California fast food restaurants raising prices after minimum wage increase

California fast food restaurants have been raising their prices since the state passed a law increasing the minimum wage for fast food workers, Kathy Fairbanks told WORLD on Tuesday. Fairbanks represents a coalition of fast food brands and franchises. Chipotle confirmed to WORLD on Monday that their restaurants in the state have also had to increase prices.

What is this law? California passed a law in September of last year. It set the minimum wage for fast food workers at $20 an hour. Meanwhile, for the rest of workers in California, the minimum wage is $16 an hour, according to the California Department of Industrial Relations. Gov. Gavin Newsom said the law was a step toward what he called more fair wages for California’s 500,000 fast-food workers.

How exactly is this affecting businesses? Chipotle has implemented a statewide price increase in response to the legislation, according to Chipotle’s Chief Corporate Affairs Officer Laurie Schalow. However, many other franchise owners are employing a combination of laying off workers and raising prices to offset the increased cost of the bill, according to Fairbanks. Fairbanks added that many franchise locations had already dealt with inflationary costs before California passed the wage increase.

How is it affecting everyday people? According to Fairbanks, consumers have been paying higher prices, and some workers have lost their jobs. The Wall Street Journal reported earlier this week that consumers were experiencing sticker shock at California fast-food restaurants.

Are these franchises experiencing a profit loss? McDonald’s reported profit growth in the first quarter of 2024 on Tuesday. Chipotle reported profit growth last week.

Dig deeper: Read Brad Littlejohn’s column in WORLD Opinions about so-called shrinkflation and the government’s responsibility to ensure honesty in the market.