A Del Taco fast-food restaurant, areas roped off during COVID-19 pandemic. (Photo: Shitterstock, Steven Bevacqua)
Fast Food Franchise Owners Speak Out Against $20 Minimum Wage
Franchise owners say they have no good options with AB 1228 on the books
By Evan Symon, February 20, 2024 2:40 am
As AB 1228’s start date to give $20 an hour to fast food employees nears, multiple franchise owners reached out to the Globe and said what the fast food landscape in California will look like in the near future.
Following the signing of AB 1228 in October by Governor Gavin Newsom, the new $20 minimum wage for fast food employees, a massive jump from the $16 minimum wage, has had multiple companies take extreme measures.
Some, like Chipotle and McDonalds, have announced already raised prices before the wage raise date of April 1st. Others are investing in automated kiosks and other automated devices to help reduce the number of employees. Some stores outright closed.
Most notable, however, has been the massive amount of layoffs. Already, over 1,200 Pizza Hut drivers have had announced lay-offs, with drivers to be replaced by services such as DoorDash and Uber Eats in the coming months. Many other chains are currently also looking into doing the same for deliveries. Seeing signs of massive layoffs ahead, many workers have even transitioned out to other lines of work in anticipation.
While there have been attempts to try and spin this as a major labor win, with the Service Employees International Union (SEIU) launching the new and largely toothless California Fast Food Workers Union earlier this month, franchise owners continue to say that someone will have to pay, with either the customers or workers themselves getting the brunt of it.
“It’s either employees getting fired or consumers getting heftier prices or both,” said one KFC franchisee to the Globe on Monday. “Pizza places have the easy option of dropping drivers thanks to so many food delivery apps out there. But most places don’t have that option for a quick drop in overhead. And the thing is, there isn’t much to cut back on. Food costs, utilities, equipment repairs, rent. There’s so much that can’t be negotiated down or kept non-paid.”
A Burger King franchisee added, “Oh, and local leaders don’t understand the issue either. When I told the Mayor and a few city council members of my problem after I cut back on some shifts so that I and some family members could take their place to save on some money because of this law, they actually recommended that I ask the company to not let me pay the franchise fee this year. A franchise fee is a one time payment that I paid years ago. They were completely out of depth and just didn’t want to see people fired because of this law.”
AB 1228
And for owners, that’s what it comes down to – employees.
“This law made them a much more bigger expenses, ” added the KFC franchisee. “A cheaper option is to actually introduce automation and more devices. And it sucks. It plain sucks that we have to do this. The economy still isn’t great, they’re still hurting. We offer a less expensive option for a meal, but we need to raise prices, so they need to pay more. And then employees, you know, we don’t want to send them to the breadline, but this $20 an hour law. We’ll go into the red if we just pay them that and don’t make changes.”
A third franchisee owner on the call then said, “Agreed. There are articles out there saying fast food franchise owners make 5% margins. 10%. 20%. They can be millionaires. I’m not saying that doesn’t happen. But there is no fixed profit or losses for us. Equipment breakdowns can be expensive. Food prices go up. And that’s not even getting into all the taxes and fees that these margins just ignore because they aren’t monthly expenses.”
The Burger King franchisee laughed, saying, “Yeah, when you have parking spaces for your business in Southern California, those things aren’t cheap. Rent or own, you pay for it one way or another. She said margins? They’re a lot thinner than you think, especially with AB 1228.”
“We’re heartless if we raise prices, we’re heartless if we fire employees, we’re heartless if we cut back hours,” said the KFC franchisee again. “And if we eat the costs ourselves, then we fail and no one gets jobs or food. For those in support of the $20 minimum wage, which terrible option do you want us to choose?”
AB 1228 is to become law on April 1st.
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Bottom line- because the Legislature ignored iron laws of economics, there will be closures of fast food locations- especially in high crime areas, leaving customers and former employees without options. Itâs already happening in the Bay Area with the closure of an In-N-Out and a Dennyâs.
Another bonehead law from our Legislature.
It was Newsom and the rest of the criminal Democrat mafia in the legislature who instituted this bonehead law. Democrat Assemblyman Chris Holden who authored Assembly Bill 1228 is now desperately trying to amend the law so that certain restaurants would be exempted from the definition of âfast food restaurant.” Holden, the son of former State Senator and LA City Councilman Nate Holden, has lived an entire life of upper class comfort and privilege. Holden has been in Democrat politics for years and his website indicates that he’s a former owner of a Subway franchise. One would think that Holden would understand the labor cost pressures that most fast food restaurant owners face? No doubt that Subway franchise that Holden owned ended up failing because of his lack of business skills?
Asm Chris Holden might be able to rehabilitate, somewhat, his political reputation by crafting SOME kind of legislation that repeals this Law from Hell, AB 1228. Because he didn’t know what he was doing except following union orders when he “authored” and introduced it, he may not have been prepared for the huge blowback from the effects of the law we are already seeing. And the law doesn’t even take effect until April 1. But business owners have to prepare well in advance when they see BIG TROUBLE coming. Holden may not have thought of that reality either.
Apparently Asm Holden is termed out of his state assembly seat and, instead of the usual move of running for state senate, is now running, for reasons unknown, against incumbent L.A. County Supervisor Kathryn Barger who is the lone sensible voice on the Board of Supervisors. I sincerely doubt (knock wood) he has a chance of winning that seat or even making it past the primary, assuming a “clean-enough” L.A. County election. (But we’ll see, of course…)
Thus because Holden’s political future is uncertain or maybe even nonexistent, a repeal of AB 1228 —- while he has the power and the chance to do it —- would at least put his potential side gig as a fast food entrepreneur in a more favorable position given he might still have part ownership in that Subway franchise you mentioned. So he might want to consider doing that, if only to help himself.
Democrats like Chris Holden go from one political office to another and they are always a burden on taxpayers? They would starve without taxpayers supporting them?
That’s for sure, TJ! You said it.
Just thought Holden would run for state senate before running for L.A. Board of Supes, where it appears he doesn’t have a shot. But maybe I missed something along the way.
Holden has covered himself by amending the law to exempt restaurants that bake their own bread. The corruption never ends.
Wow, good catch! —— didn’t even realize that before you said it.
What a snake that Chris Holden is.
AB1228 goes into law April Fools Day. Perfect day for a law crafted by Dumbocraptic fools. This party just creates more problems and solves none.
No kidding, John! Seems to me April Fools Day used to be a lighthearted day, full of (mostly) innocent pranks and jokes and tricks. No more! The buzzkill leftists ruined that, too. đ
As usual, we’re on the same page, John – the only “April Fools” are the dumbass Democrats who crafted this economic torpedo that’s going to SINK the very low-income constituents that they thought they were “saving” by mandating a “living wage”…
Well, now ya gotta deal with the incoming wave of UNEMPLOYMENT claims that will be generated by this Democrat largesse, since they don’t have a CLUE about how to run a business or how costs and overhead affect a business, let ALONE the difference between fixed and variable costs….
This is just more proof that legislators should be REQUIRED to take a cost accounting class before they’re allowed to author ANY legislation that has an economic impact (which means 99.5% of them)
You voted (or allowed the machines to vote FOR you) people – now you reap the whirlwind….
I don’t see how this is even legal.
You target an industry and destroy it with wage hikes. Will one of our Affirmative Action leaders decide all employees of Uber /Luft be paid $100 an hour?
I wonder why our crop of dumbass Democrats didn’t mandate the $100 an hour minimum wage…
I mean, shoot, why not go for broke and REALLY help the “downtrodden” fast-food workers???
And you know who wins? Sacramento with more taxes!
Coming:
Push 1 to order Hamburger
Push 2 to order Cheeseburger
When you want extras like more ketchup packets if its not on the kiosk then you are out of luck because the robots inside will give it to as ordered (which in many cases) getting your order exactly right is a step up.
There will be 1 IT and 1 Manager in the the store going forward, but you will likely never speak to the IT one.
Just remember that this was brought to you by the Democrats….more tents on sidewalks coming.
The picture looks just like the Taco Bell near our home, which NOW FEATURES an ordering kiosk between the two columns in the foreground, just like you mentioned, Orwell…
AND Katy & Co., you might want to adjust the spelling error in the image attribution, but it DID make me almost spit my lunchtime Ginger Ale outta my nose when I read it…. but that was a good one…. thanks for the laughs…
Actually it was brought to you by multinational corporations, they use your fear and ignorance to raise their profit margins, while you silly pawns fight with one another.
AB 1228 – Sponsored byAssemblymember Chris Holden [D], signed into law by Gov. Gavin Newsom.
DEMOCRATS OWN THIS and their “Fast Food Council” over reach government into private business
Newsom joined labor leaders, legislators and fast-food workers in Los Angeles on Thursday, hailing the achievement as a result of the group effort to increase the state’s minimum wage for fast-food employees.
Do you even know what a profit margin IS, Sako??? How is it calculated, please???
Calling leftists names like Libtard does not really describe them accurately. Sure there are the Useful Idiots but this destruction is targeted and calculated evil. The morons in Sacramento are doing the bidding of their masters that know Exactly what they are doing.
I can’t believe that this has not gone to the Supreme Court. There is NO authority to set minimum wages much less targeting individual industries for selective destruction.
Many nearby fast food employees don’t think a customer’s order modification like, without onions or without sugar, is that important so I rarely put them to the test.
McDonaldâs profited 14 billion last year, theyâve had 10% increase year after year. Pepsi (who owns Pizza Hut) profited 50 billion 9% increase. Franchise owners sell their souls to these companies that take advantage of the franchise owners. In order to make the same income in the same jobs as 30 years ago minimum wage needs to be $35+. Enough is enough. Shop mom and pop. Let these companies close up shop. Yâall live in a corporatism, once these juggernauts leave the market true capitalism can take effect. Problem isnât the minimum wage going up, itâs the brainwashing yâall need to unravel.
Every restaurant will cut back 15-20% of staff, thatâs 75K-100K jobs of the 500K fast food jobs in the state of California. Those 75K-100K will cost the CA Gov any increase in taxes make through the wage hike.
Non sense law, non sense politicians. McDonaldâs profited 14 billion, the franchisees didnât. The franchisees are the ones who invested and paid local and state taxes.
Smarter thing to do would have been to tax restaurant royalties paid to big corporations.
That $20 an hour will be eaten up as workers pay their own âbenefitsâ, union dues, and taxes.
Guess what amigo?
You got a raise!
And a layoff slip!
Cleanliness and hygiene will probably take the most of the brunt of this. Opening and closing used to be cleaning and disinfecting equipment, so they can save hours by not doing it?
This was done SOLELY,and ABSOLUTELY, because fast food businesses were thriving just like they do in the rest of the nation and world. Those in charge, in California, cannot stand that!!! That’s it. That’s the only reason. Those businesses were doing just fine, and that pissed people off. They had to bring them down a few notches…let’s see how that works out. Wait, is YOUR industry next?
I just notice how many people attack the opposing political party like its their sports rival..i.e..democrats are so terrible.. they are trying to destroy businesses. But then neither they or their political party have real solutions to problems. For example, if increased minimum wage creates problems, how do you solve people not having a liveable wage to survive during inflation? Its not that I think the Democrats are right or $20 minimum wage is right, but rather how none have the solutions but these parties “fans” blindly support their party and paint the other side as evil.
Nobody realizes how much they have been influenced by what the media tells them and the propaganda from the politicians
the core problem there is no such thing as a “living wage”. There will always be people working full time barely existing. You can’t change that. The more you raise wages the more prices go up. You can’t win, period.
Never seen so many people siding with billionaires and not food workers attempting to get a LIVING WAGE.
Spoken like an SEIU bot who just repeats cliches
what about equality?? I work very hard at a grocery store for $17.00.