California fast food restaurants have slashed nearly 10,000 jobs because of the state’s new $20 minimum wage as struggling franchises cut labor costs and raise prices to survive, a major trade group said Thursday.
The California Business and Industrial Alliance (CABIA) slammed Democratic Gov. Gavin Newsom for pushing through the law, which went into effect April 1 – and was blamed for forcing one beloved taco chain to shutter 48 locations in the state last week.
“California businesses have been under total attack and total assault for years,” CABIA president and founder Tom Manzo told Fox Business.
“It’s just another law that puts businesses in further jeopardy.”
Several major chains – including McDonald’s, Burger King, and even low-cost favorite In-N-Out Burger – jacked up prices to offset the higher wages.
Many had to cut employee hours and some have expedited a move to automation.
Manzo said nearly 10,000 jobs have been cut across fast food restaurants since Newsom signed California Assembly Bill 1287 into law last year, adding that officials were living in a “fantasyland” by thinking that drastic wage increases will help workers or businesses.
“You can only raise prices so much,” he said. “And you’re seeing it. People are not going to pay $20 for a Big Mac. It’s not going to happen.”
CABIA took out a full-page ad in Thursday’s USA Today that included mock “obituaries” of popular fast food brands.
Rubio’s California Grill, known for its fish tacos, closed 48 of its nearly 134 locations at the end of May – the first major chain to fall victim to the new law. The San Diego-based company cited the “rising cost of doing business” in the state for the closures. The chain filed for bankruptcy on Wednesday.
Another fast food restaurant, Fosters Freeze, recently closed a location near Fresno, saying the franchise owner could no longer afford to pay workers the upgraded salaries.
Fast food restaurants – already bearing the brunt of persistently high inflation – raised prices ahead of the new law or shortly after it went into effect.
Beverages at Starbucks stores in California were 50 cents more expensive after April 1, while Taco Bell raised menu prices by 3%, according to a recent report from Kalinowski Equity Research.
Marcus Walberg, whose family runs four Fatburger franchises in Los Angeles, told Business Insider in January that he was planning to raise menu prices between 8% and 10% in response to the new law.
Chick-fil-A prices spiked 10.6% between mid-February and mid-April, according to data from Gordon Haskett.
A recent survey conducted by LendingTree found 78% of consumers now consider fast food to be a “luxury” purchase due to how expensive the meals have become.
Part of the push for the hike was to give fast-food workers more financial freedom in a state known for its high cost of living. However, critics contend fast food jobs were meant for young people as a stepping stone.
“It’s a starter industry,” Manzo said. “You get a job as a kid working in a fast food restaurant and you learn some good work ethic and that takes you into life.”
