California’s fast food industry is feeling the effects of the state’s new $20 minimum wage, which has led to nearly 10,000 job losses. Franchises are struggling to manage labor costs and are raising prices in an effort to stay open, generating a lot of criticism. The California Business and Industrial Alliance (CABIA) has blamed Democratic Governor Gavin Newsom for pushing through a law they say has hurt the state’s economy.
Tom Manzo, president and founder of CABIA, expressed his concerns openly: “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 consequences have been quick and harsh. Big chains like McDonald’s, Burger King, and even the popular In-N-Out Burger have hiked prices to cope with higher wages. To survive, many have cut employee hours and turned to automation.
Manzo indicated that almost 10,000 jobs have disappeared from the fast food industry since Newsom signed California Assembly Bill 1287 into law last year. He criticized state officials for believing that such large 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.”
The frustration from CABIA was made clear in a full-page ad in USA Today, which featured mock “obituaries” of popular fast food brands. The ad highlighted the devastating impact of the new law, noting that Rubio’s California Grill shut down 48 of its 134 locations at the end of May. The San Diego-based chain filed for bankruptcy, citing “rising cost of doing business” as the main reason for the closures.
The crisis isn’t just affecting Rubio’s. Fosters Freeze, another well-known fast food brand, closed a location near Fresno because the franchise owner couldn’t afford the increased salaries required by the new law. This pattern of closures and job cuts is becoming more common as fast food restaurants struggle with ongoing high inflation and the added burden of higher wages.
The rise in menu prices has been noticeable. Starbucks increased beverage prices in California by 50 cents after April 1, while Taco Bell raised menu prices by 3%, according to Kalinowski Equity Research. Fatburger in Los Angeles plans to hike prices by 8% to 10%, and Chick-fil-A saw a 10.6% spike in prices 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” due to rising costs. This shows the gap between the push for higher wages and the financial realities faced by businesses and consumers alike.
Supporters of the wage hike argue it aims to give fast-food workers more financial freedom in a state known for its high cost of living. However, critics like Manzo believe fast food jobs were never meant to be long-term careers. “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 deals with the consequences of this controversial law, the debate over balancing fair wages with economic feasibility continues. One thing is clear: the state’s fast food industry is facing an uncertain and challenging future.
