The owner of 18 McDonald’s locations in northern California said he plans to reduce hours and increase prices to keep up with the state’s minimum wage hike, which began on April 1.
Price increase
Speaking to Business Insider, Scott Rodrick, owner of 18 McDonald’s locations, said he raised prices in January and March to keep his business ahead of the $20 minimum wage hike. However, he noted that customers have a limited appetite for endless price increases.
Customers could choose other fast-food chains
Rodrick expressed concerns that rising pricing could drive customers to other fast food restaurants, like In-N-Out, Chili’s, and Applebee’s. That’s why he looked into another option to minimize the costs, including cutting workers’ hours.
Other ways to stay afloat
Rodrick mentioned that he might delay the remodeling of some locations and wondered why the new minimum wage bill did not affect other places. He added that labor costs, combined with grocery inflation, are significantly impacting restaurant profits.
McDonald’s CEO on increased prices
Before the new California minimum wage law, McDonald’s was already facing backlash over its prices. The company’s CEO, Chris Kempczinski, said that this year, there will be more focus on affordability. McDonald’s generated total revenue of $25.49 billion in 2023, with $10.38 billion in the US alone.
The hidden cost of AB 1228
The pay rise was supposed to be good news for the state’s 700,000 fast-food workers. But, Assembly Bill 1228 put many out of work, especially since some companies are exploring further automation and robotics.
Slashing 1,200 in-house delivery jobs
Before the bill was enacted, two Pizza Hut operators announced they would lay off around 1,200 drivers and replace their delivery system with popular apps. Burrito chain Chipotle is already working on Autocado, a robot that helps prepare avocados.
Small business owners voiced their concerns
Jay Hazari owns and operates nine McDonald’s franchised restaurants in Sacramento and the Central Valley, employing around 500 people. He wrote an op-ed for CalMatters describing his journey and warning that AB 1228 could strip him of his rights and rob small business owners of opportunities.
Self-service kiosks
Marbue Brown, the founder of The Customer Obsession Advantage, said that the new minimum wage hike only accelerated the automatization. He shared that tech adoption will likely happen faster in some areas than others, though he does not believe there will be en masse layoffs among California’s fast food workers.
Necessary changes
Harsh Ghai, a fast-food franchisee who owns 180 Burger King, Taco Bell, and Popeyes locations, also commented on automation and explained that 25% of his locations already had self-service kiosk systems. He planned to install the rest in the next five to ten years, but the wage hike will likely increase its speed.
Still, Ghai is not firing workers
Ghai believes using automation will help cut off hours, but he does not want to fire a large number of workers. Yet, using technology will help because raising prices will hurt profit, and doing nothing will make restaurants unprofitable. He told CNN he had to close eight restaurants in 2023 and six more in 2024 before the wage hike.
Further wage increases
In June, healthcare workers will get minimum wage raises of $18, $21, or $23 an hour, depending on their place of work. John Logan, professor of labor studies at San Francisco State University, told CalMatter that other food-services companies will likely have to raise wages.
Tourism industry workers could be next
In Los Angeles, a proposed bill would form a $25 minimum wage for workers in the tourism industry before the 2026 World Cup and the 2028 Olympics, which would rise to $30 an hour by 2028.
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