Fast-food prices in California are expected to increase this spring due to the state's new minimum wage law for fast-food workers. The law, which will take effect on April 1, 2024, mandates a $20 per hour minimum wage for fast-food workers at restaurants with at least 60 locations nationwide. However, restaurants that make and sell their own bread are exempt from the law.
Major fast-food franchises such as McDonald's and Chipotle have already indicated that prices will have to rise to cover the increased labor costs. Chipotle's chief financial officer, Jack Hartung, stated that the company expects to raise prices by about 5% to 9% at its California restaurants. Hartung also mentioned that labor costs for Chipotle are projected to rise in the range of 15% to 20%, which he considers significant enough to impact the company's economics.
Similarly, McDonald's CEO Chris Kempczinski acknowledged that prices at the fast-food giant will have to increase, although the exact magnitude of the increases has not been determined. Kempczinski emphasized the need for franchisees and teams to explore productivity improvements to offset the impact of the minimum wage hike.
The minimum wage law has also prompted some businesses to consider increased automation as a way to mitigate the impact of higher labor costs. Burger King's parent company, Restaurant Brands International, plans to accelerate the rollout of digital ordering kiosks to improve order accuracy and reduce stress for employees.
It is worth noting that California's minimum wage already increased to $16 per hour in January, making it the highest in the nation. The new law for fast-food workers further raises the minimum wage to $20 per hour.
Overall, the implementation of California's $20 per hour minimum wage law for fast-food workers is expected to result in price increases at fast-food restaurants in the state. The law has prompted major franchises to consider raising prices and exploring automation as a response to the higher labor costs. However, the full impact on businesses and consumer behavior remains to be seen.