More than 625 California fast food restaurant owners are warning the state’s new Fast Food Council that hiking their industry’s minimum wage above the $20 hourly rate imposed last year would “cripple thousands of small business owners” already struggling to stay afloat.
“We simply cannot survive another wage increase,” the restaurant owners wrote in a late-December letter to the council and its chair, Nicholas Hardeman.
The warning comes as the branch of the Service Employees International Union representing fast food workers is calling for the council to raise the starting pay rate to $20.70 per hour, a 3.5 percent increase. The union made their “demands” at the council’s first-ever meeting in August, only four months after the fast food industry’s minimum wage jumped 25 percent from $16 per hour to $20, according to news reports.
In their letter, the restaurant owners say raising the minimum wage to $20 per hour “dealt a devastating blow” to local restaurant. They cited a July 2024 survey by the Employment Policies Institute, which found a litany of negative effects caused by the wage hike.
According to the survey of 182 California fast food operators, 98 percent reported raising their menu prices, 89 percent reported cutting employee hours, 73 percent reported limiting the ability of employees to pick up extra shifts or work overtime, and 70 percent reported reducing staff or consolidating positions. Sixty-seven percent of respondents reported that the $20 wage mandate would cost them at least $100,000 per location.
Raising the starting wage again would “cripple thousands of small business owners like us who are already struggling to survive the $20/hour minimum wage, our customers, and our employees,” the restaurant owners wrote in the letter to the council, adding that it is “unfair to single out local restaurant owners — yet again — for higher wages that no other industry is forced to pay.”
The $20 fast food minimum wage was the result of a years-long campaign by Big Labor leaders and their Democratic allies to target an industry they’ve long struggled to organize.
In 2022, California Democrats passed the Fast Food Accountability and Standards Recovery Act, or FAST Act, which would have created an unelected fast food council that could have hiked the industry’s minimum wage to $22 an hour. The restaurant industry fought back, gathering enough signatures for a ballot initiative to challenge the act.
Assembly Bill 1228 was a compromise between the industry and lawmakers. In exchange for eliminating the most extreme aspects of the FAST Act, the fast food industry agreed to drop its ballot initiative and raise starting pay to $20 an hour starting April 1, 2024.
The new Fast Food Council, established in AB 1228, has the ability to raise the industry’s minimum wage by 3.5 percent per year or the annual increase in the Consumer Price Index, whichever is smaller.
Opponents and proponents of the $20-per-hour wage increase have been engaged in a public feud over its impact.
Last month, the Employment Policies Institute noted U.S. Bureau of Labor Statistics data that show that between September 2023, when Newsom signed AB 1228, and June 2024, California lost more than 6,000 fast food jobs, even as employment in the industry rose nationwide.
In response, a spokesman for Newsom’s office pointed at another BLS dataset, not adjusted for seasonal hiring fluctuations, that shows fast food employment in the state actually increased in the months after the wage increase went into effect. Newsom’s office also cites a University of California Berkley study from September which found that the wage increase didn’t lead to job cuts or massive hikes in food prices.
However, several restaurant owners and chains have acknowledged that they are speeding up the installation of self-service ordering kiosks and kitchen robotics to lessen labor costs. Some owners have also streamlined their menus to reduce costs, and some have vowed to rethink future expansions in the state due in part to the minimum wage.