California’s upcoming legislation, set to boost the minimum wage for fast-food workers, is likely to nudge up the cost of fast food for consumers, especially at prominent outlets like Fatburger. With its implementation in April, this law is causing a stir among fast-food operators, pushing them to recalibrate their pricing and workforce strategies to balance the rising labor costs.
Fast-Food Chains Adjust to California’s New Minimum Wage Law
Marcus Walberg, who runs four Fatburger franchises in Los Angeles, is openly sharing his strategy for adapting to this change. Chatting with Business Insider, he revealed that price hikes at his eateries have already been made, alongside trimming down the working hours for his staff. Currently, California’s minimum wage hovers at $16 per hour, but the upcoming law will escalate it to $20 come April. This increase is a ripple effect of AB 1228’s enactment, addressing the surging living expenses and spotlighting the economic struggles of many fast-food workers living with incomes hovering around or under the federal poverty threshold. AB 1228 stands as a legislative acknowledgment of the critical need for a living wage in the face of California’s high living expenses.
In preparation for these changes, Walberg mentioned a 10% hike in menu prices at his restaurants, effective April 1. This follows a previous 8% increase he implemented last year. “It’s a scary thing because customers are already complaining that prices are too high,” Walberg expressed concerns to Business Insider. Alongside price increases, Walberg is also streamlining operations by cutting down on employee hours and suspending the paid-time-off programs at his franchises. This is in an effort to brace for the upcoming wage hike. “We’re not hiring new people to fill jobs,” he said, highlighting the tightened schedules and staffing affecting employees at his franchises.
Pricing Strategies and Workforce Changes Amid Wage Increases
Fatburger is not alone in its approach to the new wage law. Other major fast-food chains are also adopting similar strategies. Last year, executives from McDonald’s and Chipotle announced plans to raise menu prices in California to offset the minimum wage increase. Pizza Hut took a more drastic step, announcing the layoff of all delivery drivers across California franchises, affecting locations in Los Angeles, Orange, San Bernardino, Riverside, and Ventura counties. The chain plans to rely on third-party delivery services like Uber Eats, GrubHub, and DoorDash.
This new minimum wage law also establishes a nine-person council authorized to annually adjust the hourly minimum wage for the fast-food industry through 2029. The council’s adjustments will be based on either a 3.5% increase or the annual change in the consumer price index, whichever is higher. This mechanism ensures that the wages of fast-food workers keep pace with the cost of living, aiming to provide them with a more sustainable living wage.
The introduction of this law and the subsequent responses from fast-food chains like Fatburger highlight a growing concern among business owners about balancing operational costs with fair wages. While these measures aim to cushion the impact of the wage increase on businesses, they also reflect the broader economic challenges faced by both employers and employees in the fast-food industry. As April approaches, both consumers and workers alike are bracing for the changes that this new wage landscape will bring.
