California Wage Hike Forces Some Fast Food Chains to Raise Prices

An enormous wage increase is coming for about half a million California workers.

On Monday, the state’s minimum wage for fast food workers increased to $20 per hour, a 25% hike compared to last week. The rule impacts several of the largest food brands, including McDonald’s, Pizza Hut, KFC, Subway, and Starbucks. Many of these company’s stocks have declined since the legislation took effect on April 1.

Wages in the United States have been increasing in the last few years after being flat for decades, yet fast food positions pay among the worst. Women, immigrants, and people of color make up a disproportionate share of the workforce, and many of them are poor and unskilled. $20 per hour for unskilled labor should impact skilled labor, which will demand pay increases.

The new rule, which entered into force earlier this month, mandates higher wages for workers at chain restaurants with 60 or more outlets in the United States. The state’s lowest minimum wage of $16 per hour remains in effect for smaller eateries.

Certain fast food chains are considering the reduction of staff hours and the increase of menu pricing.

In-N-Out Burger President Lynsi Snyder said she met with VPs and said they couldn’t raise the prices that much.

Her firm, which is based mainly in California, owns 400+ eateries that are still privately held. Snyder has said that the company has no intentions of going public or accepting franchises.

But at its Los Angeles locations, In-N-Out has added 25 cents to the price of each burger. That is a modest raise compared to the prices other eateries were forced to adopt.

A Burger King in Los Angeles reportedly increased the price of its Double Texas Whopper from $15.09 to $16.89, a 12% increase.

Following the success of self-service ordering kiosks in 2017, some businesses, including Burger King, are considering automation as a potential tactic for reducing operating costs. According to recent data from Burger King management, consumers often order bigger portions using digital self-service displays.

A Jack in the Box franchise owner raised the possibility that casual eateries like Applebee’s or Chili’s might steal customers from fast food chains due to price increases.