CABIA President Tom Manzo joined Fox & Friends to discuss how the minimum wage increase has affected the fast food industry as thousands are forced out of a job.
California’s new $20 minimum wage for fast food workers has already caused restaurant prices to rise and foot traffic to drop since it went into effect on April 1, data show.
A recent study published by Placer.ai found that as a result of the new law — which affects restaurants with 60 or more locations — most quick-service chains have increased their menu prices in the state, from a mid-point until middle age. in percentage terms, and price increases are hurting business.
Governor Gavin Newsom signed legislation raising the minimum wage of fast food workers in California to $20 an hour at SEIU Local 721 in Los Angeles on September 28, 2023. The law took effect on April 1, 2024. (Sarah Reingewirtz/MediaNews Group/Los Angeles Daily News via Getty Images) / Getty Images)
The analysis found that during February and March of this year, foot traffic at the chain’s top restaurants in California was actually up year-over-year and higher than the national average, but it suddenly shifted as wage increases kicked in. power.
During April through May, foot traffic to fast-food restaurants in California was below the national average for seven out of eight weeks, Placer.ai said. The analytics firm said quick-service burger chains were the hardest hit.
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McDonald’s, for example, saw roughly the same year-over-year foot traffic at its California locations as the rest of its restaurants nationwide during the February-March timeframe. But after the minimum wage law went into effect, McDonald’s California locations — which make up about 9% of the company’s U.S. restaurants — began underperforming by almost 250 basis points.
A McDonald’s fast food restaurant is seen in Belmont, California on April 3, 2023. (Tayfun Coskun/Anadolu Agency via Getty Images/Getty Images)
| TICKER | Safety | The last | AmENdmENT | change % |
|---|---|---|---|---|
| MCD | MCDONALD’S CORP. | 253.09 | -1.42 | -0.56% |
The study showed that visits to California locations during April and May also underperformed the national average for Burger King, Wendy’s, Jack in the Box, In-N-Out Burger and Chipotle, which had raised its prices 6%- 7% in the state to offset the increase in wages.
| TICKER | Safety | The last | AmENdmENT | change % |
|---|---|---|---|---|
| QSR | RESTAURANT BRANDS INTERNATIONAL INC. | 69,28 | +0.41 | +0.60% |
| WEN | THE WENDY’S CO. | 16.86 | +0.20 | +1.20% |
| JACK | JACK IN THE BOX INC. | 54,88 | -1.07 | -1.92% |
| CMG | CHIPOTLE MEXICAN GRILL INC. | 3,248.12 | +77.24 | +2.44% |
Placer.ai’s analysis also showed broader impacts on the state’s restaurant industry as a result of the minimum wage increase.
“It’s early, but we’re starting to see the ripple effect of the minimum wage increase on the broader restaurant industry,” said RJ Hottovy, head of analytics research at Placer.ai. “First, we’re starting to see some operators closing locations in the state, especially chains that were already struggling financially.”
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The study noted that the new law has led several restaurant chains to close locations in California, including Rubio’s Coastal Grill, which cited the minimum wage increase as one of the reasons it filed for bankruptcy last week.
The view of the passerby in the windows of Rubio’s Costal Grill on Lincoln Blvd. in Los Angeles. (Zoe Cranfill/Los Angeles Times via Getty Images/Getty Images)
Meanwhile, the study said casual dining chains, which typically paid workers more than the $20 minimum, appear to be benefiting from rising menu prices at fast-food restaurants.
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The data showed that Olive Garden and Chili’s restaurants in California actually beat the chains’ respective national averages in foot traffic year over year in April.