fast food chain in california.
To get ready for the $20 minimum wage, fast-food chains in California are laying off employees.
For example, 1,200 workers are expected to be laid off by Pizza Hut franchisees.
The Wall Street Journal has reported that fast-food establishments in California are preparing for the implementation of a $20 minimum wage for workers in the industry in April by laying off hundreds of employees in order to reduce expenses.
Due to their decision to forgo delivery driver responsibilities in favor of third-party delivery, two Pizza Hut franchisees with locations throughout several California counties have announced plans to lay off about 1,200 employees.
Due to their decision to forgo delivery driver responsibilities in favor of third-party delivery, two Pizza Hut franchisees with locations throughout several California counties have announced plans to lay off about 1,200 employees.
Files made in December under California’s Worker Adjustment and Retraining Notification Act that Business Insider was able to view revealed that Southern California Pizza Company, a Pizza Hut franchisee, intended to fire almost 850 employees in February.
Plans to lay off over 350 employees in February were filed in December by PacPizza, another Pizza Hut franchisee, and its affiliates.
Additionally, according to WARN Act filings, in February Excalibur Pizza LLC, a franchisee of Round Table Pizza, announced that it intended to fire seventy employees by April.
Delivering drivers were among the staff being let go, and Excalibur was switching to outside delivery services, according to Round Table Pizza, which has more than 400 locations across the US, mostly on the West Coast. More employees were needed at third-party delivery services, the company claimed, viewing the layoffs as a “transfer of jobs.”
“However, as a result of this continuous change, the customer will probably see even higher prices and delivery service fees may increase,” Round Table Pizza’s statement went on.
“Today’s real world contains these restaurants.”
Even after laying off employees, a fast-food franchisee enlisted the assistance of his 73-year-old parents.
The Journal was informed by Alexander Johnson, the owner of ten Auntie Anne’s and Cinnabon locations in California, that the new law would have otherwise cost him an additional $470,000 in labor annually.
Franchise owners fear that price increases will frighten customers.
As of April 1, California will pay limited-service restaurant employees a minimum wage of $20 per hour, which is 25% more than the state’s general minimum wage.
Though observers point out that as they compete for talent, other restaurants and businesses in the state may raise wages in response to the law, which only affects chains with at least 60 locations nationwide.
The restaurant industry vigorously opposed the legislation, especially when it was first introduced as the FAST Recovery Act. Some chains claimed that the legislation would force them to raise prices to the point where they would have to fire employees and raise prices to patrons.
Prices are usually set by the franchisees, and some are worried that charging more would turn away customers.
Scott Rodrick, who owns eighteen McDonald’s restaurants in Northern California, told the Journal, “I can’t charge $20 for Happy Meals.” He claimed that he was “leaving no stone unturned” in his quest to cut costs in the face of the pay increase.
An additional McDonald’s franchisee who runs eateries in Los Angeles County previously informed KTLA 5 News that if she increased her prices to match the wage increase, her food would become “unaffordable.”
The Journal was informed by Brian Hom, the proprietor of two Vitality Bowl açaí bowl restaurants in San Jose, that he is increasing menu prices by roughly 10% in order to offset increased wages. In addition, he has reduced the number of employees at his stores from four to two, which he claims is slowing down order turnaround times.
It’s clear that Hom will no longer be hiring, he told the Journal.
According to a statement from CEO Roy Gilad to BI, Vitality Bowls has implemented “significant measures to optimize profitability,” such as modifying its menu and enhancing its technology. He claimed the business is “well prepared” to offset rising costs.
Will you soon be receiving the new minimum wage as a fast-food employee? Or perhaps a franchisee concerned about the impact on your company?