Fast-food chains are or planning to hike the cost of menu items because they're required to pay their employees $20 an hour starting Monday.
Your next burrito bowl might cost you more than $12 thanks to a California law that's significantly increasing fast-food workers' wages next month, a cost increase that big chains like Chipotle say they could pass along to consumers.
During an earnings call in February, Chipotle's chief financial and administrative officer Jack Hartung warned, 'To cover the cost of the wage increase, we would need to take a mid-single-digit price increase in California.' The law, Assembly Bill 1228, was signed by Gov. Gavin Newsom in September and takes effect Monday. It requires restaurants — corporate- and franchise-owned — with 60 establishments nationwide to bump their California-based workers' pay to $20 an hour, $4 higher than the overall state minimum wage of $16 an hour. Though Chipotle has not yet announced a final decision on new pricing, many other chains like McDonald's, Starbucks and Jack in the Box say they are also planning to push that increase onto consumers or change their operations. The law also called for the creation of a restaurant industry council to set future pay raises and advise on working conditions. Here are the fast-food favorites that are hiking their prices or changing how they operate. There won't be a uniform price change in the McDonald's menu items because corporate-owned and franchise locations will be making different modifications to their menus. A spokesperson for McDonald's told The Times the company was exploring several ways to counterbalance the increase in labor costs and has yet to decide how much it will raise the price of the menu items at its corporate-owned stores. At franchise locations, which account for 95% of the brand’s U.S. portfolio, McDonald’s provides “informed pricing recommendations” but final pricing is at the discretion of franchisees, the spokesperson said. Coffee aficionados can expect an uptick in their caffeine drink costs, but Starbucks hasn't disclosed when or how much it will increase its prices. The company elected to increase wages for all employees regardless of their level of experience, a spokesperson told The Times. Pizza prices won't increase, but two Pizza Hut operators in the state eliminated in-house delivery, forcing their local customers to rely on third-party apps. The operators laid off more than 1,200 drivers to reduce staff ahead of the implementation of Assembly Bill 1228, Business Insider reported. 'Where select California franchisees have elected to make changes to their staffing approach, access to delivery service will continue to be available via Pizza Hut’s mobile app, website and phone ordering and the customer ordering experience will remain consistent,' said Chelsea Mack, spokesperson for the company, in an email to The Times. Round Table Pizza's owner, Excalibur Pizza, said in a Worker Adjustment and Retraining notification, a 60-day written notice of forthcoming layoffs, that it planned to eliminate 73 driver positions by mid-April. The most recent state WARN report shows the company served 71 layoff notices. The change will shift Round Table delivery options to third-party service providers. Round Table Pizza told The Times that it saw the layoffs as a 'transfer of jobs,' as workers will be needed for the third-party delivery services, where they are typically employed as contractors without many worker protections or benefits. 'That said, delivery service fees may increase, and the customer will most likely see even higher prices as a result of this ongoing shift,' said a Erin Mandzik, spokesperson for Round Table Pizza. 'Operators are doing their best to retain staff and keep doors open, that is what it really comes down to.' In regard to any price changes, that's up to the franchisee, but the Round Table Pizza franchisor is helping its operators maintain its margins. 'Whether that is devising a value-drive limited time offers, providing strategic guidance on menu pricing, or providing costs of goods savings with our significant purchasing power, we are in the thick of it with our operators,' Mandzik said. Alexander Johnson is a franchisee of several locations of Auntie Anne's and Cinnabon in California. Johnson operates five locations of each business in the Bay Area and said the wage increase is making him consider layoffs and closing some locations, ABC 7 reported. Among the drawbacks, Johnson said it would also mean he would have to raise prices. It's unclear whether the pretzel or cinnamon pastry locations under Johnson's purview will definitively increase their prices and when. Jack in the Box menu items could see a hike as well. During recent earnings calls, CEO Darin Harris stated the company would depend on upward price adjustments, expecting menu prices to increase from 6% to 8%, Nasdaq reported. The Times reached out to Jack in the Box for comment, but did not receive a response before publication. Times staff writers Andrea Change and Don Lee contributed to this report.
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