Chipotle, McDonald’s, Starbucks, Jack in the Box and Shake Shack are planning to raise menu prices. Fast-food franchisees are laying off employees or cutting their hours. Smaller independent business owners, meanwhile, worry their workers will bolt unless they also increase wages.
With California’s mandatory minimum wage for fast-food workers set to jump to $20 an hour on Monday, major restaurant chains are scrutinizing every aspect of their businesses to find ways to offset the extra money they will soon be spending on labor. In many cases, customers will end up eating the cost.
“It’s going to be a pretty significant increase to our labor,” Jack Hartung, Chipotle’s chief financial officer, said of the new law during the company’s third-quarter earnings call. He estimated that the burrito chain would boost prices by “a mid-to-high single-digit” percentage as a result. “We are definitely going to pass this on.”
The pay increase established by Assembly Bill 1228 applies to California fast-food workers employed by any chain with more than 60 locations nationwide, and covers corporate-owned and franchised locations. The state has more than 540,000 fast-food workers, about 195,000 of them in Los Angeles and Orange counties, according to the latest May 2022 figures from the U.S. Bureau of Labor Statistics.