Mega-chains McDonald’s and Chipotle have announced they will raise menu prices in California to pay for the minimum wage hikes recently signed into law by Governor Gavin Newsom.
Certain fast-food workers in the Golden State will be paid at least $20 per hour next year under new regulations passed into law in September.
McDonald’s chief executive officer Chris Kempczinski said on an earnings call that the law will have ‘a wage impact for our California franchisees’ – and implied that price hikes would follow.
‘Certainly, there’s going to be some element of that that does need to be worked through with higher pricing,’ he said.
Jack Hartung, Chipotle’s chief financial officer, told analysts on a company earnings call last week that the chain will likely raise prices by a ‘mid-to-high single-digit’ percentage as a result of the law change.
California fast food workers will be paid at least $20 per hour next year under a new law passed by Democratic Governor Gavin Newsom
Kempczinski did not specify how much McDonald’s prices could go up as a result of the new state law.
‘There’s also going to be things that I know the franchisees and our teams there are going to be looking at around productivity,’ he said on the company’s latest earnings call Monday.
‘How all of that plays out, there will certainly be a hit in the short-term to franchisee cash flow in California, tough to know exactly what that hit will be because of some of the mitigation efforts.’
McDonald’s has already increased prices nationwide – despite the fact inflation has fallen.
Mega-chains McDonald’s and Chipotle said they will raise menu prices in California to pay for the minimum wage hikes
McDonald’s reported revenue of $6.69 billion in the third quarter – ‘driven by strategic menu price increases.’
That revenue translated into higher profits. The fast-food chain reported earnings of $2.32 billion – up almost 17 percent on $1.98 billion last year.
Its revenue of $6.69 billion trumped Wall Street expectations and was also up 14 percent on the $5.87 billion it made in the same quarter in 2022.
The cost of a Big Mac has shot up 125% since 1996 and is currently $3.91, according to CashNetUSA.
According to the company, fewer Americans earning $45,000 or less have been frequenting locations this past quarter.
McDonald’s chief executive officer Chris Kempczinski said on an earnings call that the law will have ‘a wage impact for our California franchisees’ – and implied that price hikes would follow
California’s minimum wage hike for fast food workers will come into effect on April 1, 2024.
It applies to workers at restaurants that have at least 60 locations nationwide – with an exception for restaurants that make and sell their own bread, like Panera Bread.
The new $20 per hour minimum wage is up from an average of $16.60 per hour, or just over $34,000 per year, according to the US Bureau of Labor Statistics.
According to the University of California-Berkeley Center for Labor Research and Education, it means workers will have among the highest minimum wages in the country.
The state’s minimum wage for all other workers – $15.50 per hour – is already among the highest in the US.
Cheering fast food workers, labor leaders gathered around Governor Newsom as he signed the bill at at the Service Employees International Union in Los Angeles on September 28.
‘This is a big deal,’ Governor Newsom said at the time.
Newsom’s signature reflects the power and influence of labor unions in the nation’s most populous state, which have worked to organize fast food workers in an attempt to improve their wages and working conditions.
In exchange for higher pay, labor unions dropped their attempt to make fast food corporations liable for the misdeeds of their independent franchise operators in California, an action that could have upended the business model on which the industry is based.