Your next burrito could cost you more than $12 thanks to a California law that will dramatically increase wages for fast food workers next month, a cost increase that big chains like Chipotle say they can pass on to consumers.
During an earnings call in February, Jack Hartung, Chipotle's chief financial and administrative officer, warned: “To cover the cost of the wage increase, we will need to increase prices by a moderate percentage in California.”
The law, Assembly Bill 1228, was signed by Gov. Gavin Newsom in September and goes into effect Monday. The order requires the restaurants — which are corporately owned and franchised — which has 60 establishments across the country to raise wages for their California-based workers to $20 an hour, $4 higher than the state's overall minimum wage of $16 an hour.
Although Chipotle has not yet announced a final decision on the new prices, several other chains such as McDonald's, Starbucks and Jack in the Box say they also plan to pay this increase to consumers or change their operations. The law also called for the establishment of a restaurant industry council to determine future wage increases and advise on working conditions.
Here are our favorite fast food restaurants that are raising their prices or changing the way they do business.
McDonald's
There will not be a uniform price change on McDonald's menu items because corporate and franchise-owned locations will make different adjustments to their menus.
A McDonald's spokesperson told the Times that the company is exploring several ways to offset the increase in labor costs and has not yet decided how much to increase the prices of menu items at company-owned stores.
At franchise locations, which represent 95% of the brand's U.S. portfolio, McDonald's makes “informed pricing recommendations” but final pricing is at the discretion of franchisees, the spokesperson said.
Starbucks
Coffee lovers can expect a slight increase in caffeine beverage costs, but Starbucks has not revealed when or by how much its prices will increase.
A company spokesperson told The Times that the company chose to increase pay for all employees regardless of their level of experience.
Pizza Hut
Pizza prices won't go up, but two Pizza Hut operators in the state have canceled in-home delivery, forcing their local customers to rely on third-party apps.
Business Insider reported that operators laid off more than 1,200 drivers to reduce staffing ahead of the implementation of Assembly Bill 1228.
“When select California franchisees choose to make changes to their hiring approach, delivery will remain accessible via Pizza Hut's mobile app, website and phone ordering, and customers' ordering experience will remain consistent,” said Chelsea Mack, Pizza Hut spokesperson. . company, in an email to The Times.
Round Table Pizza
Round Table Pizza's owner, Excalibur Pizza, said in its Worker Adjustment and Retraining Notice, a 60-day written notice of upcoming layoffs, that it plans to eliminate 73 driver positions by mid-April. The state's latest WARN report shows the company has filed 71 layoff notices.
The change will shift Round Table's delivery options to third-party service providers. Round Table Pizza told the Times that it views the layoffs as a “job shift,” where workers will be needed for third-party delivery services, where they are typically employed as contractors without many protections or benefits for workers.
However, delivery service fees may increase, and the customer will likely see higher prices as a result of this ongoing shift, Round Table Pizza spokesperson Erin Mandzik said. “Operators are doing their best to retain employees and keep the doors open, and that's really what happens.”
As for any price changes, it is up to the franchisor, but the Round Table Pizza franchisee helps its operators maintain their margins.
“Whether it's creating value-focused limited-time offers, providing strategic guidance on menu pricing, or saving on merchandise sourcing costs through our significant purchasing power, we're in the thick of it with our operators,” Manzek said.
Auntie Anne and Cinnabon
Alexander Johnson is the franchisee of several Auntie Anne's and Cinnabon locations in California. Johnson runs five locations for each company in the Bay Area, and said the wage increase is making him consider laying off workers and closing some locations, ABC 7 reported.
Among the downsides, Johnson said it would also mean he would have to raise prices.
It's not clear if and when pretzel or cinnamon pretzel locations that fall under Johnson's scope will permanently increase their prices.
Jack in the box
Jack in the Box menu items could see an uptick as well. During recent earnings calls, CEO Darren Harris said the company would rely on upward price adjustments, expecting list prices to rise 6% to 8%, Nasdaq reported.
The Times reached out to Jack in the Box for comment, but did not receive a response before publication.
Times staff writers Andrea Chang and Don Lee contributed to this report.
