California Restaurant Chain Brace for Impact: Minimum Wage Hike Set to Trigger Price Increases

Ash Jurberg

Wallets Beware: California Chain Restaurants Feel the Pinch of New Minimum Wage, Warn of Price Surge

Last month, California Governor Gavin Newsom passed a new law that is set to impact the state's hospitality industry.

Newsom signed a bill to increase wages for fast-food workers across the state. The new AB 1228 legislation, or the Fast Food Franchisor Responsibility Act, will come into effect on April 1, 2024, and guarantees fast-food employees in California a minimum wage of $20 per hour- the highest in the United States.

While this is excellent news for employees, it seems that customers may be the ones fitting the bill. The CEO of popular restaurant chain Jack in the Box, Darrin Harris, expressed his views on how this may impact the industry this week. The business owns Jack in the Box, which has about 43% of its 2,200 locations in California, and Del Taco, which operates about 63% of its 591 locations in the state.

Harris expects to raise prices 6% to 8% companywide, largely because of the California wage hikes.

"With what’s going on in California, it’s really hard to predict what really will happen with sales. So, we are focused on how we reach our customers. How we provide them service in the way that we need to." CEO Darin Harris

BJ's, a restaurant chain headquartered in California, has also stated that the wage increase will be reflected in higher menu prices. BJ's has 59 locations across California.

"We expect higher menu prices in restaurants throughout the state as operators look to mitigate the added costs. We are still finalizing our menu pricing plan for next year but expect to be able to offset inflationary pressures.” BJ’s Restaurants president and chief executive officer Greg Levin

At this stage, the increase in menu prices will only be made in California and not in other states.

Habit Burger, which has more locations in California than any other state, will incur a $10 million operating loss in the fourth quarter, partly attributed to the impacts of the legislation. They have not stated whether prices will rise.

Your thoughts

Do you believe businesses should pass these costs on? Do you agree with the new law passed by Gov. Newsom? Is it becoming too expensive to eat out in California?

Please leave your thoughts in the comment section below and share this article on social media and with others so more people can join the discussion.

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