Following the passage of AB 257 earlier this week by the California Legislature, many local fast food managers and store owners quickly began looking for any way possible they can remain open.
While a Fast Food Council in the Department of Industrial Relations and state-wide minimum standards for wages, working hours, and other areas sound beneficial on paper, on a closer level, they can do a lot of damage. The Globe talked on Friday with many owners and managers across the state on what the bill would mean, and the results were not pretty.
“Everyone is talking to employees about how wonderful getting paid up to $22 an hour would be,” said Northern California McDonalds manager Mike, to the Globe on Friday. “But let’s break it down. The best fast food restaurants can have a profit margin over 20%. That’s great, but you need to factor in costs. McDonalds gets 4% of gross sales right off the bat. Then there are a ton of other costs that eat away from that profit. Ballpark you land in the single digits for a lot of locations. Other places, like Burger King or Wendy’s, can have it worse. And that’s not even getting into troubling factors now like labor shortages already naturally upping pay and recovering from COVID shutdowns and customer loss.”
“You add in all these higher wages and other possible things like benefits, and suddenly we are screwed beyond belief. It’s not that we don’t want to pay employees more, it’s that the economics behind it simply won’t work the way all these places are set up.”
Some owners have been anticipating this for years and have instead trying to get rid of many workers as possible to fend off higher wages.
“A lot of restaurants nowadays have touch screens, a lot more automated features, and even contracting out of drive-thru workers to a remote site,” said Sanjay Singth, a multi-franchise owner in LA County, to the Globe. “We keep putting more and more of these in stores to cut back on labor costs. We cannot afford to pay employees what this AB 257 is asking us to do, and we’ve known for sometime that people pushing for higher wages would bring us to the breaking point, so we are evolving around that. You don’t need to pay people more when there are no people there in the first place.”
Higher costs coming for consumers if passed
Higher costs are another expected outcome.
“What is going to happen is that costs for consumers is going to go up,” added Stockton-area fast food manager Gail Stewart. “We are going to get rid of anyone we don’t need or reduce the number of open lines, but it won’t be enough. We’re going to see prices go up as a result. And I’m sure you can see the problem here. We remain the cheap option for breakfast, lunch, and dinner for tens of millions of Americans every day. For under $20, you can get a full meal on the quick.”
“If we raise prices, then that is hurting people on a budget. A lot of poorer families have working parents and may not be able to make dinner every night, so they need a cheap alternative. So there’s McDonald’s, Taco Bell, KFC, Panda Express, In-N-Out, and so many more cheap options. Those prices go up, they may not be able to afford the cheap option anymore.”
“And this all goes back to employees. Fast food jobs are holding more people for longer periods now. A generation or two ago, fast food was mostly teenagers working part-time or people in need of a short-term job. But events like the Great Recession brought in a new type of permanent worker. I became a manager in 2008 right when this big transition was happening. Teenagers were pushed out by older Americans out of a job and needing work anywhere. And we’ve had those adult workers be a bigger chunk ever since.”
“If this becomes law, a lot of places will not be able to handle it.”
All the owners and managers are adamant – AB 257 is going to hurt a lot of people.
“A lot of people are going to be hurt financially because of this. The people behind this bill just don’t care about the little guy, the consumer, in all of this,” added Mike.
AB 257 is currently under consideration by Governor Gavin Newsom.