Los Angeles, California – Fast-food consumers in California may soon see an increase in prices due to a new state law raising the minimum wage for fast-food workers to $20 an hour. Chains like Chipotle are considering passing on the cost to customers with potential mid-single-digit price hikes to cover the wage increase.
Assembly Bill 1228, signed by Gov. Gavin Newsom last September, will go into effect next month, impacting restaurants with 60 or more establishments nationwide. The law mandates that California-based workers earn $20 an hour, $4 higher than the state’s minimum wage.
Many major chains, including McDonald’s, Starbucks, and Jack in the Box, are also considering adjusting their prices or operations to offset the new wage requirements. A restaurant industry council will be established to set future pay raises and advise on working conditions under the new law.
McDonald’s plans to make different modifications to menu prices at corporate-owned and franchise locations in response to the wage increase. Starbucks has not disclosed the timing or extent of its price increases but has committed to raising wages for all employees. Pizza Hut operators have eliminated in-house delivery in some locations, shifting to third-party apps to offset labor costs.
Round Table Pizza franchisees are considering laying off drivers and shifting to third-party delivery services to adapt to the wage increase. Meanwhile, franchisee of Auntie Anne’s and Cinnabon locations in California are contemplating layoffs and price increases. Jack in the Box is expecting menu prices to increase by 6% to 8% to manage the wage hike.
These changes reflect the challenges faced by the fast-food industry in California as businesses navigate the impact of the new minimum wage law on their operations and pricing strategies. Stakeholders are working to find ways to maintain profitability while ensuring a positive customer experience amid rising labor costs.