After a new law went into effect, increasing the minimum wage in California to $20 per hour, fast food restaurants (both franchises and small businesses) are hurting and having to subsequently cut 10,000 jobs and raise menu prices.
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On April 1, California’s $20-an-hour minimum wage law went into effect and it not only sparked a reported 8% hike in the price of menu items at fast food restaurants, but it has also led to about 10,000 jobs being cut. In mid-April, it was first reported that after the new law’s effective date, Wendy’s raised its menu prices by about 8% while Chipotle Mexican Grill hiked its prices by about 7.5%, according to a report by Kalinowski Equity Research, obtained by New York Post.
The report also found that Seattle-based coffee chain Starbucks increased the prices of its menu items at its California locations by approximately 7%. Meanwhile, the Taco Bell California locations hiked their menu items’ prices by 3% and Burger King raised their menu prices at its California locations by 2%.
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In addition to the menu prices being increased, nearly 10,000 jobs have been cut as California fast food restaurants (franchises and small businesses included) struggle following the new $20-an-hour minimum wage law. On Thursday (June 6), California Business and Industrial Alliance (CABIA), a major trade group, revealed the news while blasting Democratic Governor Gavin Newsom for pushing the new law.
When Newsom signed the law (known as California Assembly Bill 1287) last year, he ensured that the state was getting “one step closer to fairer wages, safer and healthier working conditions, and better training by giving hardworking fast food workers a stronger voice and seat at the table.”
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However, CABIA president and founder Tom Manzo told Fox Business, “California businesses have been under total attack and total assault for years. It’s just another law that puts businesses in further jeopardy.” Manzo said that officials are living in a “fantasyland” by thinking that these huge wage increases will help out workers and businesses. He said, “You can only raise prices so much. And you’re seeing it. People are not going to pay $20 for a Big Mac. It’s not going to happen.”
Manzo noted that in order to comply with the law, some California fast food restaurants are cutting back employee hours and will likely cut the jobs in total, moving toward automation in the future. It’s been reported that California’s $20 wage increase was created to give fast food workers more financial freedom, however, Manzo argued, “It’s a starter industry. You get a job as a kid working in a fast food restaurant and you learn some good work ethic and that takes you into life.”
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