California’s Fast Food Council agreed to consider hiking the industry’s hourly minimum wage by another 70 cents, on top of last year’s massive hike.
California’s Fast Food Council agreed this week to consider hiking the industry’s hourly minimum wage by another 70 cents despite intense pushback from restaurant owners who say last year’s massive wage increase is devastating their businesses.
The council’s decision on Wednesday to put the new wage hike on the next meeting agenda also comes after a new report found that last year’s 25 percent fast-food wage increase led to industry’s worst performing year in the state this century outside of recession years.
Richard Tieu, who came to the U.S. with $50 and now owns two McDonald’s in San Jose, told the council that last April’s wage hike from $16 an hour to $20 is “crushing” him. He was one of more than 30 restaurant owners who spoke against the potential wage increase, according to the industry group Save Local Restaurants.
“I can’t afford to hire any new employees, and as people leave, I can’t replace them,” said Tieu, who added that he’s also had to raise prices and cover more shifts himself. “I worry every day about what another increase would mean — not just for me, but for my employees who depend on these jobs.”
Last week, the Berkeley Research Group consulting firm released a report that concluded that last year’s $20 wage hike led most impacted businesses in California to cut jobs, reduce employee hours, and increase menu prices by 14.5 percent — nearly double the national average. Fast-food restaurant owners have also increased automation and adopted new technologies to offset rising labor costs. “Therefore it should not be surprising that the number of employees per restaurant is declining,” the report said.
U.S. Bureau of Labor Statistics employment trends show that the state’s limited-service restaurant sector “significantly weakened in 2024, making it the worst performing year outside of a recession during the century — compelling evidence that the 25% minimum wage increase has reduced the number of jobs available,” according to the report, which was commissioned by Save Local Restaurants.
Advocates of the fast-food wage increases, including Governor Gavin Newsom, have pointed studies from left-wing groups, including a study last fall from the University of California Berkeley, that found that last year’s wage hike didn’t lead to job cuts or massive spikes in food prices. The Berkeley Research Group study pushed back, reporting that “these claims are not supported by reliable data — and are likely wrong” in part because employment gains “in non-affected establishments may mask job losses.”
The minimum wage hike may hurt the workers it was intended to help, the report said.
“Higher wages do not guarantee higher total income for workers if employers reduce hours to offset costs — a reduction most economists would expect to occur as fast food restaurants act to reduce costs in the face of the $20 per hour minimum wage,” the report said. “Survey data confirm that nearly all fast food restaurants have already cut, or plan to cut, employee hours, reducing the overall earnings of workers. If these reductions are large enough, workers could end up with less total income, despite the wage increase.”
California fast-food restaurant owners who spoke to the press ahead of the Fast Food Council’s meeting on Wednesday, agreed with that notion, saying that they’ve had to lay off staff, cut employee hours, pick up additional shifts themselves, and raise prices to keep their businesses afloat because of last year’s wage increase.
“Another wage increase really feels like the last straw,” said Tenny Megerdichian, a Dog Haus franchisee in Southern California.
“There’s less hours to be had, the price of all of our input costs are super, super high, and in the end the very people we count on to come back to our restaurants to enjoy the good food and to be part of the community are the very people this is impacting,” she said. “It’s not a sustainable model.”
Brian Hom, the owner of two Vitality Bowls in San Jose, said running the food-allergy-safe restaurants are a “passion” for him after his son died of a food allergy. But, he said, the business and the contributions he makes to local schools and hospitals, are at risk if the state mandates another wage increase in the coming months.
“We’re trying to make ends meet. We’re not making millions of dollars. We’re a small business,” he said. “I’m doing everything I can to keep my stores open.”
The Fast Food Council, established in a compromise between industry leaders and California Democrats, 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. The council is expected to discuss the potential wage hike at its next meeting in April or May.