As California gears up for a groundbreaking increase in its minimum wage to $20, slated to take effect in April, fast-food chains across the state are bracing for the financial aftershocks by implementing preemptive measures, including job cuts and operational adjustments.
According to a recent report by The Wall Street Journal, some eateries, particularly pizza chains, have initiated staff reductions to mitigate the anticipated impact on their bottom lines.
Michael Ojeda, a 29-year-old Pizza Hut driver from Ontario, California, shared his dismay with the newspaper, stating, “Pizza Hut was my career for nearly a decade, and with little to no notice, it was taken away.”
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Last year, several Pizza Hut franchises in California filed notices to comply with the Worker Adjustment and Retraining Notification Act, signaling the discontinuation of delivery services, which eliminated numerous delivery driver positions.
In a similar vein, Southern California Pizza Co. announced layoffs in December affecting approximately 841 drivers across the state and Pizza Hut locations across several counties.
A Southern California Pizza Co. spokesperson acknowledged the workforce restructuring, attributing it to a shift towards third-party delivery services.
“While it is unfortunate, we look at this as a transfer of jobs,” the statement read. “Many California restaurant operators are following the same approach due to rising operating costs.”
Acknowledging the potential ripple effects, FAT Brands conceded that delivery fees may surge and customers could face higher prices as a consequence of the transition.
Brian Hom, owner of two Vitality Bowls restaurants in San Jose, echoed these sentiments. He revealed that he now operates with a leaner staff to offset increased labor costs, which results in longer wait times and potentially elevated menu prices for patrons.
The looming wage law, which applies to workers in fast-food chains with 60 or more locations nationwide, has ignited a contentious debate.
Supporters argue that many fast-food employees are not teenagers working entry-level jobs, challenging the opposition’s portrayal. Conversely, California Assembly Republican leader James Gallagher criticized the mandate, asserting, “Restaurants are struggling to stay above water, and Democrats just threw them an anvil.”
However, amid the implementation of the wage law, there have been allegations of preferential treatment. Initially exempted from the law, Panera Bread faced scrutiny after accusations surfaced that California Governor Gavin Newsom advocated for the exemption to benefit billionaire Greg Flynn, a prominent donor. Governor Newsom refuted the allegations and announced in February that Panera would be subject to the new law.
As California braces for the sweeping changes set to unfold with the $20 minimum wage, the state’s fast-food industry navigates uncertain terrain, grappling with the dual challenges of compliance and financial viability in a landscape defined by escalating operating costs and evolving consumer expectations.
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