Why are fast food prices going up in California?
In the coming months, fast food lovers in California can expect price increases in their favorite restaurants. Why the hike in the face of lower inflation?
Fast food restaurant franchises in the state of California are preparing to increase their prices in the coming months. According to KTLA5, executives from McDonald’s and Chipotle Mexican Grill have already announced that increases in menu prices are coming.
Meanwhile, hundreds of Pizza Hut franchises will be affected by the layoffs of thousands of employees that have already been announced. What is the reason for the price increases and mass layoffs?
Minimum wage increases for fast food workers in California
At the end of September last year, the state's governor, Gavin Newsom, signed a new law that will increase the minimum wage for the more than 500,000 fast food workers in the state.
While the current state minimum wage is $16 per hour, fast food workers will earn $20 per hour starting April 1 of this year. Once this comes to pass, fast food workers in California will have the highest guaranteed base salary in the industry.
The new minimum wage for fast food workers will apply to restaurants with at least 60 locations nationwide, with the exception of restaurants that make and sell their own bread, such as Panera.
To offset higher labor costs due to the increase, some companies will choose to increase the prices of their products or services or invest in automation to reduce their workforce.
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More raises could be coming for fast food workers in CA
In addition to this year’s increase, the minimum wage could rise annually. The legislation passed in California also contemplates the creation of a nine-member Fast Food Council, which will be made up of representatives of the restaurant industry and its workers.
This council would have the power to increase the minimum wage each year until 2029. The increases would be 3.5% or according to the change in the averages of the Consumer Price Index for urban wage earners and white-collar workers (CPI-W), whichever is lower.