Californian fast-food restaurant operators are warning patrons that their meals will soon cost more due to a new minimum wage that goes into effect on Monday.
A measure that increased the minimum wage for fast food workers from the state minimum of $16 per hour to an industry-specific rate of $20 per hour was signed into law by California Governor Gavin Newsom in September.
On April 1, the measure will go into force.
Fast-food companies are adjusting their operations to cope with the rising expenses as the new pay floor draws near. These modifications may include reducing staff or raising prices.
According to a Starbucks spokeswoman, the business will use several initiatives, including pricing adjustments and enhanced operational efficiency, to handle the rising personnel costs.
To make room for more affordable automated options, staff will be decreased in addition to the price increase. Some other entrepreneurs may think about relocating entirely out of California.
Chipotle’s chief financial officer Jack Hartung reportedly said during an earnings call last year that labor expenses will increase significantly. Hartung said that a price hike in the mid-to-high single digits will be implemented to pass on a significant amount of the costs to consumers.
Harry Holzer, a Georgetown University professor and former top economist at the Labor Department, predicts that businesses will continue automating more processes wherever they can. Some franchisees may move to a different state.
Most fast-food companies will have to raise their pay due to a policy that Newsom signed into law last year. However, the measure provides an exception for companies that bake and sell bread separately from other menu items. Others voiced concerns over the carveout, saying it was seen as a favor to Greg Flynn, a millionaire who owns many Panera restaurants in the state and is well-known for being a financial backer of Newsom.
