California fast food franchise owners cut staff to survive as new minimum wage weighs on them
Restaurant Business editor Jonathan Maze weighs in on how California’s minimum wage increase will impact fast food restaurants in the Golden State.
The new $20 minimum wage for fast food workers in California is a huge cost to franchise owners.
Not only have many of them been forced to make difficult decisions – reducing hours and cutting jobs – but now, in some cases, they are even replacing other people to keep things running.
“I schedule one less person, then I come in for the time I didn’t schedule and work that hour,” Lawrence Cheng, a franchisee who operates several Wendy’s locations in Southern California, told The Associated Press.
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California’s controversial $20 minimum wage has impacted franchisees, customers and employees. (Michael Nagle/Bloomberg via Getty Images/Getty Images)
At the Fountain Valley location where he operates in Orange County, Cheng now has more than a dozen employees, down to seven on afternoon shifts after cutting hours and overtime, allowing him to fill gaps and mitigate higher costs.
His fight against the increase in the minimum wage is not, however, isolated.
Scott Rodrick, McDonald’s owner in Stonestown Galleria, just southwest of San Francisco, filed for bankruptcy last month, citing economic challenges such as rising wages.
“The unprecedented changes in California’s economic landscape, coupled with a slew of ill-timed legislative mandates, have significantly narrowed the restaurant’s path to being extended for another term,” he told Fox News Digital, in part.
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According to the Associated Press, Lawrence Cheng owns seven Wendy’s franchises in South Los Angeles. (Kena Betancur/VIEWpress / Getty Images)
His McDonald’s location is among several fast food restaurants, including Red Lobster, Arby’s, Rubio’s Coastal Grill and Fosters Freeze, that have closed since the hike.
Juancarlos Chacon, who operates nine Jersey Mike’s locations in the Los Angeles area, is also feeling the weight of the new mandate.
He told The Associated Press he had no choice but to raise prices and cut morning and evening staff to focus on busier lunch hours in light of the change.
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Juancarlos Chacon said the minimum wage increase has led to higher prices for subs at his Jersey Mike’s franchises. (Jersey Mike)
“I’ve been in the business for 25 years and I have two different brands and I’ve never had to raise prices like I did last time in April,” he said.
It’s also affecting customers, who are removing additional items from their orders to help mitigate higher costs, the report continues.
California’s $20 minimum wage for fast-food workers is $4 higher than the $16 average for other industries in the Golden State, still more than double the federal minimum wage of $7.25.
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California franchise operator Alex Johnson estimates his 10 restaurants will lose a total of $470,000 because of the state’s new minimum wage law.
FOX Business’ Kristen Altus contributed to this report.
