Fast-food giants McDonald’s and Chipotle have announced menu price increases in California to offset the impact of recently signed minimum wage hikes into law by Governor Gavin Newsom.
McDonald’s CEO Chris Kempczinski revealed during an earnings call that the wage law will affect California franchisees, and the company is considering menu price hikes to cope with the new labor costs. He emphasized that franchisees are exploring various strategies to address the financial impact in the short term, although the exact magnitude of the hit remains uncertain.
Similarly, Chipotle’s chief financial officer, Jack Hartung, stated during an earnings call that the chain is planning to raise prices in California by a “mid-to-high single-digit” percentage.
The California minimum wage law raises the minimum wage for fast food workers at restaurants with at least 60 locations nationwide to $20 per hour, effective from April 1, 2024. Notably, there is an exception for restaurants that bake their own bread.
Menu price increases are not new in the restaurant industry, as businesses have been grappling with rising costs in recent years. Inflation has been on the rise, with the U.S. Bureau of Labor Statistics reporting a 3.7% increase in prices across all items over the past 12 months. The Department of Agriculture has also noted a 2.4% uptick in the general food index from September 2022 to September 2023.
The decision by McDonald’s and Chipotle to raise menu prices to offset increased labor costs highlights the ongoing challenges faced by businesses dealing with economic fluctuations and legislative changes.
As of the time of this report, neither McDonald’s, Chipotle Mexican Grill, nor Governor Gavin Newsom’s office have responded to requests for comment on these developments.
California fast food workers will be paid at least $20 per hour next year under a new law signed Thursday by Gov. Gavin Newsom.
So McDonalds is supposed to just eat this rate increase? That’s not how it works, businesses are there to make money not be benevolent; prepare to… pic.twitter.com/owdyPhVsBl
— AlphaFo𝕏 (@Alphafox78) September 28, 2023
