California Fast Food Chains Increase Prices After $20 Minimum Wage Hike

In response to California's new $20 minimum wage law, restaurants, including Chick-fil-A and McDonald's, have raised menu prices, impacting customers and franchisees statewide.

Restaurant Owners Hike Prices to Offset California's $20 Minimum Wage Law, Varying Responses from Franchisees

As a result, restaurant proprietors have increased menu prices to offset the expense, as they are keen to preserve profits, per Business Insider.

Fast food establishments are frequently managed by franchisees, small business proprietors who remunerate a franchisor, such as McDonald's, in exchange for operating their locations. This implies that while some franchisees opt to absorb the increased labor expenses, others refrain from doing so.

Chains operating at least 60 "limited-service" locations in the United States are subject to the new California law. Limited-service restaurants require patrons to place orders and pay for their meals before arrival instead of waiting in queues.

Before implementing the new legislation, fast food faced an issue of affordability.

Some restaurant owners claim that they have already increased prices above and beyond what is customary for the past year or two due to inflation and are now concerned that another round of price hikes will deter patrons. One Burger franchisee informed BI that he is installing kiosk ordering at his restaurants to save money on wages.

Earlier this month, In-N-Out president and third-generation owner Lynsi Snyder stated on NBC's "Today" that she advocated for constrained menu price increases in light of general inflation and wage growth.

"I was sitting in VP meetings going toe-to-toe, saying, 'We can't raise the prices that much, we can't,'" she told "Today." "When everyone else was taking jumps, we weren't."

Franchisees of Major Chains Raise Menu Prices in Response to California's $20 Minimum Wage Law

According to Microsoft Start, the following restaurants, as well as their respective franchisees, have increased their menu prices in response to the implementation of California's new minimum age:

McDonald's: Scott Rodrick, the owner of eighteen McDonald's locations in Northern California, announced that he would increase prices. To save money, he also contemplated modifying his locations' business hours and delaying dining room renovations.

In an interview with The Los Angeles Times, the franchisor's franchisor stated that it has autonomy regarding price increases.

Burger King: The prices of Burger King locations in California increased by 2% between April 1 and April 1, according to a report by Kalinowski Equity Research that analyzed prices at multiple fast-food chains in the state.

Chipotle: According to the Kalinowski report, prices at the Mexican grill chain increased by 7.5% after the law was enacted in California. On an earnings call in late April, company executives verified this, stating that prices at the company's restaurants in the state increased by between 6 and 7 percent compared to the same period last year.

Wendy's: Kalinowski reports that Wendy's menu prices in California increased by 8%.

Starbucks: BI reported that beverages at Starbucks locations in California became 50 cents more costly on April 1 following the law's implementation. California locations of the Seattle-based coffee chain increased by 7%, as reported by Kalinowski.

Taco Bell: According to Kalinowski, dinner menu prices increased by 3% following the implementation of the new wage law.

Fatburger: Marcus Walberg, whose family operates four Fatburger franchises in Los Angeles, informed BI in January that, in response to the new wage law, he intended to increase prices by 8 to 10 percent. He added that he intended to reduce employee PTO and halt hiring.

Vitality Bowls: Brian Hom, the franchisee overseeing two Vitality Bowls locations in San Jose, informed BI that prices increased by 5 to 10 percent following the law's implementation. Additionally, he has discontinued the recruiting process and decreased the staffing level per shift.

Chick-fil-A: As of mid-April, prices increased by 10.6%, according to data compiled by Gordon Haskett.

Shake Shack: Gordon Haskett discovered that the burger chain increased prices in California by 7.7% between mid-February and mid-April.

Photo: Microsoft Bing