping prices affordable. Unfortunately, this speaks more to an unsustainable business model than it does a need to keep wages in check,” Lazarus argues.