Rubio’s Coastal Grill Becomes Latest Victim Of CA $20 Minimum Wage Law

Rubio’s Coastal Grill, a Carlsbad-based Mexican food restaurant chain with over 200 stores nationwide, announced that 48 stores in California would close over the weekend because of a large number of rising costs, including employee wages.

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, to be replaced by services such as DoorDash and Uber Eats in the coming months. Roundtable Pizza has also done the same with many of their delivery drivers, with many other chains also quietly doing the same for deliveries in the following months, as seen by the jump of fast food businesses on food delivery sites.

As the economic effects took a toll before the law was even in place, lawmakers scrambled to mitigate the damage. AB 1228 bill author, Assemblyman Chris Holden (D-Pasadena), created a new bill to grant numerous exemptions in an attempt to lighten the economic blow of AB 1228, including to fast food restaurants in airports, stadiums, casinos, events and corporate campuses. However, as the Globe noted, AB 610 does anything but cleanup the mess caused by AB 1228. While it was passed, closures still continued, but on the more quiet side.

“The reason you haven’t heard about a huge tide of firings since April is because it has been more of a slow roll,” explained Chris Kelly, a job placement specialist who helps food service workers transition into other careers, to the Globe on Tuesday. “What we have seen in California has not been huge blocks of stores shutting down or big announcements of like dozens of people being laid off. April and May, it was one or two or three employees going at a single place. Or maybe hours were cut back. Or maybe a store got a new touch screen and a register person was either reassigned or cut. Or employees get new tasks when an employee leaves without a new hire.”

“It is happening so low key. You know, we have disaster movies about earthquakes and tornadoes and other things. We don’t have movies about drought or gradual ocean rise because it is such a slow burn but still equally destructive in the long-term. Same has been happening here. When the state gets in new figures on the number of employees in the industry, look for the break down in fast food employees. Regular restaurants are feeling a pinch too, but that is regular inflation and other drivers. Fast food places, with this new minimum wage, is where we need to compare yearly on. But until we get those numbers, people don’t see the slow burn.”

“But then you do have those companies making a big announcement. We had Pizza Hut and others earlier this year on people being let go. Red Lobster lost 5 restaurants in California last month, but that was more based on the bankruptcy. And now, just a few days ago, we had Rubio’s with all those closings.”

Rubio’s to close 48 locations in CA

According to Rubio’s, a total of  48 “underperforming”  stores will be closing throughout the state. Half of the closures are to be in the Los Angeles area, with 11 closing in Northern California and the rest in the San Diego area.

“The rising cost of doing business and the current business climate in California are key factors in the closures,” Rubio’s said in a statement during the weekend. “Making the decision to close a store is never an easy one. While painful, the store closures are a necessary step in our strategic long-term plan to position Rubio’s for success for years to come.”

The closures will leave Rubio’s with 86 restaurants in California, Nevada, and Arizona. Industry experts pointed out that while Rubio’s did not name AB 1228 as a main factor in the closures, the way that they worded their statement makes it clear that the minimum wage law was definitely a factor.

“A lot of these chains don’t want to burn any bridges in California,” added Kelly. “Plus, just saying the ‘business climate’ is a good catch all that includes regulations and the economy. But it is painfully obvious that the minimum wage law is at least a big factor behind these closures. That’s a lot of money, and it eats into store profits. So when they say underperforming, the higher wages causing higher prices at a time when consumers are more price conscious is a big domino effect.”

Fast food layoffs are expected to continue in California as restaurants continue to adjust to the new law.