Fast food employees in California currently make $20 per hour. In response, franchisees are reducing hours

Taking orders at the register one recent day, Lawrence Cheng, whose family owns seven Wendy’s restaurants south of Los Angeles, poured boiling hot baskets of French fries and chicken nuggets, adding a flourish of salt to them.

Cheng used to staff his Fountain Valley, Orange County, facility with close to a dozen workers during the afternoon shift. As he tries to absorb a sharp increase in labor expenditures, he now only bookss seven employees for each shift. On April 1, a new California law increased the hourly rate for fast food workers from $16 to $20.

He remarked, “We kind of just cut where we can.” “I work an hour by coming in during the time I didn’t schedule and by scheduling one less person.”

Cheng anticipates a stronger profit that will be able to offset the increased expenses throughout the summer, when business is usually brisk due to families traveling and eating out more.

According to experts, it’s still too early to determine how the wage increase would affect fast food chains in the long run and whether there will be many layoffs and closures. Increases in pay in the past haven’t always resulted in job losses. Job growth persisted after the minimum wage in California and New York was nearly doubled to $15 per hour from the federal level of $7.25, according to a University of California, Berkeley research.

As of right now, the industry is still adding jobs. The U.S. Bureau of Labor Statistics reports that, in comparison to the same period in 2023, the industry added 8,000 jobs in the first two months following the law’s passage on April 1. For June, no statistics were yet available.

The Service Employees International Union, which championed the increase, said that in addition to the industry adding jobs as a result of the new law, “multiple franchisees have noted that the higher wage is already attracting better job candidates, thus reducing turnover.” Joseph Bryant is the executive vice president of the union.

However, in order to stay in business, a lot of large fast food chain companies claim they are hiking prices and reducing hours.

Juancarlos Chacon, the owner of nine Jersey Mike’s in Los Angeles, stated, “I’ve been in the business for 25 years and I’ve worked with two different brands, and I never had to increase the amount of pricing that I did this past April.”

Less than $10 for a turkey sub? It is at $11.15. He notices that although customers are still coming in, they are cutting back by not ordering drinks, chips, or dessert.

Chacon has been cutting workers in the mornings and nights because lunch is their main business. In addition, he has slashed a few part-timers, reducing the total to roughly 145 from 165.

Not just employees at entry level received salary increases. Labor accounts for nearly three-quarters of his costs; shift leaders, assistant managers, and everyone else up the ladder have to receive rises as well.

“I’m really anxious,” Chacon remarked.

The founder and CEO of a multinational restaurant consulting company, Aaron Allen, reported receiving frantic calls from suppliers and restaurant operators in California who are still recuperating from the COVID-19 lockdown. According to his predictions, there would be a rising gap between larger companies like as McDonalds, which can afford to invest in automation and cut costs through “menu reconfiguration,” and smaller, more local businesses that may have to close a significant number of outlets or go out of business.

Cheng stated that he has opted to reduce the number of workers on each shift and decrease overtime, rather than intending to let go of any of his 250 Wendy’s employees. In January, he also increased menu pricing by roughly 8% in advance of the regulation.

However, he insisted that his records indicate he went over budget by $20,000 for a two-week pay period.

The president and CEO of the California Restaurant Association, Jot Condie, stated that companies are facing pressure from both increased rent and food expenses, and his organization opposed the minimum wage measure.

Condie stated, “Any restaurant business with already thin margins will be forced to reduce expenses elsewhere when labor costs jump more than 25% overnight.” “The only options available to them are to raise prices, shorten business hours, or reduce employee headcount.”

After working at a Pizza Hut in Los Angeles for a little over a year, Julieta Garcia stated that she is now just working five days a week rather than six. She clarified that this is a good thing because it allows her to spend more time with her 4-year-old kid. With the extra cash, she can take her son to get his tonsils checked out and pay her mobile bill on time, saving her from having to stop service, she added.

A 63-year-old retiree from Sacramento who works at a Wendy’s, Howard Lewis, claimed he had been investing his spare cash.

Lewis stated, “Today was payday and I bought $500 worth of stock.” In addition, he’s assisting his ex-wife with her car’s brake repairs.

In order to pay the more than 500,000 fast food employees in the state a livable wage, Governor Gavin Newsom said the increase was required.

In his social media-posted state of the state speech, Newsom declared, “We are a state that gives a damn about fast food workers—who are predominantly women—working two and a half jobs to get by.”

The rise has been uneventful for Enif Somilleda, general manager of an Orange County Del Taco. Four individuals used to work a shift for her. Now she’s down to only two.

She remarked, “It has helped me financially.” “But I have to put in a lot more work because I have fewer people.”(Source)