California Minimum Wage Hike Forces Fast-Food Giants like Chipotle, McDonald’s, and Chick-fil-A to Increase Prices

Fast-food giants like Chipotle, McDonald’s, and Chick-fil-A have increased their prices in California following the implementation of a minimum wage hike for fast food workers that came into effect on April 1st. The state has imposed significant challenges as it requires businesses to pay employees at least $20 per hour if they operate restaurants with over sixty locations across the US, except those that make and sell their own bread. This law was signed by Governor Gavin Newsom in September last year. California’s overall minimum wage for other workers is currently set at a whopping $15.50 an hour which makes it one of the highest statewide figures around today. Contrarily, however, the federal minimum wage has remained unchanged since 2009 and stands at just $7.25 per hour or roughly $15,080 annually for a full-time employee working forty hours weekly.
The new law’s impact on businesses is evident as Chipotle reported that prices in its approximately five hundred California branches had climbed by around 6% to 7%, across all menus items, during the initial week of April this year when compared with figures from a year prior (Wall Street Journal, May 20th). Chick-fil-A also saw a noticeable surge on price lists at its Los Angeles outlets. According to research by Gordon Haskett Research Advisors, the cost for a spicy chicken sandwich in that location had risen to $7.09 from an earlier charge of $6.29, which represents approximately 13% since mid-February (Wall Street Journal, May 20th). The overall average price increase across California Chick-fil-A restaurants during this period was around ten and a half percent according to the same research body’s findings.
Companies such as McDonald’s have also felt an impact on their finances due to similar reasons. Greg LaVay, who lives in Los Angeles, told Wall Street Journal that he feels somewhat ripped off by rising prices at his local outlet of this fast-food chain (Wall street Journal May 20th). As these events continue to unfold and the minimum wage hike for California’s fast food workers remains firmly in place, it will be interesting to see whether businesses are able to mitigate any negative impacts on their bottom lines or if consumers ultimately bear the brunt of higher costs.