California QSRs Cut Jobs Ahead of April Wage Increase

The minimum wage increase has restaurants searching for ways to offset costs.

March 26, 2024

A California law raising fast food workers’ wages to $20 will take effect in April, and some chains are making job cuts in advance of the mandate, reported The Wall Street Journal. As of January, California had 726,600 people working in fast-food and other limited-service eateries.

Pizza restaurants in particular outlined plans to cut hundreds of jobs in the months leading up to the April 1 wage mandate, which will increase minimum wage pay from the current $15.50 per hour.

Many pizza operators are laying off drivers and turning to third-party delivery apps instead. Franchisees for Pizza Hut and Round Table Pizza, a chain of around 400 units, have said they plan to lay off around 1,280 delivery drivers this year, according to state reports.

McDonald’s, Chipotle and Jack in the Box, among other QSRs, have said they will raise menu prices in California to offset costs. Others are considering reducing hours, closing during slower parts of the day or serving menu items that take less time to make. Some restaurants are forgoing new locations in California and looking to expand in other states instead, the Journal reported.

“I can’t charge $20 for Happy Meals. I’m leaving no stones unturned,” Scott Rodrick, owner of 18 McDonald’s restaurants in Northern California, told the Journal.

The minimum wage law, which was signed in September 2023, will also create a Fast Food Council with the power to raise that wage each year through 2029 by either 3.5% or by the change in averages for the U.S. Consumer Price Index for urban wage earners and clerical workers, whichever is lower, reported NACS Daily.

“Economists have long debated minimum-wage increases’ effect on employment. A study by the nonpartisan Congressional Budget Office last December found that raising the federal minimum wage to $17 an hour from $7.25 by July 2029 could increase wages for more than 18 million people, but also could reduce employment by about 700,000 workers,” reported the Journal.

“Higher wages would increase employers’ costs, raise prices for consumers and depress some demand, the CBO found. Some employers would also turn to technology to try to reduce their reliance on low-wage workers,” said the Journal.

In January, 22 other states raised their minimum wage rates for 2024, with three more planning to do so later in the year. The federal minimum wage remains unchanged at $7.25 an hour. It will remain the minimum wage in 20 states, which are located primarily in the South and in parts of the Midwest.