California’s fast food industry is reeling from the repercussions of the state’s new $20 minimum wage, resulting in the loss of nearly 10,000 jobs. Struggling franchises are being forced to slash labor costs and hike prices to stay afloat, a move that has sparked widespread criticism. The California Business and Industrial Alliance (CABIA) has pointed the finger squarely at Democratic Governor Gavin Newsom, accusing him of pushing through a law that has wreaked havoc on the state’s economy.
Tom Manzo, president and founder of CABIA, didn’t mince words in his condemnation. “California businesses have been under total attack and total assault for years,” Manzo told Fox Business. “This is just another law that puts businesses in further jeopardy.”
The fallout has been swift and severe. Major chains such as McDonald’s, Burger King, and even the beloved In-N-Out Burger have been forced to raise prices to compensate for the higher wages. In a bid to survive, many have cut employee hours and ramped up moves toward automation.
Manzo revealed that nearly 10,000 jobs have been slashed across the fast food sector since Newsom signed California Assembly Bill 1287 into law last year. He lambasted state officials for living in a “fantasyland,” believing that such drastic wage increases would benefit workers or businesses. “You can only raise prices so much,” Manzo emphasized. “People are not going to pay $20 for a Big Mac. It’s not going to happen.”
CABIA’s frustration was highlighted in a full-page ad in Thursday’s USA Today, featuring mock “obituaries” of popular fast food brands. The ad underscored the devastating impact of the new law, which saw Rubio’s California Grill, known for its fish tacos, close 48 of its 134 locations at the end of May. The San Diego-based chain, which filed for bankruptcy on Wednesday, cited the “rising cost of doing business” as the primary reason for the closures.
The crisis is not limited to Rubio’s. Fosters Freeze, another fast food staple, recently shut down a location near Fresno, with the franchise owner unable to afford the upgraded salaries mandated by the new law. This trend of closures and job cuts is becoming alarmingly common as fast food restaurants struggle to cope with persistently high inflation and the added burden of increased wages.
The impact on prices has been significant. Starbucks beverages in California saw a 50-cent increase after April 1, while Taco Bell raised menu prices by 3%, according to Kalinowski Equity Research. Fatburger franchises in Los Angeles are planning to hike menu prices by 8% to 10%, and Chick-fil-A prices spiked by 10.6% between mid-February and mid-April, based on data from Gordon Haskett.
A LendingTree survey found that 78% of consumers now consider fast food to be a “luxury” purchase due to the soaring costs. This perception underscores the disconnect between the push for higher wages and the financial realities faced by both businesses and consumers.
Proponents of the wage hike argue that it aims to provide fast-food workers with more financial freedom in a state known for its high cost of living. However, critics, including Manzo, contend that fast food jobs were never meant to be long-term career positions. “It’s a starter industry,” Manzo said. “You get a job as a kid working in a fast food restaurant and you learn some good work ethic that takes you into life.”
As California grapples with the fallout from this controversial legislation, the debate over the balance between fair wages and economic viability continues to rage on. One thing is clear: the state’s fast food industry is facing an uncertain and challenging future.
