This article is based on corporate postings and accredited media reports. Linked information within this article is attributed to the following outlets: ScrapeHero.com, TheStreet.com, CNBC.com, and Corporate.McDonalds.com.
I write extensively about the McDonald’s fast food chain, though rarely regarding the politics behind the company’s operational matters. To that end, the implication in this piece's headline that the globe's preeminent fast food company had considered leaving the state of California is true... due to perceived business impossibilities over the success of a 2022 bill.
All told, over 1000 McDonald’s restaurants in the state of California alone were in danger of permanent discontinuance. For perspective, per ScrapeHero.com: There are 13,520 McDonalds restaurants in the United States as of August 29, 2023. The state with the most number of McDonalds locations in the US is California, with 1,219 restaurants, which is about 9% of all McDonalds restaurants in the US.
According to an archived report from TheStreet.com, entitled “McDonalds President Says It Might Be 'Impossible' to Operate in These Key States,” the states referenced are California and Virginia.
As excerpted from the report: In the fall of 2022, the state passed what shortens to the FAST bill -- the Fast Food Accountability and Standards Recovery Act could require fast-food restaurants to pay workers up a minimum wage of $22 an hour with an annual raise of 3.5%.
Due to substantial pushback on the part of the fast food industry, November 2024 was to see a referendum vote on the matter. Until then, implementation of FAST had been blocked.
The report went on to state: In an open letter from January 25, McDonald's USA President Joe Erlinger wrote that it "makes it all but impossible to run small business restaurants. Under the FAST Act, an unelected council of political insiders, not local business owners and their teams, would make big decisions about crucial elements of running a business, fracturing the economy in the process,"
Erlinger further wrote that paying fast-food workers such a wage could raise the cost of eating at a McDonald's by as much as 20%, which was purportedly untenable.
As to Virginia, they had passed a similar bill that has likewise raised the ire of fast food companies in general, and McDonald’s specifically.
Per a followup report from CNN.com, entitled “McDonald’s, In-N-Out, and Chipotle are Spending Millions to Block Raises for Their Workers,” most major fast food chains with a substantial California presence had joined the fight against FAST.
As excerpted from the report: Chipotle, Starbucks, Chick-fil-A, McDonald’s, In-N-Out Burger and KFC-owner Yum! Brands each donated $1 million to Save Local Restaurants, a coalition opposing the law. Other top fast-food companies, business groups, franchise owners, and many small restaurants also have criticized the legislation and spent millions of dollars opposing it.
While the rest of the state saw a $15.50 minimum wage, fast food workers’ minimum pay was set to go as high as $22 per hour should the referendum fail.
The CNN.com report elaborated on the matter, as it regarded opponents of the temporarily frozen law: They argue it unfairly targets the fast-food industry and will increase prices and force businesses to lay off workers, citing an analysis by economists at UC Riverside which found that if restaurant worker compensation increases by 20%, restaurant prices would increase by approximately 7%. If restaurant worker compensation increased by 60%, limited-service restaurant prices would jump by up to 22%, the study also found.
Though only the President of McDonald’s had openly said continuing business in the state of California may be impossible should the referendum fail, industry analysts widely agreed that other chains would likely reconsider in-state operations should new expenses incurred by FAST become untenable.
Now, however, the California side of the matter has since changed, and the issue appears to have been resolved.
What happened to break the logjam?
Let us explore.
A CNBC.com report refers to the conflict as over "for now," as with the help of Governor Gavin Newsom the California minimum wage for fast-food workers is expected to rise to $20 an hour next April, then from 2025 through 2029 a nine-person council will have the authority to raise the hourly minimum wage annually for those working in impacted businesses.
As excerpted from the report: The restaurant industry and the unions struck a deal, replacing the joint-employer provisions with the terms of their agreement, which also includes repealing the FAST Act and withdrawing the referendum by Jan. 1. Fast-food workers employed by affected restaurants will see pay increases of as much as 25% hit their paychecks starting in April. The current California minimum wage is $15.50 an hour, with a bump to $16 set for January.
Employees of smaller fast-food entities and other restaurants could also benefit from the legislation, as the report further states: “When you look at the $20 minimum wage, that’s a bar that’s being set,” Joe Pawlak, managing principal of restaurant consulting firm Technomic, told CNBC. “That’s going to make the restaurant industry a lot more competitive for employees, so other industries are going to have to also step up.”
This is a continuing story. In the event of pertinent updates to this matter, I will share them here on NewsBreak.
Thank you for reading.