- California fast food restaurants are cutting staff in preparation for a $20 minimum wage.
- For example, Pizza Hut franchisees plan to lay off about 1,200 employees.
- Restaurants are also raising prices to offset wages. Some people worry that it will spook customers.
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A new report says California fast-food restaurants are laying off hundreds of workers to cut costs in preparation for the state’s $20 minimum wage for fast-food workers taking effect in April. A book was published. wall street journal detail.
Two Pizza Hut franchisees with restaurants in various California counties announced they will lay off approximately 1,200 employees as they eliminate delivery driver roles and instead rely on third-party deliveries. .
Southern California Pizza Company, a Pizza Hut franchisee, hired about 850 employees in February, according to a December filing with Business Insider under California’s Worker Adjustment and Retraining Notification Act. announced that it plans to lay off employees.
In December, another Pizza Hut franchise, Pak Pizza and its affiliates, filed plans to lay off more than 350 employees in February.
And in February, Round Table Pizza franchisee Excalibur Pizza LLC announced it planned to lay off 70 employees in April, according to a WARN Act filing. became.
Round Table Pizza, which has more than 400 locations in the United States, primarily along the West Coast, told BI that the laid-off employees are delivery drivers and that Excalibur will transition to a third-party delivery service. The company said it believes the layoffs are a “relocation of jobs” and will instead require more staff at third-party delivery services.
“That said, delivery service fees may increase, and customers are likely to see even higher prices as a result of this continued change,” Round Table Pizza’s statement continued. This is the reality of restaurants today.
One fast-food franchisee even asked his 73-year-old parents for help after cutting staff.
Alexander Johnson, who owns 10 Auntie Anne’s and Cinnabon stores in California, told the Journal that without the new law, he would have incurred $470,000 a year in extra labor costs.
Franchisees are concerned that rising prices will scare off customers.
California will raise the state minimum wage for limited-service restaurant workers to $20 an hour starting April 1. This is 25% higher than the general minimum wage.
The law only applies to chains with at least 60 locations across the U.S., but analysts say other restaurants and workplaces in the state could also see higher wages as they compete for talent. .
The bill, particularly in its original form, the FAST Recovery Act, faced fierce opposition from the restaurant industry, with some chains saying the bill would force them to lay off employees and charge customers extra. He argued that operating costs would rise to the extent that it was not possible.
Franchisees typically set prices, and some worry that higher prices will scare away customers.
“You can’t charge $20 for a Happy Meal,” Scott Rodrick, owner of 18 McDonald’s restaurants in Northern California, told the newspaper. He said he was “doing everything possible” to save money amid rising wages.
Another McDonald’s franchisee who owns a restaurant in Los Angeles County previously told KTLA 5 News that raising prices enough to cover wage increases would make his food “unaffordable.”
Brian Hom, owner of two Vitality Bowl acai bowl restaurants in San Jose, told the newspaper that he will raise menu prices by about 10% to cover the wage increase. He also said running the store with two employees instead of four has slowed down order times.
“I have no intention of ever hiring again,” Hom told Barron’s.
Vitality Bowls has taken “significant steps to optimize profitability,” including menu changes and technology improvements, CEO Roy Gilad told BI in a statement. The company is “well-prepared” to offset the rising costs, he said.
Are you a fast food restaurant employee who will soon receive the new minimum wage? Or are you a franchisee worried about how it will affect your business? Send this reporter to the following address: Please send an email to gdean@insider.com.