Impact of California’s New Minimum Wage on Fast Food Franchisees
Kerri Harper-Howie, a McDonald’s franchisee based in Los Angeles, expressed concerns about the implications of California’s new $20 minimum wage for fast-food workers. According to her, raising prices to offset the increased labor costs would render fast food unaffordable for consumers. Harper-Howie co-owns 21 McDonald’s restaurants in California with her sister and anticipates a hit to profits due to the impending legislation.
Challenges Faced by Franchisees
Harper-Howie highlighted the limitations of simply raising menu prices, emphasizing that it would not suffice to cover the rising labor expenses. She acknowledged the inevitability of absorbing the reduced profitability that would result from the wage increase. The minimum wage for fast-food workers in California is set to rise to $20 per hour starting April 1, exceeding the state’s general minimum wage by 25%. Moreover, the legislation allows for potential annual increases of up to 3.5% based on inflation.
Impact on the Fast Food Industry
Fast-food chains across California have voiced concerns about the potential consequences of the new minimum wage laws. Many fear that they would be compelled to hike prices significantly or face diminished profits. Another franchisee, operating Fatburger outlets in the state, disclosed plans to mitigate the financial impact by reducing employee hours, eliminating vacation benefits, and implementing menu price hikes.
Ramifications for Consumers and Employees
The impending price hikes could deter some consumers from frequenting fast-food establishments. However, analysts predict that the legislation could lead to higher wages across various hourly occupations, including retail, thereby increasing disposable income for workers. This, in turn, could potentially offset the adverse effects of price increases on fast food.
Application and Concerns
The new minimum wage applies not only to franchisees but also to corporate-owned fast-food outlets, regardless of the number of restaurants they operate. Harper-Howie, whose family became McDonald’s franchisees in the 1980s, expressed skepticism about the selective application of the increased wage, questioning its adequacy for sustaining livelihoods. She emphasized the need for a broader examination of wage policies to ensure affordability for both consumers and employees.
In conclusion, California’s new minimum wage legislation presents significant challenges for fast-food franchisees, who must navigate the delicate balance between maintaining profitability and affordability for consumers in an evolving economic landscape.
