- Some restaurant chains and franchisees have increased prices in California to cover a new pay law there.
- Restaurants from Starbucks to Chipotle have marked up menu prices since the law took effect on April 1.
- Other chains have found alternatives to offset the higher wage costs.
Many fast food workers in California have been taking home more money since April 1, when the state’s minimum wage for those workers went to $20 an hour.
But restaurant owners, eager to protect profits, have raised the menu prices that consumers pay to help offset the cost.
Often, fast-food joints are operated by franchisees — business owners who run a small group of stores and pay a company like McDonald’s for the right to do so. That means that individual franchisees may choose to pass on the higher pay costs, while others don’t.
California’s new law applies to chains with at least 60 “limited-service” locations in the US — that is, restaurants where customers order and pay for their food before getting it instead of sitting down and being waited on.
Here are the restaurants — and specific franchisees — who have decided to raise menu prices since California’s new minimum age kicked in:
McDonald’s: Scott Rodrick, who owns 18 Northern California McDonald’s restaurants, said he would raise prices. He was also considering changes to his stores’ hours and putting off planned dining room renovations to save money.
Individual franchisees make their own decision about increasing prices, the company told The Los Angeles Times.
Burger King: Burger King restaurants in California raised prices by 2%, according to a report from Kalinowski Equity Research that examined prices at several fast food chains in the state before and after April 1.
Chipotle: Prices at the Mexican grill chain rose 7.5% in California after the law took effect, per the Kalinowski report. The company’s CFO said on an earnings call in February that Chipotle would increase menu prices because of the higher wages.
Wendy’s: Menu prices at Wendy’s rose 8% in California, according to Kalinowski.
Starbucks: Beverages at Starbucks’ California stores were 50 cents more expensive after April 1, BI reported after the law took effect. The Seattle-based coffee chain’s California stores raised by 7%, according to Kalinowski.
Taco Bell: Menu prices rose 3% after the new wage law took effect, Kalinowski found.
Fatburger: Marcus Walberg, whose family runs four Fatburger franchises in Los Angeles, told BI in January that he was planning to raise prices between 8% and 10% in response to the new wage law. He also planned to cut PTO for employees and freeze hiring, he said.
Vitality Bowls: Brian Hom, the franchisee in charge of two Vitality Bowls locations in San Jose, increased prices between 5% and 10% after the law took effect, he told BI. He has also stopped hiring and reduced the number of workers on duty per shift.
Fast food already had an affordability problem, Business Insider reported last year.
Indeed, some restaurant operators say that they’ve already raised prices more than usual over the last year or two in response to inflation and are worried that another round of increases would scare off customers. One Burger franchisee told BI that he’s instead installing ordering kiosks at his restaurants to save money on wages.
Lynsi Snyder, the president and third-generation owner of In-N-Out, told NBC’s “Today” earlier this month that she pushed to limit menu price increases in response to both higher wages as well as general inflation.
“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.”
Do you work at a fast food restaurant and have a story idea to share? Reach out to this reporter at abitter@businessinsider.com
