California Fast-Food Wage Deal: What You Need to Know

Scarlet Logan on September 28, 2023

In a significant development for fast-food workers in California, the restaurant industry and unions have come to an agreement on a contentious bill, bringing an end to a prolonged battle. This article will delve into the details of this compromise and its implications for both workers and restaurant operators in California.

Pay Hike and the Creation of a Council:

Fast-food workers in California are set to receive pay hikes starting next year, thanks to this compromise. A nine-person council, established with the assistance of Gov. Gavin Newsom’s office, will now decide on future wage increases for the fast-food industry in California until 2029. This resolution concludes a potentially lengthy feud that had the restaurant industry prepared to spend over $100 million on the matter.

Wage Floor and Annual Increases:

Effective April 1, 2024, the agreement sets a wage floor of $20 per hour for California workers at fast-food chains with at least 60 nationwide locations. From 2025 to 2029, the appointed council will have the authority to annually raise the minimum wage by either 3.5% or the annual change in the consumer price index, whichever is lower. This system aims to ensure that workers’ wages keep pace with the cost of living.

Council Composition:

The newly formed council consists of four representatives from the fast-food industry, four from the workers’ side, and one neutral party who will serve as the chair. This balanced composition aims to ensure fair decision-making regarding wage adjustments.

Industry Analysts’ Perspective:

While restaurant operators will need to adapt to paying higher wages, industry analysts believe that the compromise averts more severe consequences. Mark Kalinowski, CEO of Kalinowski Equity Research, suggests that the outcome is not as catastrophic as it might have been, offering a sense of relief for the industry.

Legislative Background:

The journey to this compromise began with the signing of AB 257, also known as the FAST Act, into law in January. This legislation, initially calling for a 10-person council, was met with resistance from the fast-food industry, including major chains like Chipotle Mexican Grill, Chick-fil-A, Yum Brands, and Restaurant Brands International.

Political and Legal Battles:

The restaurant industry actively lobbied against the legislation, with McDonald’s President Joe Erlinger even making a public statement condemning the bill. A referendum was initiated by the industry, set to appear on the November 2024 ballots, before a deal was struck to replace it with the compromise we see today.

Impact on Fast-food Workers and Competition:

With the compromise in place, fast-food workers in California can anticipate pay increases of up to 25% beginning in April 2024. This shift will likely set a precedent for the industry, making it more competitive in the labor market. Other industries may also need to adjust their wages to attract talent.

Potential for Replication:

California’s approach may influence other states like Minnesota or New York to establish similar councils for various industries, creating a structured framework for labor negotiations.

Labor’s Continued Advocacy:

Despite the compromise’s limitations, unions remain committed to advocating for better working conditions in the fast-food industry. SEIU President Mary Kay Henry emphasizes that the fight is far from over, with the hope of further industry transformation.

Impact on Restaurant Operators:

Restaurant operators now face the challenge of managing higher labor costs. They may need to consider options such as raising menu prices, optimizing staffing levels, or investing in automation to maintain profitability.

Takeaway:

The California fast-food wage compromise represents a significant development in the labor landscape, balancing the interests of workers and the industry. It provides a structured approach to wage adjustments and sets a potential precedent for other states. While challenges remain, this resolution brings stability and predictability to the industry, with both workers and restaurant operators having to adapt to the changing landscape.

Fast-food 1 step ahead of others amid inflation

Scarlet Logan on February 13, 2023

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Fast-food – After the fourth quarter, businesses from a range of industries have already begun to release their quarterly results.

It’s a mixed bag overall, while fast-food establishments are the most successful.

The positive news is a result of fast-casual and casual dining establishments that have had a difficult time bringing in new customers.

The news

Despite the fourth quarter coming to a finish, very few publicly traded restaurant firms have reported their most recent quarterly results.

The handful who wrote reports stressed a new pattern.

Customers who had to contend with inflation over the holiday season reduced their out-of-home eating and retail spending.

Instead, fast-food businesses have used their specials and discounted menus to draw clients from various socioeconomic backgrounds.

Economy resilience

Economic upheavals and downturns have affected the market throughout the years, but the fast-food industry has consistently been among the most resilient.

For instance, one of the largest fast-food players in the market, McDonald’s, reported same-store sales rising by 10.3%.

The rise was aided by low-income clients returning more frequently than they did in the previous two quarters.

According to executives, the promotion for Adult Happy Meals was a spectacular success.

When paired with McRib’s annual reappearance, they significantly increased sales.

The fast-food juggernaut’s US traffic climbed for the second straight quarter, defying industry averages.

Other chains

Yum Brands, a rival fast-food chain, also reported strong US demand.

Domestic same-store sales at Taco Bell rose by 11% while this was happening.

The excellent sales are the result of an increase in morning orders, the return of Taco Bell value meals, and the popularity of Mexican pizza.

In the US, Pizza Hut’s same-store sales climbed by 4%.

KFC experienced challenging year-over-year comparisons and a meager 1% gain.

More fast food outlets want to update their status in the coming weeks.

On Tuesday, Restaurant Brands International, the parent company of Burger King, is expected to announce its fourth-quarter results.

Pizza Hut has scheduled the announcement of its financial results for February 23.

A disappointing quarter

Despite the fact that numerous fast-food firms reported improvements, Chipotle Mexican Grill’s sales were a little lacking.

The company’s quarterly profits and sales on Tuesday fell short of Wall Street projections for the first time in more than ten years.

Brian Niccol, the CEO of Chipotle, reassured customers that there had not been any “meaningful resistance” to the fast-food company’s price hikes.

Instead, management at Chipotle offered a lengthy number of justifications for its lackluster outcomes, including:

Bad economic weather
The underperforming debut of the Garlic Guajillo Steak
Challenging comparisons to 2021’s brisket launch
Seasonality

Jack Hartung, the chief financial officer at Chipotle, attributed the decline in December to weak retail sales at the time.

“As we got around the holidays, we didn’t see that pop, that momentum, that we normally see,” said Hartung.

“Frankly, we started the quarter soft, and we ended the quarter soft.”

Chipotle stated that in January, the traffic started to increase.

The Omicron outbreaks from a year ago, which compelled Chipotle and other companies to either close their doors early or for a brief period of time, are simple to compare to, however.

According to a research note written by Bank of America analyst Sara Senatore and released on Wednesday, the mild January weather increased demand for the broader industry.

Chains that serve fast-casual food haven’t yet made their fourth-quarter earnings reports public.

Shake Shack has already selected February 16 as the date.

The fast-food chain, however, admitted at the start of January that its same-store sales growth was below Wall Street expectations.

Sweetgreen will declare its earnings on February 23, while Portillo’s will do so on March 2.

The casual dining scene

Although the fast-food sector has mostly flourished, fast-casual restaurants have faced greater challenges than casual dining venues.

Businesses that offer casual eating have had a hard time luring new customers since Chipotle, Sweetgreen, and Shake Shack rose to prominence as superior substitutes.

Red Lobster and Applebee’s employed various tactics, such as substantial discounts and increased promotional spending.

For many restaurant firms, like Brinker International, the issue already existed; inflation’s increase did little more than exacerbate it.

The company is presently working to turn around Chili’s Grill and Bar.

Brinker said at the start of the month that Chili’s traffic decreased 7.6% during the course of the three months that ended on December 28.

According to Kevin Hochman, the CEO of Brinker and former president of KFC’s US business, who talked to investors on the conference call, a drop was expected as it strives to reduce less lucrative transactions.

Chili’s raised its prices in an effort to cut down on the usage of coupons.

Tag: Fast-food